Title of each class Trading Symbol Name of each exchange on which registered Class A shares, no par value ARCO New York Stock Exchange 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, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d ...

Arcos Dorados Holdings Inc. (NYSE:ARCO) Q4 2022 Earnings Call Transcript March 15, 2023 10:00 AM ET Company Participants Dan Schleiniger - Vice President of Investor Relations Marcelo Rabach - Chief Executive Officer Luis Raganato - Chief Operating Officer Mariano Tannenbaum - Chief Financial Officer Conference Call Participants Dan Schleiniger Good morning, everyone, and thank you for joining our Fourth Quarter and Full Year 2022 Earnings Webcast. With us today are Marcelo Rabach, our Chief Executive Offic ...

[Condensed Consolidated Financial Statements](index=4&type=section&id=Condensed%20Consolidated%20Financial%20Statements) [Consolidated Statements of Income (Loss)](index=5&type=section&id=Consolidated%20Statements%20of%20Income%20(Loss)) The company achieved a significant turnaround with a net income of $39.0 million in H1 2022, driven by a 45.5% increase in total revenues Key Income Statement Data (Six Months Ended June 30) | Metric | 2022 (in thousands USD) | 2021 (in thousands USD) | YoY Change | | :--- | :--- | :--- | :--- | | **Total Revenues** | $1,678,576 | $1,153,812 | +45.5% | | **Operating Income** | $108,993 | $11,009 | +889.9% | | **Net Income (Loss) attributable to Arcos Dorados** | $38,984 | $(24,780) | Turnaround to Profit | | **Diluted EPS** | $0.19 | $(0.12) | Turnaround to Profit | [Consolidated Statements of Comprehensive Income (Loss)](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) The company's comprehensive income reversed from a loss to a gain, reaching $24.8 million for the first six months of 2022 Comprehensive Income (Loss) Summary (Six Months Ended June 30) | Metric | 2022 (in thousands USD) | 2021 (in thousands USD) | | :--- | :--- | :--- | | Net income (loss) | $39,204 | $(24,668) | | Total other comprehensive (loss) income | $(14,275) | $2,255 | | **Comprehensive income (loss) attributable to Arcos Dorados** | $24,795 | $(22,499) | [Consolidated Balance Sheets](index=7&type=section&id=Consolidated%20Balance%20Sheets) The company's financial position remained stable with total assets increasing slightly to $2.40 billion and total equity at $214.2 million Key Balance Sheet Data | Metric | June 30, 2022 (in thousands USD) | Dec 31, 2021 (in thousands USD) | | :--- | :--- | :--- | | **Total Current Assets** | $541,823 | $540,116 | | **Total Assets** | $2,402,691 | $2,361,257 | | **Total Current Liabilities** | $628,108 | $617,863 | | **Total Liabilities** | $2,188,453 | $2,140,095 | | **Total Equity** | $214,238 | $221,162 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities increased significantly to $121.9 million in H1 2022, reflecting improved profitability and stable cash reserves Cash Flow Summary (Six Months Ended June 30) | Metric | 2022 (in thousands USD) | 2021 (in thousands USD) | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $121,900 | $34,555 | | **Net cash used in investing activities** | $(84,011) | $(44,548) | | **Net cash (used in) provided by financing activities** | $(25,574) | $13,008 | | **Decrease in cash and cash equivalents** | $(2,752) | $(4,122) | | **Cash and cash equivalents at end of period** | $276,078 | $161,867 | [Consolidated Statement of Changes in Equity](index=9&type=section&id=Consolidated%20Statement%20of%20Changes%20in%20Equity) Total equity decreased to $214.2 million, as dividend payments and other comprehensive losses more than offset the period's net income - Key equity movements included a **net income contribution of +$39.2 million**, an **other comprehensive loss of -$14.3 million**, and **dividend payments of -$31.6 million**[17](index=17&type=chunk) [Notes to the Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) [Note 1. Organization and nature of business](index=11&type=section&id=1.%20Organization%20and%20nature%20of%20business) Arcos Dorados operates and franchises McDonald's restaurants in 20 Latin American and Caribbean territories under Master Franchise Agreements - The company's ability to operate is exclusively granted by McDonald's Corporation through **Master Franchise Agreements (MFAs)** which extend through August 2, 2027[25](index=25&type=chunk) - Operations are spread across twenty territories in Latin America and the Caribbean, including major markets like **Brazil, Mexico, and Argentina**[26](index=26&type=chunk) [Note 3. Summary of significant accounting policies](index=12&type=section&id=3.%20Summary%20of%20significant%20accounting%20policies) The company's accounting policies address highly inflationary economies like Venezuela and Argentina by remeasuring financials into US dollars - Due to high inflation, the financial statements for operations in **Venezuela and Argentina** are remeasured into US dollars, with gains and losses recognized in earnings[34](index=34&type=chunk) - No new accounting pronouncements issued or effective during the period had a **material impact** on the company's consolidated financial statements[35](index=35&type=chunk) [Note 5. Long-term debt](index=13&type=section&id=5.%20Long-term%20debt) The company refinanced its debt by issuing $350 million in new 2029 Notes to repurchase existing notes, extending its maturity profile - In April 2022, the company's subsidiary ADBV issued **$350 million in sustainability-linked Senior Notes due 2029** with an interest rate of 6.125%[55](index=55&type=chunk) - The proceeds from the 2029 Notes were primarily used to fund tender offers for the **2023 and 2027 Notes**, effectively refinancing existing debt[58](index=58&type=chunk) Long-Term Debt Principal (in thousands USD) | Note Series | June 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | 2029 Notes | $350,000 | $0 | | 2027 Notes | $385,986 | $535,986 | | 2023 Notes | $19,524 | $201,763 | [Note 6. Derivative instruments](index=18&type=section&id=6.%20Derivative%20instruments) Arcos Dorados utilizes a variety of derivative instruments to manage foreign exchange and interest rate risks Fair Value of Derivative Instruments (June 30, 2022) | Type | Assets (in thousands USD) | Liabilities (in thousands USD) | | :--- | :--- | :--- | | **Designated as Hedges** | $89,559 | $(4,499) | | **Not Designated as Hedges** | $10,685 | $(27,864) | | **Total** | **$100,244** | **$(32,363)** | - The company uses **forward contracts** to hedge foreign exchange risk on forecasted imports and **cross-currency interest rate swaps** to hedge variability of intercompany loan receivables and payables[64](index=64&type=chunk)[68](index=68&type=chunk) [Note 7. Share-based compensation](index=23&type=section&id=7.%20Share-based%20compensation) Total share-based compensation expense was $2.95 million for H1 2022, primarily from the cash-settled Phantom RSU plan - Compensation expense recognized in H1 2022 was **$97 thousand** for the 2011 Equity Incentive Plan and **$2.86 million** for the Phantom RSU plan[95](index=95&type=chunk)[103](index=103&type=chunk) - As of June 30, 2022, there were **64,895 outstanding Restricted Share Units** and **2,820,517 outstanding Phantom RSUs**[97](index=97&type=chunk)[105](index=105&type=chunk) [Note 8. Commitments and contingencies](index=25&type=section&id=8.%20Commitments%20and%20contingencies) The company has significant commitments under its MFAs, including a $650 million investment plan, and was in compliance with all covenants - The company has a growth plan for 2022-2024 to open at least **200 new restaurants** and modernize at least 400, with planned capital expenditures of approximately **$650 million**[111](index=111&type=chunk) - As of June 30, 2022, the company was in compliance with its key MFA financial covenants, with a **Fixed Charge Coverage Ratio of 1.91** (>=1.50 required) and a **Leverage Ratio of 3.43** (<=4.25 required)[112](index=112&type=chunk) Provision for Contingencies (June 30, 2022) | Contingency Type | Amount (in thousands USD) | | :--- | :--- | | Tax contingencies in Brazil | $21,828 | | Labor contingencies in Brazil | $14,152 | | Others | $11,217 | | **Subtotal** | **$47,197** | | Judicial deposits | $(7,000) | | **Net Provision** | **$40,197** | [Note 9. Segment and geographic information](index=27&type=section&id=9.%20Segment%20and%20geographic%20information) The company's three geographic divisions—Brazil, NOLAD, and SLAD—all demonstrated strong revenue growth in H1 2022 - Effective October 1, 2021, the company reorganized its operations into three geographic divisions: **Brazil, NOLAD, and SLAD**[124](index=124&type=chunk) Revenues by Segment (Six Months Ended June 30) | Segment | 2022 (in thousands USD) | 2021 (in thousands USD) | | :--- | :--- | :--- | | Brazil | $670,048 | $428,990 | | NOLAD | $426,578 | $367,026 | | SLAD | $581,950 | $357,796 | | **Total** | **$1,678,576** | **$1,153,812** | Adjusted EBITDA by Segment (Six Months Ended June 30) | Segment | 2022 (in thousands USD) | 2021 (in thousands USD) | | :--- | :--- | :--- | | Brazil | $98,744 | $47,357 | | NOLAD | $44,660 | $32,874 | | SLAD | $63,253 | $20,690 | [Note 10. Shareholders' equity](index=31&type=section&id=10.%20Shareholders%27%20equity) The company approved a $0.15 per share cash dividend for 2022, while Accumulated Other Comprehensive Loss stood at $622.0 million - On March 15, 2022, the company approved a cash dividend of **$0.15 per share**, to be paid in four installments throughout 2022, with the first two payments totaling **$16.8 million**[140](index=140&type=chunk) Changes in Accumulated Other Comprehensive Loss (H1 2022) | Component | Balance at Dec 31, 2021 | Net Change in H1 2022 | Balance at June 30, 2022 | | :--- | :--- | :--- | :--- | | Foreign currency translation | $(625,071) | $(3,226) | $(628,297) | | Cash flow hedges | $17,840 | $(9,539) | $8,301 | | Securities available for sale | $0 | $(1,802) | $(1,802) | | Post-employment benefits | $(537) | $378 | $(159) | | **Total (in thousands USD)** | **$(607,768)** | **$(14,189)** | **$(621,957)** | [Note 11. Earnings per share](index=33&type=section&id=11.%20Earnings%20per%20share) Earnings per share improved significantly to $0.19 for H1 2022, a turnaround from a loss of ($0.12) in the prior-year period EPS Calculation (Six Months Ended June 30) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Net income (loss) attributable to Arcos Dorados (in thousands USD) | $38,984 | $(24,780) | | Weighted-average shares - Basic (in millions) | 210.5 | 210.3 | | Weighted-average shares - Diluted (in millions) | 210.7 | 210.5 | | **Basic EPS** | **$0.19** | **$(0.12)** | | **Diluted EPS** | **$0.19** | **$(0.12)** | [Note 13. Disclosures about fair value of financial instruments](index=34&type=section&id=13.%20Disclosures%20about%20fair%20value%20of%20financial%20instruments) The company's financial instruments, primarily derivatives, are measured at fair value using Level 2 observable market inputs - The company's derivative assets and liabilities are valued using **Level 2 inputs**, which include observable market parameters like interest rate yield curves and currency rates[165](index=165&type=chunk)[169](index=169&type=chunk) - As of June 30, 2022, the fair value of the company's short and long-term debt was estimated at **$689.5 million**, compared to a carrying amount of **$759.0 million**[170](index=170&type=chunk)

[Preliminary Information](index=6&type=section&id=Preliminary%20Information) [Presentation of Financial and Other Information](index=6&type=section&id=PRESENTATION%20OF%20FINANCIAL%20AND%20OTHER%20INFORMATION) This section outlines the definitions, financial statement conventions, and operating data structure used throughout the report - The company operates McDonald's-branded restaurants in **20 countries** and territories in Latin America and the Caribbean under Master Franchise Agreements (MFAs)[10](index=10&type=chunk)[11](index=11&type=chunk) - Financial statements are prepared in accordance with U.S. GAAP and reported in U.S. dollars, with the fiscal year ending on December 31[12](index=12&type=chunk)[13](index=13&type=chunk) - Effective October 1, 2021, the company reorganized its operations from four to three geographic divisions: (i) Brazil, (ii) North Latin American division (NOLAD), and (iii) South Latin American division (SLAD)[14](index=14&type=chunk) - Restaurants are operated in two formats: Company-operated and franchised, with systemwide data including both formats[15](index=15&type=chunk) [Forward-Looking Statements](index=8&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section provides a standard safe harbor statement, cautioning that the report contains forward-looking statements subject to various risks and uncertainties - The report contains forward-looking statements identified by words such as "anticipate," "believe," "expect," etc., which are subject to risks and uncertainties[20](index=20&type=chunk) - Key risks highlighted include the impact of the COVID-19 pandemic, economic and political conditions in Latin America, inflation, exchange rate fluctuations, and the ability to comply with the **Master Franchise Agreements (MFAs)**[21](index=21&type=chunk) [Enforcement of Judgments](index=9&type=section&id=ENFORCEMENT%20OF%20JUDGMENTS) This section explains the legal challenges investors may face in enforcing U.S. court judgments against the company, its directors, and officers - The company is incorporated in the British Virgin Islands (BVI), and a majority of its directors, officers, and assets are located outside the United States, primarily in Latin America[23](index=23&type=chunk)[24](index=24&type=chunk) - There is no treaty between the U.S. and the BVI for reciprocal recognition and enforcement of judgments, meaning U.S. judgments are not automatically enforceable in the BVI[25](index=25&type=chunk) [PART I](index=10&type=section&id=PART%20I) [Item 3. Key Information](index=11&type=section&id=ITEM%203.%20KEY%20INFORMATION) This section provides crucial financial and operational data, outlines significant risks, and discusses exchange rate environments [Selected Financial Data](index=11&type=section&id=A.%20Selected%20Financial%20Data) This subsection presents key financial and operating data for the fiscal years 2019, 2020, and 2021 Selected Income Statement Data (in thousands of U.S. dollars) | Indicator | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | **Total revenues** | $2,659,941 | $1,984,219 | $2,959,077 | | **Operating income (loss)** | $139,519 | $(66,754) | $159,936 | | **Net income (loss) attributable to Arcos Dorados** | $45,486 | $(149,451) | $79,896 | | **Diluted EPS** | $0.22 | $(0.72) | $0.38 | Selected Balance Sheet Data (in thousands of U.S. dollars) | Indicator | As of Dec 31, 2021 | As of Dec 31, 2020 | As of Dec 31, 2019 | | :--- | :--- | :--- | :--- | | **Total assets** | $2,361,257 | $2,293,954 | $2,557,685 | | **Total liabilities** | $2,140,095 | $2,095,938 | $2,136,119 | | **Total equity** | $221,162 | $198,016 | $421,566 | Adjusted EBITDA by Segment (in thousands of U.S. dollars) | Segment | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | **Brazil** | $175,603 | $76,155 | $227,844 | | **NOLAD** | $85,323 | $41,496 | $64,059 | | **SLAD** | $77,573 | $830 | $63,043 | | **Corporate & others** | $(66,741) | $(50,370) | $(63,171) | | **Total Adjusted EBITDA** | $271,758 | $68,111 | $291,775 | Systemwide Restaurant Count | Segment | As of Dec 31, 2021 | As of Dec 31, 2020 | As of Dec 31, 2019 | | :--- | :--- | :--- | :--- | | **Brazil** | 1,051 | 1,020 | 1,023 | | **NOLAD** | 625 | 629 | 655 | | **SLAD** | 585 | 587 | 615 | | **Total** | **2,261** | 2,236 | 2,293 | - Effective October 1, 2021, the company reorganized its operations from four to three geographic divisions (Brazil, NOLAD, SLAD), and has restated comparative segment information for 2020 and 2019[29](index=29&type=chunk) - The company discusses significant currency devaluations and exchange controls in key markets, particularly Argentina, which has had currency controls in place that substantially limit the ability to make payments abroad[50](index=50&type=chunk)[51](index=51&type=chunk) [Risk Factors](index=22&type=section&id=D.%20Risk%20Factors) This subsection provides a comprehensive overview of the risks facing the company - **Business & Operations Risks:** The company's rights to operate McDonald's restaurants derive exclusively from the **Master Franchise Agreements (MFAs)**, which expire on **August 2, 2027**, and renewal is not guaranteed and depends on McDonald's judgment[85](index=85&type=chunk)[86](index=86&type=chunk) - **Business & Operations Risks:** McDonald's has the right to acquire the company's non-public shares or its interests in one or more territories at **80% of fair market value** upon a material breach of the **Master Franchise Agreements (MFAs)**[93](index=93&type=chunk)[94](index=94&type=chunk)[95](index=95&type=chunk) - **Business & Operations Risks:** The COVID-19 pandemic significantly disrupted operations in 2020 and continues to pose a risk, leading the company to implement cash preservation measures, receive temporary waivers on debt covenants and **Master Franchise Agreements (MFAs)** requirements, and agree to a revised, shorter-term investment plan with McDonald's[95](index=95&type=chunk)[98](index=98&type=chunk)[103](index=103&type=chunk) - **Financial Risks:** High inflation in countries like Argentina and Venezuela, along with government measures to curb it, can adversely affect economic growth, consumer demand, and operating margins[138](index=138&type=chunk)[139](index=139&type=chunk) - **Financial Risks:** The company is subject to significant foreign currency exchange controls, particularly in Argentina, which substantially limit the ability to retain foreign currency or make payments abroad[144](index=144&type=chunk)[147](index=147&type=chunk) - **Industry Risks:** The food services industry is intensely competitive, with pressure on price, brand image, and product innovation from international and local chains[167](index=167&type=chunk) - **Regulatory Risks:** Several countries, including Chile, Peru, Mexico, and Brazil, have imposed or are considering restrictions on advertising to children and the use of toys in meals, which could harm brand image and results[176](index=176&type=chunk)[177](index=177&type=chunk)[179](index=179&type=chunk) - **Shareholder Risks:** Executive Chairman Woods Staton controls **75.4% of the voting power**, limiting the ability of Class A shareholders to influence corporate activities[205](index=205&type=chunk)[206](index=206&type=chunk) [Item 4. Information on the Company](index=45&type=section&id=ITEM%204.%20INFORMATION%20ON%20THE%20COMPANY) This item details the company's history, business operations, organizational structure, and property portfolio [History and Development of the Company](index=45&type=section&id=A.%20History%20and%20Development%20of%20the%20Company) This subsection outlines the company's origins and key developments - The company commenced operations on August 3, 2007, after acquiring McDonald's operations in Latin America and the Caribbean[223](index=223&type=chunk) - A new growth and investment plan for 2022-2024 was agreed with McDonald's, which includes opening at least **200 new restaurants** and modernizing at least **400**, with capital expenditures of approximately **$650 million**[230](index=230&type=chunk) Capital Expenditures (in millions of U.S. dollars) | Year | Property and Equipment Expenditures | | :--- | :--- | | 2021 | **$115.0** | | 2020 | **$90.1** | | 2019 | **$267.9** | - In 2021, the company opened **46 new restaurants**, reimaged **34**, and opened **27 McCafé locations** and **107 Dessert Centers**[230](index=230&type=chunk) [Business Overview](index=47&type=section&id=B.%20Business%20Overview) This subsection provides a comprehensive description of the company's business - As of December 31, 2021, the company operated or franchised **2,261 McDonald's-branded restaurants**, with **1,579 (69.8%)** being Company-operated and **682 (30.2%)** franchised[235](index=235&type=chunk) Restaurant Portfolio by Division (as of Dec 31, 2021) | Division | Company-Operated | Franchised | Total Restaurants | Dessert Centers | McCafé Locations | | :--- | :--- | :--- | :--- | :--- | :--- | | **Brazil** | 631 | 420 | 1,051 | 2,013 | 95 | | **NOLAD** | 453 | 172 | 625 | 536 | 14 | | **SLAD** | 495 | 90 | 585 | 716 | 159 | | **Total** | **1,579** | **682** | **2,261** | **3,265** | **268** | - The company's social and environmental strategy, "Recipe for the Future," focuses on six pillars: youth opportunity, climate change, circular economy, sustainable sourcing, commitment to families, and diversity & inclusion[310](index=310&type=chunk) - The company is committed to McDonald's Science Based Target to reduce GHG emissions, with its Scope 1 & 2 GHG emissions in 2021 being **356,204 tonnes of CO2-equivalent**[338](index=338&type=chunk) - By 2025, the company aims for **100% of its packaging** to come from renewable, recycled, or certified sources, a goal it achieved in 2021, and also aims to offer recycling in all restaurants by 2025[342](index=342&type=chunk) - The company has a commitment to source **cage-free eggs by 2025** and to eliminate **deforestation from its global supply chain by 2030**, with a specific focus on beef and soy[359](index=359&type=chunk)[362](index=362&type=chunk) [Organizational Structure](index=72&type=section&id=C.%20Organizational%20Structure) This subsection describes the corporate structure of Arcos Dorados - The company's controlling shareholder, Los Laureles Ltd., is beneficially owned by Executive Chairman Woods Staton and holds **100% of the Class B shares**[368](index=368&type=chunk) - This ownership structure gives Los Laureles Ltd. **38.01% of the company's economic interest** and **75.40% of its voting power**[368](index=368&type=chunk)[649](index=649&type=chunk) [Property, Plants and Equipment](index=72&type=section&id=D.%20Property,%20Plants%20and%20Equipment) This subsection details the company's real estate assets - As of December 31, 2021, the company owned the land for **490 of its 2,261 restaurants**, totaling approximately **1.1 million square meters**[370](index=370&type=chunk) - The company owned the buildings for **all but 8 of its stand-alone restaurants**, with the remaining 8 under developmental licenses where the licensee owns or leases the property[370](index=370&type=chunk) [Item 5. Operating and Financial Review and Prospects](index=73&type=section&id=ITEM%205.%20OPERATING%20AND%20FINANCIAL%20REVIEW%20AND%20PROSPECTS) This item provides a detailed management discussion and analysis of the company's financial condition and results of operations [Operating Results](index=73&type=section&id=A.%20Operating%20Results) This subsection provides a detailed analysis of the company's financial performance, comparing 2021 to 2020 and 2020 to 2019 Systemwide Sales Growth (2021 vs. 2020) | Metric | 2021 vs 2020 | | :--- | :--- | | **Sales Growth (Nominal)** | **32.2%** | | **Sales Growth (Constant Currency)** | **46.9%** | | **Comparable Sales Growth** | **45.9%** | - Total sales by Company-operated restaurants increased **34.3% to $2,543.9 million** in 2021, driven by higher traffic and average check as COVID-19 restrictions eased[424](index=424&type=chunk)[428](index=428&type=chunk) - Food and paper costs as a percentage of Company-operated restaurant sales decreased by **0.4 percentage points to 35.3%** in 2021, reflecting improved margins from better product mix and pricing[437](index=437&type=chunk) - Payroll and employee benefits costs decreased as a percentage of sales by **2.8 percentage points to 19.0%** in 2021, primarily due to sales leverage[440](index=440&type=chunk) - Royalty fees as a percentage of sales decreased to **5.2%** in 2021, mainly due to growth support funding provided by McDonald's Corporation[449](index=449&type=chunk) - Net income attributable to the company was **$45.5 million** in 2021, a significant improvement from the net loss of **$149.5 million** in 2020[469](index=469&type=chunk) [Liquidity and Capital Resources](index=99&type=section&id=B.%20Liquidity%20and%20Capital%20Resources) This subsection details the company's financial health, cash flows, and capital structure Cash Flow Summary (in thousands of U.S. dollars) | Cash Flow Activity | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | **Net cash provided by operating activities** | **$258,044** | **$15,966** | **$223,481** | | **Net cash used in investing activities** | **$(108,279)** | **$(88,706)** | **$(260,991)** | | **Net cash (used in) provided by financing activities** | **$(17,926)** | **$126,009** | **$(29,632)** | - As of December 31, 2021, total financial debt was **$657.9 million**, consisting primarily of **$201.3 million** in 2023 notes and **$532.6 million** in 2027 notes[527](index=527&type=chunk) - The company has a new growth and investment plan for 2022-2024 with planned capital expenditures of approximately **$650 million** to open at least **200 new restaurants** and modernize at least **400**[524](index=524&type=chunk) - In April 2022, the company issued **$350 million of 6.125% sustainability-linked senior notes due 2029** and launched **tender offers for its existing 2023 and 2027 notes** to extend its debt maturity profile[564](index=564&type=chunk)[1178](index=1178&type=chunk)[1180](index=1180&type=chunk) [Trend Information](index=108&type=section&id=D.%20Trend%20Information) This subsection identifies key trends affecting the business - The business saw a significant recovery in economic growth and consumer consumption in the second half of 2021 after the disruption in 2020[575](index=575&type=chunk) - Long-term growth is expected to be supported by the favorable demographics and improving socio-economic conditions in Latin America and the Caribbean[576](index=576&type=chunk) - Key challenges include an inflationary environment impacting costs, increased competition in some markets, and volatility of foreign exchange rates[577](index=577&type=chunk)[578](index=578&type=chunk)[579](index=579&type=chunk) - The company is adapting to changing consumer trends, including demands for healthier products, sustainable practices, and a greater focus on diversity and inclusion[581](index=581&type=chunk)[582](index=582&type=chunk) [Item 6. Directors, Senior Management and Employees](index=109&type=section&id=ITEM%206.%20DIRECTORS,%20SENIOR%20MANAGEMENT%20AND%20EMPLOYEES) This item provides information on the company's governance and human capital - The Board of Directors consists of **10 members**, divided into **three staggered three-year term classes**[585](index=585&type=chunk)[586](index=586&type=chunk) - As of December 31, 2021, the company had a total of **81,256 employees**, of which **83% were crew**, **13% were restaurant managers**, and the remainder were professional staff, with approximately **42% of employees were in Brazil**[638](index=638&type=chunk)[640](index=640&type=chunk) - The company utilizes a **2011 Equity Incentive Plan** (issuing restricted share units) and a **Phantom RSU Plan** (cash-settled) for long-term employee incentives[624](index=624&type=chunk)[629](index=629&type=chunk) - The Board has an **Audit Committee, a Compensation and Nomination Committee, and a Finance Committee** to oversee key governance areas[633](index=633&type=chunk)[635](index=635&type=chunk)[636](index=636&type=chunk) [Item 7. Major Shareholders and Related Party Transactions](index=120&type=section&id=ITEM%207.%20MAJOR%20SHAREHOLDERS%20AND%20RELATED%20PARTY%20TRANSACTIONS) This item details the company's ownership structure and transactions with related parties - Los Laureles Ltd., beneficially owned by Executive Chairman Woods Staton, is the controlling shareholder, holding **100% of Class B shares**, which equates to **38.01% of the economic interest** and **75.40% of the voting power**[649](index=649&type=chunk)[650](index=650&type=chunk) - The company has a master commercial agreement with Axionlog, a company under common control, for distribution and logistics services, incurring **$40.2 million** in distribution fees payable to Axionlog in 2021[656](index=656&type=chunk)[657](index=657&type=chunk) - Francisco Staton, son of the Executive Chairman, serves as the President of the SLAD Division and is a member of the board of directors[658](index=658&type=chunk) [Item 8. Financial Information](index=122&type=section&id=ITEM%208.%20FINANCIAL%20INFORMATION) This item contains the company's consolidated financial statements and information on legal proceedings and dividend policy - The company is subject to several legal proceedings, particularly labor litigation in Brazil regarding work schedules and conditions, including a significant 2013 settlement with the Labor Prosecutor's Office with ongoing monitoring for compliance[663](index=663&type=chunk)[665](index=665&type=chunk) - As of December 31, 2021, the company had a provision for contingencies of **$40.7 million** and noted a range of possible losses for certain matters between **$240 million and $271 million**[675](index=675&type=chunk)[678](index=678&type=chunk) - The Board of Directors approved a dividend of **$0.15 per share** for 2022, payable in quarterly installments, and in 2021, the company made a stock distribution of **one share for every seventy shares held**[683](index=683&type=chunk) [Item 10. Additional Information](index=126&type=section&id=ITEM%2010.%20ADDITIONAL%20INFORMATION) This item provides details on the company's corporate governance, including its memorandum and articles of association, and a summary of its material contracts - The company is incorporated in the British Virgin Islands, and its corporate governance is subject to the BVI Business Companies Act, which differs from Delaware corporate law in areas such as director fiduciary duties and shareholder rights[689](index=689&type=chunk)[702](index=702&type=chunk) - The company's shares are divided into Class A (one vote per share) and Class B (five votes per share), with all Class B shares held by the controlling shareholder[692](index=692&type=chunk)[694](index=694&type=chunk) - The **Master Franchise Agreements (MFAs)** with McDonald's are the core of the business, granting exclusive rights in **20 territories** until **August 2, 2027**[740](index=740&type=chunk)[742](index=742&type=chunk) - Under the **Master Franchise Agreements (MFAs)**, McDonald's has a "**Call Option**" to acquire the company's non-public shares at **100% of fair market value** upon certain events (like expiration or death of the controlling shareholder) or at **80% of fair market value** in the event of a material breach[759](index=759&type=chunk)[760](index=760&type=chunk) - The **Master Franchise Agreements (MFAs)** require the company to maintain a **fixed charge coverage ratio of at least 1.50** and a **leverage ratio not exceeding 4.25**, with the company being **in compliance** with both ratios as of December 31, 2021[765](index=765&type=chunk)[767](index=767&type=chunk) [Item 11. Quantitative and Qualitative Disclosures About Market Risk](index=145&type=section&id=ITEM%2011.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This item discusses the company's exposure to various market risks, primarily foreign currency exchange rate risk and commodity price risk - The company's primary market risks are **foreign currency exchange rate fluctuations** and **commodity price volatility**[803](index=803&type=chunk) - The company is exposed to FX risk as revenues are in local currencies while a significant portion of its long-term debt is denominated in U.S. dollars, and it uses derivative instruments to partially hedge this exposure[804](index=804&type=chunk) - A sensitivity analysis as of December 31, 2021, shows that a **10% depreciation of the Brazilian real** against the U.S. dollar would result in a **net foreign exchange loss of $10.8 million**[807](index=807&type=chunk) - Commodity price risk is managed through **supplier hedging, pricing agreements, and leveraging purchasing volume**[818](index=818&type=chunk) [PART II](index=148&type=section&id=PART%20II) [Item 15. Controls and Procedures](index=148&type=section&id=ITEM%2015.%20CONTROLS%20AND%20PROCEDURES) This item addresses the effectiveness of the company's internal controls - Management concluded that the company's disclosure controls and procedures were **effective** as of December 31, 2021[823](index=823&type=chunk) - Management's assessment concluded that the company's internal control over financial reporting was **effective** as of December 31, 2021, based on the COSO 2013 framework[826](index=826&type=chunk)[827](index=827&type=chunk) - The independent registered public accounting firm, **Pistrelli, Henry Martin y Asociados S.R.L. (Ernst & Young Global)**, issued an **unqualified opinion** on the effectiveness of the company's internal control over financial reporting as of December 31, 2021[828](index=828&type=chunk)[829](index=829&type=chunk) [Item 16. Corporate Governance and Accountant Fees](index=151&type=section&id=ITEM%2016.%20%5BRESERVED%5D) This item covers various governance topics, including the audit committee, code of ethics, accountant fees, and exemptions from NYSE listing standards - The Board of Directors has determined that it has an "**audit committee financial expert**" serving on its audit committee[838](index=838&type=chunk) Principal Accountant Fees (in thousands of U.S. dollars) | Fee Category | 2021 | 2020 | | :--- | :--- | :--- | | **Audit fees** | **$2,159** | **$2,036** | | **Audit-related fees** | **$42** | **$0** | | **Tax fees** | **$271** | **$276** | | **All other fees** | **$0** | **$0** | - As a foreign private issuer, the company relies on exemptions from certain NYSE corporate governance standards, including the requirement for a **majority of independent directors** on the board[848](index=848&type=chunk)[849](index=849&type=chunk) [PART III](index=154&type=section&id=PART%20III) [Item 18. Financial Statements](index=154&type=section&id=ITEM%2018.%20FINANCIAL%20STATEMENTS) This item contains the company's audited consolidated financial statements for the fiscal years ended December 31, 2021, 2020, and 2019, prepared in accordance with U.S. GAAP - The financial statements were audited by **Pistrelli, Henry Martin y Asociados S.R.L. (Ernst & Young Global)**, which issued an **unqualified opinion**[871](index=871&type=chunk)[872](index=872&type=chunk) - Critical Audit Matters identified by the auditor were the **impairment of long-lived assets** and the **assessment of tax and labor contingencies**, particularly in Brazil, due to the significant judgments and complex interpretations required[875](index=875&type=chunk)[877](index=877&type=chunk)[882](index=882&type=chunk) - Note 18 on Commitments and Contingencies details the financial covenants under the **Master Franchise Agreements (MFAs)**, including a **fixed charge coverage ratio of at least 1.50** and a **leverage ratio not exceeding 4.25**, with the company being **in compliance** as of December 31, 2021[1102](index=1102&type=chunk)[1108](index=1108&type=chunk) - Note 27 on Subsequent Events discloses the issuance of **$350 million in sustainability-linked notes due 2029** in April 2022 and the launch of **tender offers for its existing 2023 and 2027 notes** to refinance debt[1178](index=1178&type=chunk)[1180](index=1180&type=chunk)

Financial Reporting - Arcos Dorados filed its annual report on Form 20-F for the fiscal year ended December 31, 2021, on April 29, 2022[5] Company Operations - The company operates over 2,250 McDonald's restaurants across 20 Latin American and Caribbean countries and territories[6] - As of March 31, 2022, Arcos Dorados employs over 90,000 people[6] Social Responsibility - The company is committed to providing young people with their first formal job opportunities[6] Environmental Initiatives - Arcos Dorados aims to achieve a positive environmental impact through its Recipe for the Future initiative[6]

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 June, 2021 Commission File Number: 001-35129 Arcos Dorados Holdings Inc. (Exact name of registrant as specified in its charter) Dr. Luis Bonavita 1294, Office 501 Montevideo, Uruguay, 11300 WTC Free Zone (Address of principal executive office) Pursuant to the requirements of the Securities Exchange Act o ...