Revenues in the Caribbean division, excluding Venezuela, increased 19.2% in US dollars, or 19.3% in constant currency terms. Systemwide comparable sales increased 7.4%, sustaining the sequential improvement compared with the 1.0% increase in the third quarter and 40.4% decline in the second quarter. Total revenue growth also reflects 100% company-operated restaurants in Puerto Rico in the fourth quarter of 2020, versus 67% in the prior year quarter.

At the end of the quarter, 98% of the division’s restaurants were operational, with 90% operating all sales segments. Free-standing restaurants, which represent 72% of the division’s footprint, continued generating positive sales growth versus the prior year.

Marketing activities for the fourth quarter in Puerto Rico focused on celebrating the Company’s iconic products such as the “Spicy McNuggets” campaign, which received strong consumer response with inventories lasting just three weeks, compared to the original four-week plan. Also, the “J Balvin Meal” campaign, that showcased three iconic products (Big Mac, McFries and McFlurry), and helped strengthen the Brand's ties with a younger target audience. The Company continued offering product innovation to consumers with the launch of the “Double Tasty” in Colombia and “American BBQ” in Puerto Rico, generating incremental sales in the Premium business. Also during the quarter, sales in the Drive-thru segment benefitted from exclusive promotions and dedicated media, especially in Colombia.

As reported Adjusted EBITDA reached $16.9 million, growing 17.4% year-over-year, or 16.7% in constant currency terms, despite the fact that last year’s Adjusted EBITDA included a $10 million non-cash bad debt reserve reversal in Puerto Rico. Adjusted EBITDA margin contracted 20 basis points to 14.3%, but expanded 990 basis points excluding the non-cash reserve reversal from the prior year result. Notably, profitability benefitted from the growth of Drive-thru sales in Colombia as well as better results in the US dollar and euro-generating markets of Puerto Rico and the French West Indies, respectively.

New Unit Development

The Company opened 9 new restaurants during the twelve-month period ended December 31, 2020. In-line with its guidance, excluding Venezuela, the Company optimized its footprint by closing 56 restaurants in 2020, with about 60% of closings between Mexico and Argentina. At the end of the fourth quarter, the Company had 733 Experience of the Future Restaurants.

Balance Sheet & Cash Flow Highlights

Cash and cash equivalents were $166.0 million and total financial debt (including the value of derivative instruments) was $673.2 million, as of December 31, 2020. Net debt (Total Financial Debt minus Cash and cash equivalents) was $507.2 million, up $33.4 million versus the prior year end, as cash provided by operating activities and the Company’s hedging strategy mostly offset the issuance of an additional $150 million of the 2027 Notes. The Net Debt/Adjusted EBITDA ratio was 7.4x at the end of the reporting period.

Net cash generated from operating activities for the three months ended December 31, totaled $66.2 million, while cash used in net investing activities totaled $25.0 million. Capital expenditures in the quarter totaled $21.5 million, compared to $98.1 million in the previous year’s period. Net cash used in financing activities was $15.1 million.

Full Year 2020 – Excluding Venezuela

Excluding the Venezuelan operation and for the year ended December 31, 2020, the Company’s revenues, in US dollars, decreased by 32.9% to $2.0 billion, impacted by the COVID-19 pandemic and the depreciation of several of the region’s key currencies. This led to a significant de-leveraging of the Company’s costs and expenses, resulting in a consolidated Adjusted EBITDA margin contraction of 6.3 percentage points to 3.7% versus the prior year.

Consolidated net loss for full year 2020 amounted to $(141.8) million, compared with net income of $88.5 million in 2019. The Company recorded net loss per share of $(0.69), compared to earnings per share of $0.43 in the previous year.

Net cash provided by operating activities for 2020 totaled $16.0 million, while cash used in net investing activities totaled $88.7 million. Capital expenditures for full year 2020 totaled $86.3 million, compared to $265.2 million in the previous year. Net cash provided by financing activities was $125.6 million, which included the issuance of an additional $153.4 million in 2027 Notes as part of a liability management transaction in September and October 2020.

Recent Developments

Executive Variable Compensation Program

Arcos Dorados will incorporate Environmental, Social and Governance (ESG) indicators, beginning in 2021, for determining a portion of the variable compensation of its bonus-eligible employees. For the first year, the Company selected indicators related to youth opportunity as well as responsible and ethical business practices.

2021 Annual General Shareholders’ Meeting (AGM)

On March 12, 2021, the Company announced the date for its AGM, which will be held on April 28,

2021, in Bogota, Colombia, at 10:00 a.m. (local time), for all shareholders of record as of March 26, 2021. AGM materials are available on the investor relations website: www.arcosdorados.com/ir

Fourth Quarter and Full Year 2020 Earnings Webcast

A webcast to discuss the information contained in this press release will be held today, March 17, 2021, at 10 a.m. ET. In order to access the webcast, members of the investment community should follow this link Arcos Dorados Investor Update.

A replay of the webcast will be available later today through May 11, 2021 in the investor section of the Company’s website: www.arcosdorados.com/ir.

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Definitions:

Systemwide comparable sales growth: refers to the change, measured in constant currency, in our Company-operated and franchised restaurant sales in one period from a comparable period for restaurants that have been open for thirteen months or longer. While sales by our franchisees are not recorded as revenues by us, we believe the information is important in understanding our financial performance because these sales are the basis on which we calculate and record franchised revenues and are indicative of the financial health of our franchisee base.

Constant currency basis: refers to amounts calculated using the same exchange rate over the periods under comparison to remove the effects of currency fluctuations from this trend analysis. To better discern underlying business trends, this release uses non-GAAP financial measures that segregate year-over-year growth into two categories: (i) currency translation, (ii) constant currency growth. (i) Currency translation reflects the impact on growth of the appreciation or depreciation of the local currencies in which we conduct our business against the US dollar (the currency in which our financial statements are prepared). (ii) Constant currency growth reflects the underlying growth of the business excluding the effect from currency translation.

Excluding Venezuela basis: due to the ongoing political and macroeconomic uncertainty prevailing in Venezuela, and in order to provide greater clarity and visibility on the Company’s financial and operating overall performance, this release focuses on the results on an “Excluding-Venezuela” basis, which is non-GAAP measure.

Adjusted EBITDA: In addition to financial measures prepared in accordance with the general accepted accounting principles (GAAP), within this press release and the accompanying tables, we use a non-GAAP financial measure titled ‘Adjusted EBITDA’. We use Adjusted EBITDA to facilitate operating performance comparisons from period to period.

Adjusted EBITDA is defined as our operating income plus depreciation and amortization plus/minus the following losses/gains included within other operating income (expenses), net, and within general and administrative expenses in our statement of income: gains from sale or insurance recovery of property and equipment; write-offs of property and equipment; impairment of long-lived assets and goodwill; reorganization and optimization plan expenses; and incremental compensation related to the modification of our 2008 long-term incentive plan.

We believe Adjusted EBITDA facilitates company-to-company operating performance comparisons by backing out potential differences caused by variations such as capital structures (affecting net interest expense and other financial charges), taxation (affecting income tax expense) and the age and book depreciation of facilities and equipment (affecting relative depreciation expense), which may vary for different companies for reasons unrelated to operating performance. Figure 11 of this earnings release include a reconciliation for Adjusted EBITDA. For more information, please see Adjusted EBITDA reconciliation in Note 21 of our financial statements (6-K Form) filed today with the S.E.C.

About Arcos Dorados

Arcos Dorados is the world’s largest independent McDonald’s franchisee, operating the largest quick service restaurant chain in Latin America and the Caribbean. It has the exclusive right to own, operate and grant franchises of McDonald’s restaurants in 20 Latin American and Caribbean countries and territories with more than 2,200 restaurants, operated by the Company or by its sub-franchisees, that together employ over 100 thousand people (as of 12/31/2020). The Company is also committed to the development of the communities in which it operates, to providing young people their first formal job opportunities and to utilize its Scale for Good to achieve a positive environmental impact. Arcos Dorados is listed for trading on the New York Stock Exchange (NYSE: ARCO). To learn more about the Company, please visit the Investors section of our website: www.arcosdorados.com/ir.

Cautionary Statement on Forward-Looking Statements

This press release contains forward-looking statements. The forward-looking statements contained herein include statements about the Company’s business prospects, its ability to attract customers, its affordable platform, its expectation for revenue generation and its outlook and guidance for 2020. These statements are subject to the general risks inherent in Arcos Dorados' business. These expectations may or may not be realized. Some of these expectations may be based upon assumptions or judgments that prove to be incorrect. In addition, Arcos Dorados' business and operations involve numerous risks and uncertainties, many of which are beyond the control of Arcos Dorados, which could result in Arcos Dorados' expectations not being realized or otherwise materially affect the financial condition, results of operations and cash flows of Arcos Dorados. Additional information relating to the uncertainties affecting Arcos Dorados' business is contained in its filings with the Securities and Exchange Commission. The forward-looking statements are made only as of the date hereof, and Arcos Dorados does not undertake any obligation to (and expressly disclaims any obligation to) update any forward-looking statements to reflect events or circumstances after the date such statements were made, or to reflect the occurrence of unanticipated events.

Fourth Quarter & Full Year 2020 Consolidated Results

(In thousands of U.S. dollars, except per share data)

Fourth Quarter & Full Year 2020 Consolidated Results – Excluding Venezuela

(In thousands of U.S. dollars, except per share data)

Fourth Quarter & Full Year 2020 Results by Division

(In thousands of U.S. dollars)

Summarized Consolidated Balance Sheets

(In thousands of U.S. dollars)

(1) Includes "Other receivables", "Inventories", "Prepaid expenses and other current assets", "McDonald's Corporation's indemnification for contingencies", and "Derivative Intruments".

(2) Includes "Miscellaneous", "Collateral deposits", and "McDonald´s Corporation indemnification for contingencies".

(3) Includes "Income taxes payable" and "Other taxes payable".

(4) Includes "Royalties payable to McDonald´s Corporation" and "Interest payable".

(5) Includes "Short-term debt", "Current portion of long-term debt" and "Derivative instruments".

(6) Includes "Long-term debt, excluding current portion" and "Derivative instruments".