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Actionable news in ARCO: ARCOS DORADOS HOLDINGS Inc,

Report of foreign issuer [Rules 13a-16 and 15d-16]

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Washington, D.C. 20549




For the month of November, 2015

Commission File Number: 001-35129

Arcos Dorados Holdings Inc.

(Exact name of registrant as specified in its charter)

Roque Saenz Peña 432

B1636FFB Olivos, Buenos Aires, Argentina

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):




Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Item 1



Achieved high single-digit comparable sales growth.

Buenos Aires, Argentina, November 4, 2015 – 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 quarter ended September 30, 2015.

Third Quarter 2015 Key Results

“Our long-term strategy to improve our operating efficiency, reduce our cost structure, monetize the value of some of our real estate assets and reduce our total debt levels is advancing as planned. We have now completed the roll out of our new scheduling and forecasting system in Brazil. In addition, we recently implemented a significant G&A restructuring plan across the entire organization, which generates, well ahead of schedule, the 10% reduction of our G&A expenses that we committed to in our three-year plan. We have also signed our first agreement to sell one of


1 For a definition of organic results please refer to page 14 of this document.

our real estate properties in Mexico and have reached agreements to re-franchise more than 20 Company-operated restaurants in Brazil.”

“We are reporting low double-digit organic revenue growth and a high single-digit expansion in comparable sales in the third quarter. Three of our four divisions delivered strong operating results during the quarter despite important currency headwinds. The Brazil division was impacted by a further deterioration in that country’s consumer environment, which dampened third quarter EBITDA results and more than offset EBITDA gains in our other divisions.”

“The long term market fundamentals in Latin America are still very much in place. Although we expect to face cyclical challenges, we are pursuing strategies designed to ensure that Arcos Dorados will be well positioned to capture the opportunity when the region’s economies begin to turn around”, said Sergio Alonso, Chief Executive Officer of Arcos Dorados.

Third Quarter 2015 Results


(3Q15 = 3Q14 + Special items + Currency translation + Organic growth). Please refer to “Definitions” section for further detail.

The 16.6% decline in Arcos Dorados’ third quarter as reported revenues resulted mainly from the 55.7% year-over-year average depreciation of the Brazilian real. The use of a weaker official exchange rate to remeasure the results of the Company’s Venezuelan operation and currency depreciation in other key markets also impacted revenues. On an organic basis, revenue growth of 11.4% was driven by a 9.4% expansion in systemwide comparable sales due to average check growth. The increase in average check was partially offset by a low single-digit decline in traffic. The net addition of 36 restaurants during the last 12-month period contributed $20.5 million to organic revenue growth.

Special items impacting Adjusted EBITDA consisted of:

As reported Adjusted EBITDA ($ million)

Breakdown of main variations contributing to 3Q15 Adjusted EBITDA

Third quarter as reported Adjusted EBITDA decreased 22.9%, primarily due to currency translation impacts in Brazil and Venezuela.

The Adjusted EBITDA margin contracted by more than 50 basis points to 6.8%. The result reflects higher Food and Paper (F&P) costs and G&A expenses, which were partially offset by lower Payroll costs and Occupancy and Other Operating Expenses as a percentage of sales. The increase in F&P costs in the quarter mainly arose from an unfavorable shift in mix in three of the Company’s four divisions versus the prior year quarter.

As reported, consolidated G&A decreased by 2.3%, or $1.5 million in the quarter. On a constant currency basis, G&A increased by 23.5% year-over-year, or $15.0 million in absolute terms. Excluding the impact of variable compensation adjustments in the year-ago period, G&A expenses would have increased 15.0% year-over-year, in constant currency terms.

Consolidated – excluding Venezuela

Excluding the Company’s Venezuelan operation, as reported revenues declined by 15.8% year-over-year, mainly due to the depreciation of the Brazilian real. Organic revenues increased 10.0% in the third quarter. Systemwide comparable sales increased 7.3% driven by average check growth, partially offset by a modest decline in traffic.

As reported Adjusted EBITDA contracted 23.6% and 1.8% in organic terms. The Adjusted EBITDA margin declined 70 basis points to 6.9%, as higher F&P and G&A expenses as a percentage of revenues more than offset lower Payroll costs and Occupancy and Other Operating Expenses.

Non-operating Results

Non-operating results for the third quarter reflected a $27.9 million foreign currency exchange loss, versus a loss of $7.2 million last year, mainly due to the depreciation of the Brazilian real (BRL) from the previous quarter end. The BRL depreciation generated a loss related to intercompany balances, partially offset by a gain on BRL-denominated long-term debt. Net interest expense was $4.5 million lower year-over-year, totaling $14.5 million in the quarter.

The Company reported an income tax expense of $14.1 million for the quarter, compared to $7.7 million in the prior year period.

Third quarter net loss attributable to the Company totaled $35.9 million, compared to net income of $240 thousand in the same period of 2014. The decline is mainly explained by lower operating results, coupled with higher foreign exchange losses and income tax expenses, which were partially offset by lower net interest expenses.

The Company reported a basic net loss per share of $0.17 in the third quarter of 2015, compared to earnings per share of $0.001 in the previous corresponding period. Total weighted average shares for the third quarter of 2015 were 210,537,949 as compared to 210,215,076 in the third quarter of 2014, reflecting the issuance of shares as a result of the partial vesting of restricted share units.

Analysis by Division :

Brazil Division

Brazil’s as reported revenues decreased by 32.3%, as a 55.7% year-over-year average depreciation of the Brazilian real more than offset a low-single digit increase in comparable sales and the contribution of new restaurant openings. Excluding the depreciation of the Brazilian real, organic revenues increased 4.3% year-over-year. Systemwide comparable sales increased by 1.2%, driven by average check growth, which was partially offset by negative traffic.

Traffic levels were impacted by the further deterioration of the macroeconomic and consumer environments in Brazil, as reflected by the all-time low consumer confidence index recorded in September. The Company was able to partially offset this effect by continuing to use marketing and promotional activities to support...