Arcos Dorados (ARCO) Sees Q3 Sales Growth Stronger than H111; Outlines Net Income Impacts

Arcos Dorados Holdings Inc.’s (NYSE: ARCO) guides its third-quarter results.

On a constant currency basis, our sales growth for the third quarter of 2011 improved upon the growth we experienced in the first half of the year. As evidence of this trend, we expect our systemwide comparable sales growth in the third quarter of 2011 to be stronger than the growth we experienced in the first half of the year.

Despite this strong operating performance, and in light of certain factors which have affected our results in prior periods and which we have previously reported, we expect our net income for the third quarter of 2011 when compared to the net income for the third quarter of 2010 to be impacted by:

• an increase in compensation expense related to equity grants under our long-term incentive plan (in light of the increase in the current quoted market price of our class A shares (based on a closing price of $23.19 per share as of September 30, 2011, compared to $21.09 as of June 30, 2011)),
  
  
• the one-time charges associated with the partial redemption of our 2019 Notes (as further described above), and
  
  
• the depreciation of certain local currencies against the U.S. dollar during September 2011, which primarily generated a non-cash charge over certain balance sheet accounts. This depreciation was offset, in part, by gains from certain foreign currency hedging transactions.

We also expect that our effective tax rate for the third quarter of 2011 will be higher than our effective tax rate for the first half of 2011 as a result of several factors, including (i) the partial recovery of our valuation allowance related to our deferred tax assets during the first half of 2011 and (ii) withholding tax and additional expenses of our holding company.

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