UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR
15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934


For the month of August, 2024
 
Commission File Number: 001-35129

Arcos Dorados Holdings Inc.
(Exact name of registrant as specified in its charter)

Río Negro 1338, First Floor
Montevideo, Uruguay, 11100
(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:
Form 20-FX Form 40-F 







ARCOS DORADOS HOLDINGS INC.


TABLE OF CONTENTS


ITEM
1.        Arcos Dorados Holdings Inc. Unaudited Condensed Consolidated Financial Statements as of June 30, 2024 and December 31, 2023 and for the six-month period ended June 30, 2024 and 2023 (Unaudited)








SIGNATURE

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.
Arcos Dorados Holdings Inc.
By:/s/ Juan David Bastidas
Name: Juan David Bastidas
Title: Chief Legal Counsel

Date: August 14, 2024










 
 

 

 
 

 
Arcos Dorados Holdings Inc.
 
 
Condensed Consolidated Financial Statements
As of June 30, 2024 and December 31, 2023 and for the six-month period ended June 30, 2024 and 2023 (Unaudited)
F-1

Arcos Dorados Holdings Inc.
Consolidated Statements of Income
 For the six-month period ended June 30, 2024 and 2023 (Unaudited)
Amounts in thousands of US dollars, except for share data and as otherwise indicated
 
 20242023
REVENUES  
Sales by Company-operated restaurants$2,092,131 $1,940,884 
Revenues from franchised restaurants100,126 90,429 
Total revenues2,192,257 2,031,313 
OPERATING COSTS AND EXPENSES  
Company-operated restaurant expenses:  
Food and paper (733,913)(685,611)
Payroll and employee benefits(395,498)(379,382)
Occupancy and other operating expenses(614,611)(542,720)
Royalty fees(131,364)(115,259)
Franchised restaurants – occupancy expenses(42,275)(38,629)
General and administrative expenses(141,612)(135,118)
Other operating income, net8,786 6,583 
Total operating costs and expenses(2,050,487)(1,890,136)
Operating income141,770 141,177 
Net interest expense and other financing results(30,579)(21,987)
Gain (loss) from derivative instruments1,249 (14,120)
Foreign currency exchange results(19,115)20,945 
Other non-operating (expenses) income, net (652)6 
Income before income taxes92,673 126,021 
Income tax expense, net(37,106)(59,850)
Net income55,567 66,171 
Less: Net income attributable to non-controlling interests(426)(396)
Net income attributable to Arcos Dorados Holdings Inc.$55,141 $65,775 
Earnings per share information:  
Basic net income per common share attributable to Arcos Dorados Holdings Inc.$0.26 $0.31 
Diluted net income per common share attributable to Arcos Dorados Holdings Inc.0.26 0.31 

See Notes to the Condensed Consolidated Financial Statements.
F-2

Arcos Dorados Holdings Inc.
 Consolidated Statements of Comprehensive Income
 For the six-month period ended June 30, 2024 and 2023 (Unaudited)
Amounts in thousands of US dollars
 
 20242023
Net income$55,567 $66,171 
Other comprehensive (loss) income, net of tax:
  
Foreign currency translation (55,105)58,925 
Cash flow hedges:  
Net gain (loss) recognized in accumulated other comprehensive income15,639 (15,217)
  Reclassification of net (gain) loss to consolidated statement of income (12,181)10,869 
Cash flow hedges (net of deferred income taxes of $342 and $834)3,458 (4,348)
Securities available for sale:
   Unrealized gain (loss) on available for sale securities637 (449)
Reclassification adjustment for loss included in net income438 — 
Securities available for sale  (net of deferred income taxes of $(145) and $nil)1,075 (449)
Total other comprehensive (loss) income (50,572)54,128 
Comprehensive income 4,995 120,299 
Less: Comprehensive income attributable to non-controlling interests(370)(293)
Comprehensive income attributable to Arcos Dorados Holdings Inc.$4,625 $120,006 
 
See Notes to the Condensed Consolidated Financial Statements.
F-3

Arcos Dorados Holdings Inc.
Consolidated Balance Sheet
As of June 30, 2024 and December 31, 2023
Amounts in thousands of US dollars, except for share data and as otherwise indicated
As of
June 30, 2024As of
(Unaudited)December 31, 2023
ASSETS  
Current assets  
Cash and cash equivalents$104,216 $196,661 
Short-term investments35,140 50,106 
Accounts and notes receivable, net141,156 147,980 
Other receivables40,898 38,719 
Inventories51,070 52,830 
Prepaid expenses and other current assets140,289 118,982 
Derivative instruments364 — 
Total current assets513,133 605,278 
Non-current assets  
Miscellaneous96,958 104,225 
Collateral deposits2,500 2,500 
Property and equipment, net1,104,280 1,119,885 
Net intangible assets and goodwill66,930 70,026 
Deferred income taxes102,709 98,163 
Derivative instruments64,309 46,486 
Equity method investments17,483 18,111 
Lease right of use asset927,721 954,564 
Total non-current assets2,382,890 2,413,960 
Total assets$2,896,023 $3,019,238 
LIABILITIES AND EQUITY  
Current liabilities  
Accounts payable$332,993 $374,986 
Royalties payable to McDonald’s Corporation19,843 21,292 
Income taxes payable82,811 77,722 
Other taxes payable85,687 85,421 
Accrued payroll and other liabilities144,292 142,487 
Provision for contingencies1,360 1,447 
Interest payable8,048 7,447 
Short-term debt38,623 29,533 
Current portion of long-term debt2,101 1,803 
Derivative instruments7,738 6,025 
Operating lease liabilities93,122 93,507 
Total current liabilities816,618 841,670 
Non-current liabilities  
Accrued payroll and other liabilities20,686 27,513 
Provision for contingencies32,146 49,172 
Long-term debt, excluding current portion713,704 713,038 
Derivative instruments10,893 16,733 
Deferred income taxes1,598 1,166 
Operating lease liabilities829,850 853,107 
Total non-current liabilities1,608,877 1,660,729 
Total liabilities2,425,495 2,502,399 
Equity  
Class A shares of common stock389,967 389,907 
Class B shares of common stock132,915 132,915 
Additional paid-in capital8,659 8,719 
Retained earnings570,772 566,188 
Accumulated other comprehensive loss(613,597)(563,081)
Common stock in treasury(19,367)(19,367)
Total Arcos Dorados Holdings Inc. shareholders’ equity469,349 515,281 
Non-controlling interests in subsidiaries1,179 1,558 
Total equity470,528 516,839 
Total liabilities and equity$2,896,023 $3,019,238 
See Notes to the Condensed Consolidated Financial Statements.
F-4

Arcos Dorados Holdings Inc.
 Condensed Consolidated Statements of Cash Flows
 For the six-month period ended June 30, 2024 and 2023 (Unaudited)
Amounts in thousands of US dollars
 20242023
Operating activities  
Net income attributable to Arcos Dorados Holdings Inc.$55,141 $65,775 
Adjustments to reconcile net income attributable to Arcos Dorados Holdings Inc. to cash provided by operating activities:  
Non-cash charges and credits:  
Depreciation and amortization88,293 68,520 
Gain on sales of restaurants businesses(5,501)(4,008)
Foreign currency exchange results 14,499 (10,458)
(Gain) Loss from derivative instruments(1,249)14,120 
Others, net(15,271)6,112 
Changes in assets and liabilities(72,205)(55,805)
Net cash provided by operating activities63,707 84,256 
Investing activities  
Property and equipment expenditures(148,927)(123,146)
Purchases of restaurant businesses paid at acquisition date(5,023)(1,303)
Proceeds from sales of property and equipment, restaurant businesses and related advances4,781 1,072 
Proceeds from short-term investments45,786 25,000 
Acquisition of short-term investments(30,000)(10,450)
Other investing activity(648)(205)
Net cash used in investing activities(134,031)(109,032)
Financing activities  
Dividend payments to Arcos Dorados Holdings Inc.’s shareholders(25,278)(21,063)
Open Market Repurchases of 2027 Senior Notes— (1,904)
Open Market Repurchases of 2029 Senior Notes— (2,813)
Net collection (payment) of derivative instruments201 (715)
Net short-term borrowings 11,064 1,812 
Other financing activities(3,553)(3,188)
Net cash used in financing activities (17,566)(27,871)
Effect of exchange rate changes on cash and cash equivalents(4,555)(12,798)
Decrease in cash and cash equivalents(92,445)(65,445)
Cash and cash equivalents at the beginning of the year196,661 $266,937 
Cash and cash equivalents at the end of the period $104,216 $201,492 
Supplemental cash flow information:
Cash paid during the period for:  
   Interest$26,881 $23,647 
   Income tax64,745 33,113 
Non-cash investing and financing activities:
  Exchange of assets$— $3,538 
Dividend declared pending of payment25,279 18,959 
Seller financing and others pending of payment 1,622 1,700 
  Settlement of franchise receivables related to purchases of restaurant businesses510 — 
Receivable related to sales of restaurant businesses2,448 — 

See Notes to the Condensed Consolidated Financial Statements.
F-5

Arcos Dorados Holdings Inc.
 Consolidated Statement of Changes in Equity
 For the six-month period ended June 30, 2024 (Unaudited)
Amounts in thousands of US dollars, except for share data and as otherwise indicated 
 Arcos Dorados Holdings Inc. Shareholders’ Equity  
 Class A shares of
common stock		Class B shares of
common stock		Additional
paid-in
capital		Retained
earnings		Accumulated
other
comprehensive
loss		Common stock in treasuryTotalNon-
controlling
interests		Total
NumberAmountNumberAmountNumberAmount
Balances at beginning of fiscal year132,964,031 $389,907 80,000,000 $132,915 $8,719 $566,188 $(563,081)(2,309,062)$(19,367)$515,281 $1,558 $516,839 
Net income for the period (Unaudited)— — — — — 55,141 — — — 55,141 426 55,567 
Other comprehensive loss (Unaudited)— — — — — — (50,516)— — (50,516)(56)(50,572)
Cash Dividends to Arcos Dorados Holdings Inc.’s shareholders ($0.24 per share) (Unaudited)— — — — — (50,557)— — — (50,557)— (50,557)
Issuance of shares in connection with the partial vesting of outstanding restricted share units under the 2011 Equity Incentive Plan (Unaudited)8,088 60 — — (60)— — — — — — — 
Dividends to non-controlling interests (Unaudited)— — — — — — — — — — (749)(749)
Balances at end of period (Unaudited)132,972,119 $389,967 80,000,000 $132,915 $8,659 $570,772 $(613,597)(2,309,062)$(19,367)$469,349 $1,179 $470,528 
    

See Notes to the Condensed Consolidated Financial Statements.
F-6

Arcos Dorados Holdings Inc.
Consolidated Statement of Changes in Equity
 For the six-month period ended June 30, 2023 (Unaudited)
Amounts in thousands of US dollars, except for share data and as otherwise indicated
 
 Arcos Dorados Holdings Inc. Shareholders’ Equity  
 Class A shares of
common stock		Class B shares of
common stock		Additional
paid-in
capital		Retained
earnings		Accumulated
other
comprehensive
loss		Common stock in treasuryTotalNon-
controlling
interests		Total
NumberAmountNumberAmountNumberAmount
Balances at beginning of fiscal year132,903,607 $389,393 80,000,000 $132,915 $9,206 $424,936 $(613,460)(2,309,062)$(19,367)$323,623 $804 $324,427 
Net income for the period (Unaudited)— — — — — 65,775 — — — 65,775 396 66,171 
Other comprehensive income (loss) (Unaudited)— — — — — — 54,231 — — 54,231 (103)54,128 
Cash Dividends to Arcos Dorados Holdings Inc.’s shareholders ($0.19 per share) (Unaudited)— — — — — (40,022)— — — (40,022)— (40,022)
Issuance of shares in connection with the partial vesting of outstanding restricted share units under the 2011 Equity Incentive Plan (Unaudited)60,424 514 — — (514)— — — — — — — 
Stock-based compensation related to the 2011 Equity Incentive Plan (Unaudited)— — — — 27 — — — — 27 — 27 
Dividends to non-controlling interests (Unaudited)— — — — — — — — — — (382)(382)
Balances at end of period (Unaudited)132,964,031 $389,907 80,000,000 $132,915 $8,719 $450,689 $(559,229)(2,309,062)$(19,367)$403,634 $715 $404,349 

See Notes to the Condensed Consolidated Financial Statements.
F-7
Arcos Dorados Holdings Inc.
Notes to the Condensed Consolidated Financial Statements
For the six-month period ended June 30, 2024 and 2023 (Unaudited)
Amounts in thousands of US dollars, except for share data and as otherwise indicated


1.    Organization and nature of business

Arcos Dorados Holdings Inc. (the “Company”) is a company limited by shares incorporated and existing under the laws of the British Virgin Islands. The Company’s fiscal year ends on the last day of December. The Company has through its wholly-owned company Arcos Dorados Group B.V., a 100% equity interest in Arcos Dorados B.V. (“ADBV”).

On August 3, 2007 the Company, indirectly through its wholly-owned subsidiary ADBV, entered into a Stock Purchase Agreement and Master Franchise Agreements (“MFAs”) with McDonald’s Corporation pursuant to which the Company completed the acquisition of the McDonald’s business in Latin America and the Caribbean (“LatAm business”). Prior to this acquisition, the Company did not carry out operations. The Company’s rights to operate and franchise McDonald’s-branded restaurants in the Territories, and therefore the ability to conduct the business, derive exclusively from the rights granted by McDonald’s Corporation in the MFAs through 2027. The initial term of the MFA for French Guiana, Guadeloupe and Martinique was ten years through August 2, 2017 with an option to extend the agreement for these territories for an additional period of ten years, through August 2, 2027. On July 20, 2016, the Company has exercised its option to extend the MFA for these three territories.

The Company, through ADBV’s wholly-owned and majority owned subsidiaries, operates and franchises McDonald’s restaurants in the food service industry. The Company has operations in twenty territories as follows: 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 (USVI) and Venezuela. All restaurants are operated either by the Company’s subsidiaries or by independent entrepreneurs under the terms of sub-franchisee agreements (franchisees).

2.    Basis of presentation and principles of consolidation

The accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) for interim financial information and include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The Company has elected to report its consolidated financial statements in United States dollars (“$” or “US dollars”).

The accompanying condensed consolidated financial statements do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted for purposes of this presentation. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated annual financial statements of the Company as of December 31, 2023.

The accompanying condensed consolidated financial statements are unaudited and include, in the opinion of management, all adjustments, consisting only of normal recurring adjustments, which are considered necessary for the fair presentation of the information in the consolidated financial statements.

Operating results for the six-month period ended June 30, 2024 are not necessarily indicative of results that may be expected for any future periods.







F-8
Arcos Dorados Holdings Inc.
Notes to the Condensed Consolidated Financial Statements
For the six-month period ended June 30, 2024 and 2023 (Unaudited)
Amounts in thousands of US dollars, except for share data and as otherwise indicated



3.    Summary of significant accounting policies

The following is a summary of significant accounting policies followed by the Company in the preparation of the consolidated financial statements.

Use of estimates

The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Foreign currency matters

The financial statements of the Company’s foreign operating subsidiaries are translated in accordance with guidance in ASC 830 Foreign Currency Matters. Except for the Company’s Venezuelan and Argentinian operations, the functional currencies of the Company’s foreign operating subsidiaries are the local currencies of the countries in which they conduct their operations. Therefore, assets and liabilities are translated into US dollars at the balance sheet date exchange rates, and revenues, expenses and cash flow are translated at average rates prevailing during the periods. Translation adjustments are included in the “Accumulated other comprehensive loss” component of shareholders’ equity. The Company includes foreign currency exchange results related to monetary assets and liabilities transactions, including intercompany transactions, denominated in currencies other than its functional currencies in its statements of income.

Since January 1, 2010 and July 1, 2018, Venezuela and Argentina, respectively, were considered to be highly inflationary, and as such, the financial statements of these subsidiaries are remeasured as if its functional currency was the reporting currency of the immediate parent company (US dollars). As a result, remeasurement gains and losses are recognized in earnings rather than in the cumulative translation adjustment, component of “Accumulated other comprehensive loss” within shareholders’ equity.

In addition, in these territories, there are foreign currency restrictions. Since 2019, in Argentina several measures have been adopted including, among others: (i) limitation to hoarding and consumption in foreign currency for natural persons, (ii) taxes to increase the official exchange rate for certain services and goods, (iii) approvals required from the Central Bank of Argentina to access foreign currency to settle imports of goods or services, principal and interest from financial payables to foreign parties and dividends. Furthermore, Venezuela has currency restrictions which have been in place for several years under different currency exchange regulations. Although during 2019, the Central Bank of Venezuela loosened those restrictions by permitting financial institution to participate as intermediaries in foreign currency operations, the Company’s ability to immediately access cash through repatriations continues to be limited. Additionally, the Venezuelan market is subject to price controls. Its government issued a regulation establishing a maximum profit margin for companies and maximum prices for certain goods and services. However, the Company was able to increase prices during the six-month period ended June 30, 2024.

As of June 30, 2024, Argentina’s and Venezuela’s net nonmonetary asset positions were $176.2 million and $18.8 million, respectively, mainly fixed assets.



F-9
Arcos Dorados Holdings Inc.
Notes to the Condensed Consolidated Financial Statements
For the six-month period ended June 30, 2024 and 2023 (Unaudited)
Amounts in thousands of US dollars, except for share data and as otherwise indicated



Accounts payable outsourcing

The Company offers its suppliers access to an accounts payable services arrangement provided by third party financial institutions. This service allows the Company’s suppliers to view its scheduled payments online, enabling them to better manage their cash flow and reduce payment processing costs. Independent from the Company, the financial institutions also allow suppliers to sell their receivables to the financial institutions in an arrangement separately negotiated by the supplier and the financial institution. The Company has no economic interest in the sale of these receivables and no direct relationship with the financial institutions concerning the sale of receivables. All of the Company’s obligations, including amounts due, remain to the Company’s suppliers as stated in the supplier agreements. These obligations require payment in full within 180 days of the invoice date. As of June 30, 2024 and December 31, 2023, $18,558 and $13,650, respectively, of the Company’s total accounts payable (included within “Accounts payable” in the Balance Sheet) are available for this purpose.

Recent accounting pronouncements

Segment Reporting

In November 2023, the Financial Accounting Standards Board issued Accounting Standards Update ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures”. The pronouncement expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods beginning after December 15, 2024. We are currently in the process of determining the impact that ASU 2023-07 will have on the Company’s consolidated financial statement disclosures.

Income Taxes

In December 2023, the Financial Accounting Standards Board issued Accounting Standards Update ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. The pronouncement expands the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. We are currently in the process of determining the impact that ASU 2023-09 will have on the Company’s consolidated financial statement disclosures.

Climate related disclosures

In March 2024, the U.S. Securities and Exchange Commission adopted rules requiring registrants to disclose climate-related information in registration statements and annual reports. Registrant will be required to disclose, within the financial statements, the effect of severe weather events and other natural conditions. This rule is effective for Large accelerated filers starting in fiscal year 2025.

No other new accounting pronouncement issued or effective during the fiscal year had or is expected to have a material impact on the Company’s consolidated financial statements.

F-10
Arcos Dorados Holdings Inc.
Notes to the Condensed Consolidated Financial Statements
For the six-month period ended June 30, 2024 and 2023 (Unaudited)
Amounts in thousands of US dollars, except for share data and as otherwise indicated




4.    Short-term debt

Short-term debt consists of the following:
As of
June 30, 2024As of
(Unaudited)December 31, 2023
Short-term bank loans $37,581 $29,502 
Bank overdrafts1,042 31 
Total$38,623 $29,533 

Short-term bank loans

As of June 30, 2024, the Company had drawn short term bank loans in Chile and Uruguay, amounting to $37,581. As of December 31, 2023, short-term bank loans were comprised of two loans in Chile, amounting to $29,502.

The following table presents additional information related to short-term bank debt:
Principal as of
TerritoriesEntityCurrencyAnnual interest rateJune 30, 2024 (Unaudited)December 31, 2023Maturity
ChileBanco Itaú ChileCLP8.28%$18,400 $19,681 December, 2024
Banco de Chile8.88%9,181 9,821 
UruguayBanco Itaú Uruguay S.A.USD5.74%8,000 — May, 2025
Banco Bilbao Vizcaya Argentaria Uruguay S.A.5.55%2,000 — 
Total$37,581 $29,502 

Revolving credit facilities

On February 15, 2024, the Company renewed its revolving credit facility with J.P. Morgan upon the same previously existing terms and conditions for a total amount of $25 million, now maturing on February 17, 2026. In addition, on April 15, 2024, the Company signed a revolving credit facility agreement for a total amount of $25 million with Itaú Unibanco S.A. that matures on April 14, 2025.

These revolving credit facilities permit the Company to borrow money from time to time to cover its working capital needs and for other general corporate purposes. Principal is due upon maturity. However, prepayments are permitted without premium or penalty. Each loan made under the J.P. Morgan agreement will bear interest annually at SOFR plus 3.10% that will be payable on the date of any prepayment or at maturity; additionally, each loan made under the Itaú Unibanco S.A. agreement will bear interest annually at TERM SOFR plus a range between 2.65% and 4.85%.







F-11
Arcos Dorados Holdings Inc.
Notes to the Condensed Consolidated Financial Statements
For the six-month period ended June 30, 2024 and 2023 (Unaudited)
Amounts in thousands of US dollars, except for share data and as otherwise indicated



The obligations of the Company under the revolving credit facilities are jointly and severally guaranteed by certain of the Company’s subsidiaries on an unconditional basis. The revolving credit facilities include customary covenants including, among others, restrictions on the ability of the Company, the guarantors and certain material subsidiaries to: (i) incur liens, (ii) enter into any merger, consolidation or amalgamation; (iii) sell, assign, lease or transfer all or substantially all of the borrower’s or guarantor’s business or property; (iv) enter into transactions with affiliates; (v) engage in substantially different lines of business; (vi) engage in transactions that violate certain anti-terrorism laws. In addition, for the J.P. Morgan agreement, the Company is required to comply, as of the last day of each quarter during the agreement, with a consolidated net indebtedness (including interest payable) to EBITDA lower than 3.00x. As of June 30, 2024, the Company’s net indebtedness (including interest payable) to EBITDA ratio was 1.18x and thus it is currently in compliance with the ratio requirement.

The revolving credit facilities provide for customary events of default, which, if any of them occurs, would permit or require the lender to terminate its obligation to provide loans under the revolving credit facility and/or to declare all sums outstanding under the loan documents immediately due and payable.

No amounts are due at the date of issuance of these condensed consolidated financial statements in connection with these revolving credit facilities.


F-12

Arcos Dorados Holdings Inc.
Notes to the Condensed Consolidated Financial Statements
For the six-month period ended June 30, 2024 and 2023 (Unaudited)
Amounts in thousands of US dollars, except for share data and as otherwise indicated





5.    Long-term debt

Long-term debt consists of the following: 
As of
June 30, 2024As of
(Unaudited)December 31, 2023
2029 Notes$334,200 $334,200 
2027 Notes379,265 379,265 
Finance lease obligations7,318 8,498 
Other long-term borrowings2,803 1,700 
Subtotal723,586 723,663 
Discount on 2029 Notes(3,677)(4,059)
Discount on 2027 Notes(2,160)(2,571)
Premium on 2029 Notes345 382 
Premium on 2027 Notes962 1,141 
Deferred financing costs(3,251)(3,715)
Total$715,805 $714,841 
Current portion of long-term debt2,101 1,803 
Long-term debt, excluding current portion$713,704 $713,038 

2029 and 2027 Notes

The following table presents additional information related to the 2029 and 2027 Notes (the “Notes”):
 Principal as of
Annual interest rate CurrencyJune 30, 2024 (Unaudited)December 31, 2023Maturity
2029 Notes6.125 %USD$334,200 $334,200 May 27, 2029
2027 Notes5.875 %USD379,265 379,265 April 4, 2027

The following table presents additional information for the six-month period ended June 30, 2024 and 2023:

 Interest Expense (i) DFC Amortization (i)Amortization of Premium/Discount, net (i)
2024 (Unaudited)2023 (Unaudited)2024 (Unaudited)2023 (Unaudited)2024 (Unaudited)2023 (Unaudited)
2029 Notes$10,235 $10,277 $235 $292 $345 $351 
2027 Notes11,141 11,077 229 237 232 245 

(i)These charges are included within “Net interest expense and other financing results” in the consolidated statements of income.


F-13

Arcos Dorados Holdings Inc.
Notes to the Condensed Consolidated Financial Statements
For the six-month period ended June 30, 2024 and 2023 (Unaudited)
Amounts in thousands of US dollars, except for share data and as otherwise indicated

6.    Derivative instruments

The Company’s derivatives that are designated for hedge accounting consist of cross-currency interest rate swaps, foreign currency forwards, call spreads, interest coupon only swaps and sustainability linked ESG principal only swap and are classified as cash flow hedges. Further details are in “Derivatives designated as hedging instruments” section.

The Company enters into certain derivatives that are not designated for hedge accounting. The Company has entered into foreign currency forwards, call spread and interest coupon only swap to mitigate the foreign currency fluctuations on foreign currency denominated liabilities. Further details are explained in the “Derivatives not designated as hedging instruments” section.

The following table presents the fair values of derivative instruments included in the consolidated balance sheets as of June 30, 2024 and December 31, 2023:
AssetsLiabilities
Type of DerivativeBalance Sheets LocationAs ofAs ofBalance Sheets LocationAs ofAs of
June 30, 2024 (Unaudited)December 31, 2023June 30, 2024 (Unaudited)December 31, 2023
Derivatives designated as hedging instruments 
Cash Flow hedge
Forward contractsOther receivables$1,377 $119 Accrued payroll and other liabilities$— $(1,536)
Call spread + coupon-only swapDerivative instruments4,481 2,823 Derivative instruments— (185)
Sustainability-linked ESG principal only swap Derivative instruments21,863 18,466 Derivative instruments(233)(261)
Cross-currency interest rate swapDerivative instruments28,843 19,337 Derivative instruments(1,327)(2,398)
Subtotal$56,564 $40,745 $(1,560)$(4,380)
Derivatives not designated as hedging instruments  
Forward contractsDerivative instruments$278 $— Derivative instruments$(241)$— 
Call spread + coupon-only swapDerivative instruments5,810 3,761 Derivative instruments(10,590)(12,578)
Call spreadDerivative instruments3,398 2,099 Derivative instruments— — 
Coupon-only swapDerivative instruments— — Derivative instruments(6,240)(7,336)
Subtotal$9,486 $5,860 $(17,071)$(19,914)
Total derivative instruments$66,050 $46,605 $(18,631)$(24,294)


Derivatives designated as hedging instruments

Cash flow hedge

The Company has entered into various forward contracts in a few territories to hedge a portion of the foreign exchange risk associated with forecasted imports of goods. The effect of the hedges results in fixing the cost of goods acquired (i.e. the net settlement or collection adjusts the cost of inventory paid to the suppliers). As of June 30, 2024, the Company estimated that the whole amount of net derivative gains or losses related to its cash flow hedges included in accumulated other comprehensive loss will be reclassified into earnings within the next 12 months.
F-14

Arcos Dorados Holdings Inc.
Notes to the Condensed Consolidated Financial Statements
For the six-month period ended June 30, 2024 and 2023 (Unaudited)
Amounts in thousands of US dollars, except for share data and as otherwise indicated



Moreover, the Company, through its Brazilian subsidiary, enters into certain instruments designated as cash flow hedge to reduce the exposure to variability in expected future cash flows related to intercompany loans (principal and interest). The Company uses call spread, coupon-only swaps, cross-currency interest rate swap and a sustainability-linked ESG principal only swap. As of June 30, 2024, the Company estimated that the whole amount of net derivative gains or losses related to its cash flow hedges included in accumulated other comprehensive loss will be reclassified into earnings within the next 5 years.

The following table presents the notional amounts of the Company’s outstanding derivative instruments classified as cash flow hedge:
Notional amount as of
June 30, 2024 (Unaudited)December 31, 2023
Forward contracts$41,775 $44,412 
Call spread + coupon-only swap24,000 24,000 
Sustainability-linked ESG principal only50,000 50,000 
Cross-currency interest rate swap80,000 80,000 

Additional disclosures

The following table presents the pretax amounts affecting income and other comprehensive (loss) income for the six-month period ended June 30, 2024 and 2023 for each type of derivative relationship: 
Derivatives in Cash Flow
Hedging Relationships		Gain (Loss) Recognized in Accumulated OCI on Derivative (Unaudited)(Gain) Loss Reclassified from Accumulated OCI into income
 (Unaudited)
2024202320242023
Forward contracts (i)$1,787 $(5,746)$1,007 $3,016 
Cross-currency interest rate swaps (ii)12,592 (14,350)(10,283)10,723 
Call spread (iii)1,080 — (2,490)1,666 
Coupon-only swap (iii)1,213 — (260)(491)
Sustainability linked ESG principal only swap (ii)6,103 — (6,949)— 
Total$22,775 $(20,096)$(18,975)$14,914 
 
(i)The results recognized in income related to forward contracts were recorded as an adjustment to food and paper.

F-15

Arcos Dorados Holdings Inc.
Notes to the Condensed Consolidated Financial Statements
For the six-month period ended June 30, 2024 and 2023 (Unaudited)
Amounts in thousands of US dollars, except for share data and as otherwise indicated



(ii)The net income (loss) recognized in income is presented as follows:

For the six-month period ended June 30,
Adjustment to:2024 (Unaudited)2023 (Unaudited)
Net interest expense and other financing results$(1,161)$(851)
Foreign currency exchange results18,393 (9,872)
Total$17,232 $(10,723)


(iii)The results recognized in income related to call spread agreements were recorded as an adjustment to “Foreign currency exchange results”. The results recognized in income related to coupon-only agreements were recorded as an adjustment to “Net interest expense and other financing results”.

Derivatives not designated as hedging instruments

The Company entered into certain derivatives that are not designated for hedge accounting, therefore the changes in the fair value of these derivatives are recognized immediately within “Gain (loss) from derivative instruments”.

The following table presents the notional amounts of the Company’s outstanding derivative instruments not designed as hedging instruments:

Notional amount as of
June 30, 2024 (Unaudited)December 31, 2023
Forward contracts$18,000 $— 
Call spread + coupon-only swap50,000 50,000 
Call spread30,000 30,000 
Coupon-only swap30,000 30,000 


F-16

Arcos Dorados Holdings Inc.
Notes to the Condensed Consolidated Financial Statements
For the six-month period ended June 30, 2024 and 2023 (Unaudited)
Amounts in thousands of US dollars, except for share data and as otherwise indicated

7.    Share-based compensation

2011 Equity Incentive Plan

From 2011 to 2019, the Company made recurring grants of awards relating to class A shares, including awards in the form of shares (also referred to as stock), options, restricted shares, restricted share units, share appreciation rights, performance awards and other share-based awards to attract and retain the most highly qualified and capable professionals and to promote the success of its business (“Equity Incentive Plan” or “2011 Plan”). The last portion of the 2011 Plan vested in May 2023.

The Company recognized stock-based compensation expense related to this award in the amount of $nil and $27 during the six-month period ended June 30, 2024 and 2023, respectively. Stock-based compensation expense is included within “General and administrative expenses” in the consolidated statements of income.

For the period ended June 30, 2024, the Company issued 8,088 Class A shares. Therefore, accumulated recorded compensation expense totaling $60 was reclassified from “Additional paid-in capital” to “Common Stock” upon issuance.

As of June 30, 2024, there were no outstanding Class A shares pending of issuance in connection with previous partial vesting.

F-17

Arcos Dorados Holdings Inc.
Notes to the Condensed Consolidated Financial Statements
For the six-month period ended June 30, 2024 and 2023 (Unaudited)
Amounts in thousands of US dollars, except for share data and as otherwise indicated
Phantom RSU Award

In May 2019, the Company implemented a new long-term incentive plan (called Phantom RSU Award) to reward employees giving them the opportunity to share the success of the Company in the creation of value for its shareholders. In accordance with this plan, the Company granted units (called “Phantom RSU”) to certain employees, pursuant to which they are entitled to receive, when vested, a cash payment equal to the closing price of one Class A share per unit on the respective day in which this benefit is due and the corresponding dividends per-share (if any) formally declared and paid during the service period. However, in the event of death, disability or retirement of the employee, any unvested portion of the annual award will be fully vested.

The Company recognizes compensation expense related to these benefits on a straight-line basis over the requisite service period. As a consequence, when the award includes multiple vesting periods, it is considered as multiple awards.

The total compensation (expense)/benefit for the six-month period ended June 30, 2024 and 2023 amounts to $(241) and $5,527 respectively, which has been recorded under “General and administrative expenses” within the consolidated statement of income. The accrued liability is remeasured at the end of each reporting period until settlement.

The following table summarizes the activity under the plan as of June 30, 2024:

UnitsSettlement
Outstanding at December 31, 20233,200,187 $— 
Grant 2024651,575 — 
Vesting and settlement of 2019 grant (943,288)10,480 
Vesting and settlement of 2021 grant (692,422)7,693 
Vesting and settlement of 2023 grant(32,599)351 
Forfeited(89)— 
Outstanding at June 30, 20242,183,364 — 

The following table provides a summary of the plan as of June 30, 2024:

Total Non-vested (i)
Number of units outstanding (i)2,183,364 
Share price as of June 30, 2024
9.00 
Total fair value of the plan19,650 
Weighted-average accumulated percentage of service40.34 %
Accrued liability (ii)7,927 
Compensation expense not yet recognized (iii)11,723 

(i)Related to awards that will vest between April 2025 and May 2027.
(ii)Presented within “Accrued payroll and other liabilities” in the Company’s current and non-current liabilities balance sheet.
(iii)Expected to be recognized in a weighted-average period of 2.15 years.

8.    Commitments and contingencies

Commitments

The MFAs require the Company and its MF subsidiaries, among other obligations:
F-18

Arcos Dorados Holdings Inc.
Notes to the Condensed Consolidated Financial Statements
For the six-month period ended June 30, 2024 and 2023 (Unaudited)
Amounts in thousands of US dollars, except for share data and as otherwise indicated


 
(i)to agree with McDonald’s Corporation on a restaurant opening plan and a reinvestment plan for each three-year period or such other commitment or period that McDonald’s may approve; and pay an initial franchise fee for each new restaurant opened;
(ii)to pay monthly royalties commencing at a rate of approximately 5% of gross sales of the restaurants, during the first 10 years. This percentage increased to 6% and 7% for the subsequent two five-year periods of the agreement. Nevertheless, at times, McDonald’s Corporation has supported Company’s investment plans by agreeing to provide an incentive (the “growth support”), which resulted or is expected to result in a lower royalty rate;
(iii)to commit to funding a specified Strategic Marketing Plan; that includes the expenditure of 5% of the Company’s gross sales on Advertising and Promotion activities;
(iv)to own (or lease) directly or indirectly, the fee simple interest in all real property on which any franchised restaurant is located; and
(v)to maintain a minimum fixed charge coverage ratio (as defined therein) at least equal to 1.50 as well as a maximum leverage ratio (as defined therein) of 4.25.

If the Company would not be in compliance with these commitments under the MFA, it could be in material breach. A breach of the MFA would give McDonald’s Corporation certain rights, including the ability to acquire all or portions of the business.

On January 10, 2022, the Company reached an agreement with McDonald’s Corporation on a new growth and investment plan for the next few years. To support its future growth, the Company plans to open at least 200 new restaurants and to modernize at least 400 restaurants, with capital expenditures of approximately $650 million from 2022 to 2024. In addition, McDonald’s Corporation agreed to provide growth support which resulted in an effective royalty rate of 5.6% and 6.0% of sales in 2022 and 2023, respectively, and is expected to result in an effective royalty rate of about 6.3% of sales in 2024.

For the six-month period ended June 30, 2024, the Company was in compliance with the ratio requirements mentioned in point (v) above. The ratios for the period mentioned, were as follows:

June 30, 2024 (Unaudited)March 31, 2024 (Unaudited)
Fixed Charge Coverage Ratio2.25 2.17
Leverage Ratio3.17 3.23

F-19

Arcos Dorados Holdings Inc.
Notes to the Condensed Consolidated Financial Statements
For the six-month period ended June 30, 2024 and 2023 (Unaudited)
Amounts in thousands of US dollars, except for share data and as otherwise indicated




In addition, the Company, through its wholly-owned subsidiary ADBV, maintains standby letters of credit in favor of McDonald’s Corporation as collateral for the obligations assumed under the MFAs, for a total aggregate drawing amount of $80 million. These letters of credit can be drawn if certain events occur, including the failure to pay royalties. No amounts have been drawn at the date of issuance of these financial statements. The following table presents information related to the standby letters of credit:

BankCurrencyAmount
Itaú$15,000
Credit Suisse$45,000
J.P. Morgan$20,000

These letters of credit contain a limited number of customary affirmative and negative covenants, including a maximum indebtedness to EBITDA ratio, as follows:
BankRatioRequired Maximum RatioJune 30, 2024 (Unaudited)
ItaúNet indebtedness to EBITDA4.50 0.27
Credit SuisseIndebtedness to EBITDA4.00 0.50
J.P. MorganIndebtedness to EBITDA4.50 0.50

For the six-month period ended June 30, 2024 all the ratios were in compliance.

Provision for contingencies

The Company has certain contingent liabilities with respect to existing or potential claims, lawsuits and other proceedings, including those involving labor, tax and other matters. As of June 30, 2024 and December 31, 2023, the Company maintains a provision for contingencies, net of judicial deposits, amounting to $33,506 and $50,619, respectively, presented as follows: $1,360 and $1,447 as a current liability and $32,146 and $49,172 as a non-current liability, respectively. The breakdown of the provision for contingencies is as follows:
As of
June 30, 2024As of
 (Unaudited)December 31, 2023
Tax contingencies in Brazil$24,844 $40,583 
Labor contingencies in Brazil 10,751 12,674 
Others5,442 5,929 
Subtotal41,037 59,186 
Judicial deposits(7,531)(8,567)
Provision for contingencies$33,506 $50,619 

As of June 30, 2024, there are certain matters related to the interpretation of tax, customs, labor and civil laws for which there is a reasonable possibility that a loss may have been incurred in accordance with ASC 450-20-50-4 within a range of $471 million and $513 million. In accordance with ASC 405-20-50-6, unasserted claims or assessments that do not meet the conditions mentioned have not been included.



F-20

Arcos Dorados Holdings Inc.
Notes to the Condensed Consolidated Financial Statements
For the six-month period ended June 30, 2024 and 2023 (Unaudited)
Amounts in thousands of US dollars, except for share data and as otherwise indicated


As of June 30, 2024, there are certain matters related to the interpretation of income tax laws which could be challenged by tax authorities in an amount of $184 million, related to assessments for the fiscal years 2009 to 2017. No formal claim has been made for fiscal years within the statute of limitation by Tax authorities in any of the mentioned matters, however those years are still subject to audit and claims may be asserted in the future.

Pursuant to Section 9.3 of the Stock Purchase Agreement, McDonald’s Corporation indemnifies the Company for certain Brazilian claim. As of June 30, 2024, the provision for contingencies includes $1,284 ($1,458 as of December 31, 2023), related to this claim. As a result, the Company has recorded a non-current asset in respect of McDonald’s Corporation’s indemnity within “Miscellaneous” in the consolidated balance sheet.

9.    Segment and geographic information

The Company is required to report information about operating segments in annual financial statements and interim financial reports issued to shareholders in accordance with ASC 280. Operating segments are components of a company about which separate financial information is available that is regularly evaluated by the chief operating decision maker(s) in deciding how to allocate resources and assess performance. ASC 280 also requires disclosures about the Company’s products and services, geographic areas and major customers.

The following table presents information about profit or loss and assets for each reportable segment: 

For the six-month period ended
 June 30,
 20242023
(Unaudited)(Unaudited)
Revenues:  
Brazil$890,927 $779,397 
NOLAD612,926 536,856 
SLAD688,404 715,060 
Total revenues$2,192,257 $2,031,313 
For the six-month period ended
June 30,
20242023
(Unaudited)(Unaudited)
Adjusted EBITDA:  
Brazil$161,614 $128,602 
NOLAD54,763 51,910 
SLAD55,312 77,590 
Total reportable segments271,689 258,102 
Corporate and others (i)(43,972)(47,542)
Total adjusted EBITDA$227,717 $210,560 

F-21

Arcos Dorados Holdings Inc.
Notes to the Condensed Consolidated Financial Statements
For the six-month period ended June 30, 2024 and 2023 (Unaudited)
Amounts in thousands of US dollars, except for share data and as otherwise indicated


For the six-month period ended
June 30,
 20242023
 (Unaudited)(Unaudited)
Adjusted EBITDA reconciliation:  
Total adjusted EBITDA$227,717 $210,560 
(Less) Plus items excluded from computation that affect operating income:  
Depreciation and amortization(88,293)(68,520)
Gains from sale and insurance recovery of property and equipment2,614 263 
Write-offs of long-lived assets(268)(1,126)
Operating income141,770 141,177 
(Less) Plus:  
Net interest expense and other financing results(30,579)(21,987)
Gain (loss) from derivative instruments1,249 (14,120)
Foreign currency exchange results(19,115)20,945 
Other non-operating (expenses) income, net(652)6 
Income tax expense, net(37,106)(59,850)
Net income attributable to non-controlling interests(426)(396)
Net income attributable to Arcos Dorados Holdings Inc.$55,141 $65,775 

For the six-month period ended
June 30,
 20242023
 (Unaudited)(Unaudited)
Depreciation and amortization:  
Brazil$36,484 $30,713 
NOLAD24,760 19,670 
SLAD22,119 14,583 
Total reportable segments83,363 64,966 
Corporate and others (i)
5,267 3,866 
Purchase price allocation (ii)
(337)(312)
Total depreciation and amortization$88,293 $68,520 

F-22

Arcos Dorados Holdings Inc.
Notes to the Condensed Consolidated Financial Statements
For the six-month period ended June 30, 2024 and 2023 (Unaudited)
Amounts in thousands of US dollars, except for share data and as otherwise indicated


For the six-month period ended
June 30,
 20242023
 (Unaudited)(Unaudited)
Property and equipment expenditures:  
Brazil$46,827 $45,277 
NOLAD41,327 28,235 
SLAD60,769 48,993 
Others4 641 
Total property and equipment expenditures$148,927 $123,146 

 As of
June 30,
2024December 31,
 (Unaudited)2023
Total assets:  
Brazil$1,212,805 $1,304,759 
NOLAD903,267 900,429 
SLAD773,479 748,073 
Total reportable segments2,889,551 2,953,261 
Corporate and others (i)105,753 171,255 
Purchase price allocation (ii)(99,281)(105,278)
Total assets$2,896,023 $3,019,238 

(i)Primarily relates to corporate general and administrative expenses, corporate supply chain operations in Uruguay, and related assets. Corporate general and administrative expenses consist of corporate office support costs in areas such as facilities, finance, human resources, information technology, legal, marketing, restaurant operations, supply chain and training. As of June 30, 2024 and December 31, 2023, corporate assets primarily include cash and cash equivalents and short-term investments.

(ii)Relates to the purchase price allocation adjustment made at corporate level, which reduces the accounting value of our long-lived assets (excluding Lease right of use) and goodwill, considering the corresponding depreciation and amortization. As of June 30, 2024 and December 31, 2023, primarily related with the reduction of goodwill.
 
The Company’s revenues are derived from two sources: sales by Company-operated restaurants and revenues from restaurants operated by franchisees. All of the Company’s revenues are derived from foreign operations.
 
Long-lived assets consisting of property and equipment totaled $1,104,280 on June 30, 2024; and $1,119,885 on December 31, 2023. All of the Company’s long-lived assets are related to foreign operations.

F-23

Arcos Dorados Holdings Inc.
Notes to the Condensed Consolidated Financial Statements
For the six-month period ended June 30, 2024 and 2023 (Unaudited)
Amounts in thousands of US dollars, except for share data and as otherwise indicated

10.    Shareholders’ equity

Authorized capital

The Company is authorized to issue a maximum of 500,000,000 shares, consisting of 420,000,000 Class A shares and 80,000,000 Class B shares of no par value each.

Issued and outstanding capital

As of June 30, 2024 and December 31, 2023, the Company issued 212,972,119 and 212,964,031 shares with no par value, consisting of 132,972,119 and 132,964,031 Class A shares respectively and 80,000,000 Class B shares for each period.

As of June 30, 2024 and December 31, 2023, the Company had 2,309,062 shares in treasury.

Therefore, as of June 30, 2024 the Company had 210,663,057 shares outstanding, consisting of 130,663,057 Class A shares and 80,000,000 Class B shares.

Rights, privileges and obligations

Holders of Class A shares are entitled to one vote per share and holders of Class B shares are entitled to five votes per share. Except with respect to voting, the rights, privileges and obligations of the Class A shares and Class B shares are pari passu in all respects, including with respect to dividends and rights upon liquidation of the Company.
 
Distribution of dividends
 
The Company can only make distributions to the extent that immediately following the distribution, its assets exceed its liabilities, and the Company is able to pay its debts as they become due.

On March 12, 2024, the Company approved a cash dividend distribution to all Class A and Class B shareholders of $0.24 per share to be paid in four installments, as follows: $0.06 per share in March 28, June 28, September 27 and December 27, 2024, respectively. As of June 30, 2024, the Company paid $25,278 of cash dividends.

F-24

Arcos Dorados Holdings Inc.
Notes to the Condensed Consolidated Financial Statements
For the six-month period ended June 30, 2024 and 2023 (Unaudited)
Amounts in thousands of US dollars, except for share data and as otherwise indicated




Accumulated other comprehensive loss

The following tables set forth information with respect to the components of “Accumulated other comprehensive loss” as of June 30, 2024 and 2023, respectively, and their related activity during the six-month period ended:
 
 
 
Foreign currency translation
 
Cash flow hedges
 
Securities available for sale (i)
Total Accumulated other comprehensive loss
Balances at December 31, 2023$(555,781)$(3,015)$(4,285)$(563,081)
Other comprehensive (loss) income before reclassifications (Unaudited)(55,049)15,639 637 (38,773)
Net (gain) loss reclassified from accumulated other comprehensive loss to consolidated statement of income (Unaudited)— (12,181)438 (11,743)
Net current-period other comprehensive (loss) income (Unaudited)(55,049)3,458 1,075 (50,516)
Balances at June 30, 2024 (Unaudited)$(610,830)$443 $(3,210)$(613,597)


 
 
 
Foreign currency translation
 
Cash flow hedges
 
Securities available for sale (i)
Total Accumulated other comprehensive loss
Balances at December 31, 2022$(609,090)$(746)$(3,624)$(613,460)
Other comprehensive income (loss) before reclassifications (Unaudited)59,028 (15,217)(449)43,362 
Net loss reclassified from accumulated other comprehensive loss to consolidated statement of income (Unaudited) — 10,869 — 10,869 
Net current-period other comprehensive income (loss) (Unaudited)59,028 (4,348)(449)54,231 
Balances at June 30, 2023 (Unaudited)$(550,062)$(5,094)$(4,073)$(559,229)

(i)Related to unrealized results on available for sale securities. As of June 30, 2024, the Company maintains Securities classified as available for sale in accordance with guidance in ASC 320 Investments – Debt and Equity Securities amounting to $5,140, included within “Short-term investments” in the Consolidated Balance Sheet. The amortized cost amounted to $8,545.
F-25

Arcos Dorados Holdings Inc.
Notes to the Condensed Consolidated Financial Statements
For the six-month period ended June 30, 2024 and 2023 (Unaudited)
Amounts in thousands of US dollars, except for share data and as otherwise indicated
11.    Earnings per share

The Company is required to present basic earnings per share and diluted earnings per share in accordance with ASC 260. Earnings per share are based on the weighted average number of shares outstanding during the period after consideration of the dilutive effect, if any, for common stock equivalents, including stock options and restricted share units. Basic earnings per common share are computed by dividing net income available to common shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share are computed by dividing net income by the weighted average number of shares of common stock outstanding and dilutive securities outstanding during the period under the treasury method.

The following table sets forth the computation of basic and diluted net income per common share attributable to Arcos Dorados Holdings Inc. for all periods presented:
For the six-month period ended
June 30,
 20242023
 (Unaudited)(Unaudited)
Net income attributable to Arcos Dorados Holdings Inc. available to common shareholders$55,141 $65,775 
Weighted-average number of common shares outstanding - Basic210,658,096 210,610,288 
Incremental shares from vesting of restricted share units— 49,285 
Weighted-average number of common shares outstanding - Diluted210,658,096 210,659,573 
Basic net income per common share attributable to Arcos Dorados Holdings Inc.$0.26 $0.31 
Diluted net income per common share attributable to Arcos Dorados Holdings Inc.$0.26 $0.31 
 

12.    Related party transactions

The Company has entered into a master commercial agreement on arm’s length terms with Axionlog, a company under common control that operates the distribution centers in Argentina, Chile, Colombia, Ecuador, Mexico, Peru, Uruguay, Venezuela, French Guiana, Guadeloupe, Martinique, Aruba, Curaçao, the USVI and Trinidad and Tobago (the “Axionlog Business”). Pursuant to this agreement Axionlog provides the Company distribution inventory, storage and transportation services in the countries in which it operates.

F-26

Arcos Dorados Holdings Inc.
Notes to the Condensed Consolidated Financial Statements
For the six-month period ended June 30, 2024 and 2023 (Unaudited)
Amounts in thousands of US dollars, except for share data and as otherwise indicated



The following table summarizes the outstanding balances between the Company and the Axionlog Business as of June 30, 2024 and December 31, 2023: 
 As of
June 30,
2024December 31,
 (Unaudited)2023
Other receivables5,948 5,979 
Miscellaneous4,104 4,190 
Accounts payable(24,705)(26,092)

The following table summarizes the transactions between the Company and the Axionlog Business for the six-month period ended June 30, 2024 and 2023:    
For the six-month period ended
 June 30,
20242023
 (Unaudited)(Unaudited)
Food and paper (i)$(168,216)$(152,063)
Occupancy and other operating expenses(5,366)(4,547)

(i)Includes $32,251 of distribution fees and $135,965 of supplier purchases managed through the Axionlog Business for the six-month period ended June 30, 2024; and, $31,301 and $120,762, respectively, for the six-month period ended June 30, 2023.

As of June 30, 2024 and December 31, 2023, the Company had other receivables with Operadora de Franquicias Saile S.A.P.I. de C.V. totaling $609 and $710, respectively.

13.    Disclosures about fair value of financial instruments

As defined in ASC 820 Fair Value Measurement and Disclosures, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The transaction is based on a hypothetical transaction in the principal or most advantageous market considered from the perspective of the market participant that holds the asset or owes the liability. The valuation techniques that can be used under this guidance are the market approach, income approach or cost approach. The market approach uses prices and other information for market transactions involving identical or comparable assets or liabilities, such as matrix pricing. The income approach uses valuation techniques to convert future amounts to a single discounted present amount based on current market conditions about those future amounts, such as present value techniques, option pricing models (e.g. Black-Scholes model) and binomial models (e.g. Monte-Carlo model). The cost approach is based on current replacement cost to replace an asset.

The Company utilizes market data or assumptions that market participants who are independent, knowledgeable and willing and able to transact would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated or generally unobservable. The Company attempts to utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. The Company is able to classify fair value balances based on the observance of those inputs. The guidance establishes a formal fair value hierarchy based on the inputs used to measure fair value. The hierarchy gives the highest priority to level 1 measurements and the lowest priority to level 3 measurements, and accordingly, level 1 measurement should be used whenever possible.

F-27

Arcos Dorados Holdings Inc.
Notes to the Condensed Consolidated Financial Statements
For the six-month period ended June 30, 2024 and 2023 (Unaudited)
Amounts in thousands of US dollars, except for share data and as otherwise indicated



The three levels of the fair value hierarchy as defined by the guidance are as follows:

Level 1: Valuations utilizing quoted, unadjusted prices for identical assets or liabilities in active markets that the Company has the ability to access. This is the most reliable evidence of fair value and does not require a significant degree of judgment. Examples include exchange-traded derivatives and listed equities that are actively traded.

Level 2: Valuations utilizing quoted prices in markets that are not considered to be active or financial instruments for which all significant inputs are observable, either directly or indirectly for substantially the full term of the asset or liability.

Financial instruments that are valued using models or other valuation methodologies are included. Models used should primarily be industry-standard models that consider various assumptions and economic measures, such as interest rates, yield curves, time value, volatilities, contract terms, current market prices, credit risk or other market-corroborated inputs. Examples include most over-the-counter derivatives (non-exchange traded), physical commodities, most structured notes and municipal and corporate bonds.

Level 3: Valuations utilizing significant unobservable inputs provides the least objective evidence of fair value and requires a significant degree of judgment. Inputs may be used with internally developed methodologies and should reflect an entity’s assumptions using the best information available about the assumptions that market participants would use in pricing an asset or liability. Examples include certain corporate loans, real-estate and private equity investments and long-dated or complex over-the-counter derivatives. 

Depending on the particular asset or liability, input availability can vary depending on factors such as product type, longevity of a product in the market and other particular transaction conditions. In some cases, certain inputs used to measure fair value may be categorized into different levels of the fair value hierarchy. For disclosure purposes under this guidance, the lowest level that contains significant inputs used in valuation should be chosen. Pursuant to ASC 820-10-50, the Company has classified its assets and liabilities into these levels depending upon the data relied on to determine the fair values. The fair values of the Company’s derivatives are valued based upon quotes obtained from counterparties to the agreements and are designated as Level 2.
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Arcos Dorados Holdings Inc.
Notes to the Condensed Consolidated Financial Statements
For the six-month period ended June 30, 2024 and 2023 (Unaudited)
Amounts in thousands of US dollars, except for share data and as otherwise indicated



The following fair value hierarchy table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of June 30, 2024 and December 31, 2023:

Quoted Prices in
Active Markets
For Identical Assets
(Level 1)		Significant Other
Observable Inputs
(Level 2)		Significant
Unobservable Inputs
(Level 3)
As ofAs ofAs ofAs ofAs ofAs ofBalance as ofBalance as of
June 30, 2024 (Unaudited)December 31, 2023June 30, 2024 (Unaudited)December 31, 2023June 30, 2024 (Unaudited)December 31, 2023June 30, 2024 (Unaudited)December 31, 2023
Assets
Cash equivalents$37,242 $113,726 $— $— $— $— $37,242 $113,726 
Short-term Investments$30,000 $45,000 $5,140 $5,106 $— $— $35,140 $50,106 
Derivatives$— $— $66,050 $46,605 $— $— $66,050 $46,605 
Total Assets$67,242 $158,726 $71,190 $51,711 $— $— $138,432 $210,437 
Liabilities
Derivatives$— $— $18,631 $24,294 $— $— $18,631 $24,294 
Total Liabilities$— $— $18,631 $24,294 $— $— $18,631 $24,294 

The derivative contracts were valued using various pricing models or discounted cash flow analyses that incorporate observable market parameters, such as interest rate yield curves, option volatilities and currency rates that were observable for substantially the full term of the derivative contracts.

Certain financial assets and liabilities not measured at fair value

As of June 30, 2024, the fair value of the Company’s short term and long-term debt was estimated at $707,544, compared to a carrying amount of $762,476. This fair value was estimated using various pricing models or discounted cash flow analysis that incorporated quoted market prices and is similar to Level 2 within the valuation hierarchy. The carrying amount for notes receivable approximates fair value.

Non-financial assets and liabilities measured at fair value on a nonrecurring basis

Certain assets and liabilities are measured at fair value on a nonrecurring basis; that is, the assets and liabilities are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (e.g., when there is evidence of impairment). As of June 30, 2024, no material fair value adjustments or fair value measurements were required for non-financial assets or liabilities.



F-29
Arcos Dorados (NYSE:ARCO)
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