Good morning, and welcome to the Arcos Dorados' Second Quarter 2015 Earnings Call. A slide presentation accompanying today's webcast, which will also be available in the Investor section of the company's website, www.arcosdorados.com/ir. And as a reminder, all participants will be in listen-only mode. There will be an opportunity for you to ask questions at the end of today’s presentation. [Operator Instructions] Today's conference call is being recorded. At this time, I would like to turn the call over to Daniel Schleiniger, Director of Investor Relations. Please go ahead, sir.

Thank you, and good morning, everyone. Thank you for joining us today. With me on today's call are Woods Staton, our Chairman and Chief Executive Officer; Sergio Alonso, our Chief Operating Officer; and José Carlos Alcantara, our Chief Financial Officer. Before we proceed, I would to like to make the following Safe Harbor statement. Today’s call will contain forward-looking statements and I refer you to the forward-looking statements section of our earnings release and recent filings with the SEC. We assume no obligation to update or revise any forward-looking statements to reflect new or changed events or circumstances. In addition to reporting financial results in accordance with Generally Accepted Accounting Principles, we report certain non-GAAP financial results. Investors are encouraged to review the reconciliation of these non-GAAP financial results, as compared with GAAP results, which can be found in the press release filed with the SEC on Form 6-K. I would now like to turn the call over to Chairman, Woods Staton.

Thank you, Dan. Hello, everyone, and thank you for joining us today. Before I turn to our second quarter results, let me say a few words about another topic. As many of you know, I have spoken for long time in the past about passing my CEO duties to a younger person once I turn 65, which means that I am eight months late in making this announcement. This morning we announced the appointment of Sergio Alonso, my friend and long-term colleague as the next CEO of Arcos Dorados. Sergio has a proven track record of [indiscernible] and I'm confident that he is the right person to lead our company in the future. We have worked side by side for almost 30 years in the McDonald system and he participated in every step of the development of our long-term strategic plan that we announced earlier this year. As such, this leadership change is really the revolution of our business strategy and I expect a seamless handover of the day to day management of the company to Sergio. I will remain as the Executive Chairman to help guide the long-term success of the business and support Sergio in any way he may find useful. This morning we also announced that Marcelo Rabach who replaced Sergio as COO of Arcos Dorados. Marcelo joined McDonald system 25 years ago and quickly rose from the ranks of crew member to senior leadership position expanding all four geographies within our company. Marcelo is joining as President of North Latin American Division. In each of his division's, he has built a reputation for instilling and thriving operational excellence and results. I am confident that his knowledge of McDonald's system and proven leadership skills will serve him in our company very well. These changes in our management…

Thank you Woods and hello everyone. First, let me say that I’m honored and excited to have been appointed COO of Arcos Dorados. I am committed to delivering on our three-year plan and I am confident in the power of the McDonald’s brand in Latin America. Now let me turn to our results for the second quarter. On a consolidated basis, organic revenues excluding Venezuela increased 7.7% in the second quarter, while as reported revenues declined 12.8%, mainly due to the depreciation of the Brazilian real. Systemwide comparable sales expanded 4.9% due to average check growth partially offset by a decline in comparable traffic of less than 1%. Turning to slide 4, Brazil’s revenues were once again impacted the significant depreciation of the Brazilian currency, which more than offset a low-single digit increase in comparable sales and the contribution of the new restaurant openings. Reported revenues decreased by 23.6% due to the 37.7% year-over-year average depreciation of the real. Excluding the currency impact, organic revenues rose 5.3%. Systemwide comparable sales increased by 1.9% supported by average check growth and slightly positive traffic. While the consumption environment in Brazil remains weak, traffic levels benefited from a favorable year-over-year comparisons in the second half of June due to the FIFA World Cup last year and promotional activities with strong track record such as the Monopoly promotion and the Super/Mega/Grand Big Mac campaign also supported traffic trends. Finally, the launch of the successful Minions campaign in Happy Meal which reaffirms our focus on the family business helped mitigate the soft consumer environment in the country. One thing I’d like to note is that over 40% of our restaurant base in Brazil comprises freestanding restaurants. These concentration of freestanding units in our portfolio is a key point of strength to Arcos Dorados given the…

Thank, José Carlos. As I said before, the short-term outlook of our region and our company is challenging and we do not foresee an acceleration in consumer activity in the short-term. However, our unique business model, which comprises talented employees outstanding suppliers and dedicated operators is a reason McDonald’s remains a preferred QSR restaurant in Latin America with the highest top of mind brand recognition across our markets. I am very proud of the efforts of our more than 95,000 employees to strengthen the long-term fundamentals of our business and win the loyalty of over 4 million guests that pass through our doors every day. The margin improvements that you’re seeing in each of our divisions are the first steps toward delivering on our three-year roadmap. I want to assure you that we are working every day to achieving these goals, because like all of our shareholders, I am anxious to see the positive results of this plan. We implementing the necessary systems and processes that will build on margin improvements. We’ll continue to be viewing our structure to identify and capitalize on additional G&A savings opportunities. Finally, soon we also expect to have some news on real estate asset monetization plants, another much of a home work is done. With our dominant position as leading QSR player in the region and our two-year plan well underway, we will whether the current economic downturn while preparing our company to capitalize on the next cycle of economic growth in the region. Thank you for your attention. I’ll now open the call up to questions.

[Operator Instructions] Our first question comes from Robert Ford with Merrill Lynch. Please go ahead.

Thank you, and good day everybody and congratulations on the progress. You made some very impressive strides in G&A, payroll, occupancy and other expenses. And I was hoping you could give us some examples in terms of how you’re achieving that and what you’re doing to maintain service levels in the stores. [indiscernible] mentioned of opportunities, you see to further trim the cost structure and I was hoping you could provide some examples of the opportunities you see going forward please.

Hi, Bob. Let me first talk about that and I will pass you to Sergio for more color. But for instance, in the case of what we are doing in Brazil and which is the base for the rest of our company. The new scheduling system we are using is really great, because it puts the right people, the right amount of people in the right positions at the right time and they work on 50-minute increments, so that’s very good for the store. It uses mathematics that are very, very precise. So, what we’re getting is we’re getting huge increases in productivity but also none of the expense - and that’s the most important part, none of the expense with consumers. So, our consumer satisfaction opportunity scores are maintaining themselves or even getting better. And then also, one of the things that that does is because it is such a great projection system, our working capital needs are being monitored on a much more careful basis. I’m going to pass you to Sergio then, so he can follow-up on this.

Sure. Good morning, Bob. Maybe a couple of comments that would add some color to your answer. I’d say that Bob, to begin with, all the efforts that we’re doing at the restaurant level to get additional margin leverage, they actually started last year. These are not new actions that we’re taking for this quarter and not even last quarter. We have a large employee base, large restaurant base. So, any action plan that we put in place takes time to start showing the benefits and that is the case that we’re seeing these days and we honestly expect these improvements to continue. We obviously focus on the structures of the both crew and management level at the restaurants. We also focus on the after services that we have in every single market and we’re starting to see the results. We also in spite of having to emphasize all the affordability categories in our markets in order to protect traffic and try to weather these situations, it’s also real that through management dedication and through the optimization of the - as I said, the affordability platform that we have, we are gaining also ground in the gross margin of food and paper area as well. So, I believe, my personal opinion is that the good news is we’re not getting the benefits just from one single line. It’s a combination of decisions, combination of results that we gain all through the different lines in our P&L and as I said before, this will continue down the road.

Good for you, and just one follow-up, and that is with respect to the hedges. I mean, you’ve done a phenomenal job in terms of the currency hedges and I would expect there is some long-term supply contracts that are also beneficial. Can you give us a sense of when those are due to rollover and what kind of terms you expect to roll those into and the pricing power that you may have to maybe offset some of those additional pressures?

Let me pass you to Carlos, Bob. José Carlos Alcantara: Yes, hi, Bob, good morning. As you alluded to, I think we’ve done good job hedging our exposure this year. We fully hedge in Brazil as we mentioned before. I think recently expanded our coverage in Colombia, which is also seeing some depreciation in the currency. Moving forward for 2016, we’re obviously monitoring the currency situation. It’s very volatile right now. We’re evaluating the cost and benefit of hedging for 2016 and we probably have some news in the next call or the following call as we prepare for the plan next year. But again, it’s still very volatile market, difficult process, the cost and the benefits that we can obtain from hedging next year 2016.

The next question comes from Jeronimo De Guzman with Morgan Stanley. Please go ahead.

Hi, good morning, and congratulations on the new role Sergio and everyone else. I wanted to ask a follow-up on the margin side, because it seems like again this quarter, you had very strong margins in the restaurant operations based on what you just discussed but the corporate expenses continue to be under pressure. If I convert them to pesos to try to get kind of the local currency growth, I’m still getting some pretty big increases, 38% year-on-year in pesos, 27% quarter-on-quarter. So, just wanted to understand what is driving this increase in the corporate expenses and is there anything that’s being allocated to the corporate that wasn’t maybe and also where do you think you can get efficiencies in these expenses, so that you don’t lose kind of all the efficiency gains at the divisional level?

Yeah, hi, Jeronimo, let me pass you to José Carlos. José Carlos Alcantara: Hi, Jeronimo, good morning. As we mentioned I think in the last quarter call, couple of impacts are going through our corporate expense. We were seeing the inflation devaluation differential impact in Argentina as you alluded to. We’re also, as we mentioned, investing in more system-wide upgrades. This is a little bit of an update that we’re giving aside from the scheduling and forecasting model that we’ve alluded to. We’re also looking at indirect procurement. We’re looking at overall system upgrades at the restaurant level. So, that’s also pressured little bit of our corporate costs as we have consulting fees that we’re using to support us in these evaluation and the definition of this project. And additionally also, we’ve seen some IT expenses that were one-offs that were timing more than anything that we shouldn’t see going forward that were renewal of licenses. So, that’s basically what we’re doing. As we said, we continue to scrutinize G&A and we’re looking at corporate level G&A and we’re going to be doing that in the next foreseeable future.

And do you think - that’s helpful, thank you. And then in the second half, do you think you can already start having some of these consulting or nonrecurring expenses rolling off or do you think the pressure can continue in the next couple of quarters? José Carlos Alcantara: This will continue in the next couple of quarters, Jeronimo. This is going to be marking as long-term, medium-to long term project, again, of upgrading our systems aside from the scheduling and laboring.

The next question comes from Martha Shelton from Itau. Please go ahead.

Thanks for taking the question. I have a question regarding the management changes that were just announced. I guess the question is to Woods, how are you seeing your role as the Chairman? I’ve always understood that you’ve been very involved in the day-to-day operations of the restaurants and kind of having a big picture strategic overview of how restaurants are operating in different markets. So, how should we expect to see that your role above now that you’re moving up to the Chairman of the Board position? Thanks for the question.

Yeah, hi, Martha, look, basically I will not be involved in the day-to-day management of the Company. My job will be to support Sergio in any way that he might be in and the board might be in but I’m not leaving Arcos out. I’m major shareholder of the Company and I’m - I’ll continue as the Chairman of the Board. So, I think we have a lot of long-term strategic issues that we’re looking at in the Company. I’ll be working on that with the government relation, for instance, and with communication, external communications, but as you said, the day-to-day managing of this business and the operational leaps forward and these margin improvements will be basically in the hands of Sergio and his team.

Great, thanks so much.

The next question comes from John Ivankoe with JPMorgan. Please go ahead.

Hi, great, thank you. I was wondering if we could talk about maybe what - Woods, it’s a perfect segue what you just said, kind of the long-term view on Venezuela and if there is anything from a government relations or public relations in a point of view that Arcos feels that it can do to stabilize profits in the market and if my calculation was right, I mean, it’s 134 or so stores which has negative EBITDA. So, it’s a type of - question is like does it make sense to close them or given the size of that revenue base, could that EBITDA material like turnaround in the near-term?

Yeah, hi, John. Your question is a very good question. The Venezuelan operations that we have are facing very, very challenging economic and a very challenging consumer environment. None of our assets have been expropriated. And importantly at the SIMADI FX rate, our Venezuelan operations today account for a very small portion of the consolidated numbers. So that's good. Then also don't forget that Venezuela is essentially and firmly sustainable market and we do not and have not been injecting any material amounts of cash in to the country. So right now, our local team is focused on maintaining consumer satisfaction. We are maintaining, to your point, relations that are good with government officials and we work with them all the time. We’re a big employer of young people. We're not a strategic company. I think consumers in Venezuela like us. Some of the best metrics of the McDonald’s system as far as the brand is concerned in Latin America has to do with that country. So I think we’re overall liked, we’re doing what we can to maintain good relations with everybody. We have an extremely good base of franchisees that work every day, day in and day out on helping those. So it's a difficult situation to ascertain and I think it's very difficult for most companies and we are just, on a day-to-day basis, monitoring that situation and doing as best we can. I mean as you know, we don't have any more French Fries we don't have [indiscernible] and it seems to be doing well. So people still like us and we continue to be there. So that’s it.

Okay. Understood. And then secondly a separate question, regarding the labor scheduling in Brazil, in my perception, has been many stories even after some of the traffic declines are still very much capacity constrained right around the lunch hour, but I guess say whether that’s true or not and then secondly whether labor scheduling as you have defined it means you take labor hours at a certain productive hours throughout the day, and you actually add more hours in periods like lunch that actually may allow you to serve more customers where there is that obvious demand, given the lines that I've seen in many of your Brazilian operation stores?

Yeah, another very good question. What the programming does is that it puts people where we have customers and guests. So what we are finding is that we, in the past, were not doing as great a job scheduling as we could have. Now, we’re doing a much better job, we’re putting more people when we have guests taking away when we don't have the guests. The overall result is better customer satisfaction at a higher productivity rate. So in some of our stores, to your point, we are capacity constrained, which is, that's a good problem. We have to figure out a way around that. But this system is really, really good and it is helping our managers to manage the stores much better. And Sergio wanted to -

Maybe you said it well, keep in mind that the forecast sales every 15 minute period, so that gives us a lot of accuracy in terms of how many could we need in each one of the shifts to capture the various opportunities. You said it was John, in some cases, we need less people than the one who are scheduling, some other cases, we need more and that is where the systems have been every time.

[Operator Instructions] Our next question comes from Robert Schweich, I’m so sorry, I can’t pronounce your name, from Burnham. Please go ahead.

Good morning. I want to commend you on your press release. It has some additional detail that you haven’t provided in the past and I noticed a lot of little things and I think it's a good stuff. I have two questions. I feel that your conversion of assets to cash may be moving a little slower than you expected and I'm looking, just wondering when we’re going to get a lot more information on these various restaurant conversions. Or is that just something that takes time?

Hi, Bob. Nice to have you on the call. You’re talking about multimillion dollar things. So pieces of real estate and as I mentioned in the call, we’re going to continue to own those restaurants and we’re going to continue to operate McDonald’s stores there. So it's complicated in the sense that when you talk to the developer, you have to make sure that his needs or their needs are satisfied as well as your needs. So in many cases, we have to have certain signage, we have to have certain design things for the store and so that’s the process, which is a little bit complicated. So I think obviously we always wanted to work faster than we are, but I wouldn't say that we’re all that far behind and I think I would hope that by the time next six months maybe, we can have some more better news on this subject.

Thank you. My second question, you mentioned this continuing challenging environment. We continue to read adverse news about what's going on in Brazil and I wonder if you would comment on the overall environment in Brazil.

Yeah, Bob. I'll start and I’ll pass it off to Sergio and Jose, so they can add - they’ve both worked in Brazil. I think the short-term for Brazil is a bit daunting. I think that what’s going on in Brazil however is very good for the medium and long term of that country. It's a huge country, huge - lot of progress, but I think the political environment today is a bit rarified and we just have to live with that, as people worry about their jobs, they go out less. We're not a definition as a product, we have to - we get people when they go to the movies or they go out shopping, so when they reduce that, that obviously hurts us. And I think people in Brazil today are worried. However, for the medium and long term, I'm very, very bullish on Brazil. I would have been and I don't think you’re going back to the situation in the past where everybody has said always that Brazil had a great future and they were around for 50 years still saying, Brazil has a great future. Brazil is a great future and we just have to weather this period right now. So, I don’t know Sergio if you would like to add and then Jose Carlos.

Probably, maybe to borrow your words was I believe that Brazil is a great present. I mean actually because we had a very, very good business there and obviously, we have plenty of opportunities to capture business opportunities. It's a matter of weathering the actual situation and we know that we may face some additional pressure in the near future, but the reality is we have a very healthy business there. We have a very strong brand position there. We’re fully committed to sustain and protect and what we represent in Brazil and we have gone through situations like this in the past and every time that this happens, we emerge stronger than before. So I don't know.

Okay.

[Operator Instructions] This concludes our question-and-answer session. I'd now like to turn the conference back over to Mr. Woods Staton for any closing remarks.

Thank you and thank you all for your questions and your attention today. And we look forward to speaking with you again next quarter. In the interim, the team remains available to meet with you and answer any questions that you might have. And thanks for being with us and enjoy the rest of your day. Bye-bye now.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.