Good morning and welcome to the Arcos Dorados' Fourth Quarter and Full Year 2014 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. As a reminder all participants will be in listen-only mode. There will be an opportunity for you 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 conference over to Daniel Schleiniger, our Director of Investor Relations. Please go ahead sir.

Thank you. Good morning, everyone and thank you for joining us today. With me on today's call are Woods Staton, 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 take -- 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 our Chairman, Woods Staton. Woods?

Thank you, Dan. Hello everyone and thank you for joining us today. Before I comment on our fourth quarter and full year 2014 performance I would like to introduce you to our new Chief Financial Officer, José Carlos Alcantara, who joined us in January of this year. José Carlos brings Arcos Dorados substantial experience as a finance executive in both Latin America and the consumer products industry. I am confident that his leadership, broad skillset and regional experience will be a tremendous asset to our company. I would also like to take a moment to thank his predecessor and my longtime colleague and friend, Germán Lemonnier. Germán's contributions to our company over his 21 year tenure are too many to list. Suffice it to say that he was instrumental in helping us grow into the largest restaurant chain in Latin America and the largest McDonald’s franchisee in the world. I wish him the best in all of his future endeavors. Turning to our fourth quarter results we reached double-digit revenue in comparable sales growth, as we stepped up our promotional campaigns and benefited from a seasonal pick-up in consumer activity. Organic revenues grew 16.4% in the quarter backed by a 15.4% increase in comparable sales. While we achieved further efficiencies in G&A and other cost items our EBITDA margin reflected more active marketing activities to drive profit. Despite the year-end pick-up 2014 was a difficult year overall and our performance fell short of our expectations. Organic revenues increased 12.7% and comparable sales grew 10%. While we anticipated economic and other obstacles heading into the year the deceleration of economic and consumption growth and the depreciation of some of the main currencies in our region were greater than anyone expected. As an example, two exchange rate changes during the year in…

Thank you Woods and hello everyone. We've been strengthening our value proposition in supporting our customers through this period of weak economic growth by offering more affordable menu options. As we mentioned on our last call this strategy contributed to a stabilization of fourth quarter volume trends versus a challenging trend [ph] in third quarters of 2014. You'll turn to slide three, this was particularly the case in our larger market, Brazil. While still negative as compared to the prior year traffic trends picked up from the second and third quarters, which were impacted by FIFA World Cup. These improvements reflect an expected seasonal pick-up as well as promotional activities, which were focused on value offerings and core products. Organic revenues increased 9.4% versus the prior year period backed by a 5.2% rise in comparable sales. Average check was underpinned by sales of the Happy Meal, Big Mac and GPPP platforms. As reported revenue growth declined 2.2% due to the 12% year-over-year depreciation of the Brazilian real. The net addition of 54 restaurants during the last 12 months period of which over half were free standing units contributed $23.5 million to revenues on a constant currency basis during the quarter. The openings brought the restaurant count in Brazil to a total of 866. Before I move to NOLAD, let me update you on the rollout of the new restaurant management technology in Brazil. We now expect to be fully implemented in our largest cities by the middle of the third quarter of this year and the entire country by the end of the year. Later this year we plan to commence that rollout in Argentina which should take about six months to complete. The system will also serve as a platform to rollout customer facing strategies, inline with McDonald’s global…

Thank you, José Carlos. As you heard from Sergio and José Carlos, as well as in my opening remarks, we’ve develop the roadmap with concrete steps and initiatives aimed at generating shareholder value by improving our operational efficiency, extracting value from the assets without a long-term impact on our business and making prudent capital allocation decisions. The short-term outlook for our region and our company is challenging. However we are not standing still. We are confident that the strategic direction we’ve described today will prepare us, not only for the current economic challenges, but will also and more importantly put us in a position to accelerate this momentum when the macroeconomic environment recovers in the future. We have long-term competitive advantages that have helped us overtime and those advantages are even more prevalent today. The McDonald’s brand remains a preferred brand in the minds of casual diners in Brazil and all of our major markets. And even as the branded QSR market goes for a cyclical downturn we are maintaining or gaining share in most of our main markets. As operators of the region’s dominant QSR brand with an unmatched footprint and unparalleled experience operating in volatile markets I remain confident that we will be at forefront of an eventual recovery and growth. Thank you for your attention. As I mentioned earlier José Carlos joined our company two months ago and is in the process of familiarizing himself with the business. For today’s call, Dan Schleiniger will also join the Q&A session to help answer questions related to our financial indicators and outlook. I would now like to open the call up to questions.

Yes, thank you. We will now begin the question-and-answer session. [Operator Instructions]. And the first question comes from John Ivankoe with JPMorgan.

Hi, thank you. Couple of quick ones if I can. I guess I’ll ask them one at a time. In terms of raising $200 million of proceeds from what, I guess sounds like land sales without affecting EBITDA. I mean, it would seem like -- that would be land, that would be valuable, that would actually be very well performing type of McDonald’s units. But just, do you clarify that these stores are actually EBITDA breakeven at the store level or is it offset by other cost cuts that you’ve talked about also in your presentation?

Yeah, hi John, this is Woods. Look, this is a subject of ongoing negotiations. So I can share just a few details with you. As you said we expect to generate about $200 million from this initiative. We have some office and non-core real-estate assets that we can sell and consolidate. We also have some restaurants locations with a real-estate value that far exceeds the operating potential of the location. And in those cases we can partner with a local developer to monetize the asset and after a period of construction continue operating our restaurant at that location.

Okay, that’s interesting. So you can monetize the assets, you continue to operate the restaurant, but that doesn’t all of a sudden become rent then, in another words. Like you don’t -- I mean what you previously owned, it’s not a sale lease-back transition? I just want to be clear about that.

That is correct, but that doesn’t mean we might not look at also some sale and lease-backs. But you’re right.

Okay. Okay, I think, I understand. And then secondly, as part of the MSA with McDonald’s I think by my math it still suggests that you would have to open over a 100 units maybe even a little bit more than that in 2016 to hit your MSA. Was there any discussion of -- is that still the case or are there any discussions with McDonald’s of reducing your unit opening requirements?

Yeah, in 2014, we opened up 80 new restaurants of which 60 were free standing. We have several variables that we can look at to reach our commitment with McDonald’s Corporation having to do with timing of the openings, the restaurant formats, the ownership structure of them. We are monitoring market conditions along with McDonald’s and we will agree on an opening plan for 2016 based on the prevailing outlook later this year. The agreement with McDonald’s is responsive to changes in market conditions and both parties are committed to a level of openings that reflect market dynamics. And we are being inline with McDonald’s global strategy and we are reducing our pace of openings for the short-term to reflect political and economic dynamics going on today.

Thank you. And the next question comes from Martha Shelton with Itau BBA.

Thanks for taking the question. I was hoping you could walk through the refranchising of the existing restaurant initiative. I know that 24% of the portfolio is currently franchise operated. So I am just kind of trying to get a sense for the economics of the higher shifts towards more franchise units, I would like to better understand perhaps your return metrics associated with a larger percentage of your portfolio being more franchise operated?

Hi, Martha, this is Woods. We are looking at selling some franchises, some franchise stores in areas where quite frankly they are far away from the main cities and where we spend considerable G&A. So there is a pickup there. Our current ownership is 74-26. We can go up to 50%. And we plan to continue shifting a higher percentage of our unit growth to our existing or even perhaps new sub franchises, so that we can get these savings in G&A and I think quite frankly in some areas of our countries, where we operate Mr. or Mrs. McDonald’s in that particular community has a better handle on what’s going on then perhaps we can. So it’s a question of getting the geographies that we have and making them as operationally efficient as possible from a margin perspective as well as a G&A perspective.

Got it, and so when you are talking about that $50 million you are talking about or you are referring to the proceeds from the sale of these restaurants?

That is correct.

Okay, thank you.

Thank you. [Operator Instructions]. And the next question comes from Jeronimo De Guzman with Morgan Stanley.

Hi good morning. Maybe I could start with the refranchising question, a follow-up there. Wanted to know the $50 million more or less how many units are we talking about to get a better sense of what are the economics out of those $50 million gains work [ph] and then longer term where do you see yourself as having, like what’s the optimal mix of franchise versus company operated units?

Hi, Jeronimo how are you? I don’t want to get into where we are going to do it yet but all of our countries are up for this kind of remixing of operations. So I don’t want to get into how much we can get per store, per restaurant or where will be our focus, but I think that if you look at all of our countries there are possibilities everywhere. I don’t think we want to get down to the 50-50, as I said before, but certainly over the next, as we said, for the next two or three years we will do, we will up the pace, as we have last year as well, of new franchise stores, sub-franchise stores.

Okay, thanks. And then on your release you also mentioned this new project that you are working on to redesign the way you manage and operate your business, and I just wanted to know if you could give us a little bit more detail on what exactly is within this project and what kind of benefits you expect to have from it?

Yeah, let me pass you to Sergio. He can answer that question.

Yes, sure Jeronimo and hi how are you? There is a system we are implementing at the restaurant level that will really help us enhance the efficiency, the way we operate our stores. The system has actually the capacity to forecast sales in a much more accurate manner than obviously the method that we use today. Therefore it will allow us to manage labor/crew scheduling more efficiently. For instance the system calculates how many crew people the restaurant need for different day parts, and also tell us the actual position for each one of the employees considering the number of stations that we have in the kitchen, in the front counter, in the lobby and the drive through et cetera. And we also are going to get additional gains because out of the more accurate sales position we will have, all that we called the supply chain part, which is the all the process that we do at the restaurants to buy products from the distribution center leading us to have a more optimized inventory levels, not only at the restaurant but also at the distribution center, so we may expect to get additional gains in working capital as well.

And let me just add a few things, Jeronimo to what Sergio said is perfect. But I think an important thing for all of you to know is that we've been looking at pilot almost for a year now. There is almost 20 stores and we've been able to reduce labor hours considerably and our CSO scores, the customer satisfaction opportunity that you all are familiar with, those numbers have remained constant. So the challenge has always been to become more efficient, but that it's invisible to the customer. The customer still keeps getting the best and high levels of service that we have and by the way I will just remind you all that we have some of the highest CSO scores in the McDonald’s system worldwide and we're very proud of them and we'll continue to maintain them.

Thanks. So, yes, I mean I can figure that, that can be very positive for the margin on the same store sales front, just one last question. You gave your guidance of expecting same store sales in line with inflation. When I look at, kind of try to estimate it for kind of the current net chart of your business, that would imply same store sales of around 9% to 10%. So that is above kind of what you are trending right now. So I guess the question is what are the main levers you see to accelerate that same store sales momentum, to reach that medium to longer term guidance of same store sales?

Let me pass this to Sergio.

Well Jeronimo the reality is that as we always said, during these economic difficulties that we're facing in some of our -- parts of our geography, our marketing efforts and initiatives are targeting to retain traffic because that is the way we believe the business will be protected long life. If you look what we have plans for this year in terms of marketing, we have a really, really strong calendar towards the end of the year, particularly in the second half. So the reality is that, as I said before we will continue with promotional gain, we will obviously sustain the launch of new products to create news [ph]. The Happy Meal is performing better, this is a process that already started in 2014. So we remain quite confident on the contribution that we will make our business looking forward to 2015 and we're also enhancing the marketing activities in other day parts like breakfast and [indiscernible] in the bigger markets, that is also helping us to create additional sales volumes on those day parts, apart from lunch and dinner.

Great. Thank you very much.

Thank you. [Operator Instructions]. And we do have a follow-up question from John Ivankoe with JPMorgan.

Hi. Thank you. Just two quick ones. Firstly does the increase in EBITDA guidance over the next three years include the increase in the royalty rate to McDonalds that I think occurs in early 2017? And then secondly in the CapEx guidance in 2015 it seems like almost all that CapEx would be associated with the new restaurants that are being built, especially with a number of free standing restaurants. So if you could talk about being kind of what’s happened to existing unit CapEx or remodel CapEx or corporate CapEx, in another words CapEx outside of new stores, thanks.

Yes, hi John. As far as our 2017 step up in royalty payments we haven’t discussed those yet with them. Their brand building credit is given to us and it will be reduced in 2017. It's too early to say whether or not this agreement would change. But with that said, we do believe that we have many opportunities to improve our business long-term and we're focusing our efforts, the margin improvement that we are giving through 2017 includes a step up. Okay, just to answer you specifically. And if could repeat the second question I didn't quite get it?

Yes, I'm sorry. So of the $90 million to $120 million of CapEx in fiscal '15 is on 40 to 45 new restaurants, which 60% are free standing. So it seems like the vast majority of that CapEx is being associated with those new builds. So I wanted to clarify that and also understand what kind of CapEx is associated, whether on the corporate side or remodels or reimages or other types of technology initiatives that might be necessary in the capital budget?

Hi, John this is Dan. I think you need to keep in mind that from a CapEx perspective you can't draw a parallel with last year's unit growth numbers and last year's CapEx level with this year’s because remember about 55% of our opening this year will also be with sub-franchises. And that's higher than our installed base of 24%, that's higher than our opening mix last year, which included about 30% of sub-franchises, okay. So what that should do is we have, actually an additional, let's say, percentage of the total CapEx that we have and that's where we will then be reinvesting in the business and technology to not enhance the base but also go into investments that only enhance the base but also go into the technological investments that would, as [indiscernible] already mentioned in their remarks.

And Dan, if I'm still on is it a capital white [ph] franchise or is it the traditional franchise where you are responsible -- where Arcos is responsible for the CapEx and the land and the building?

The traditional model is today is where Arcos is responsible for the land and the building but we are looking at alternatives, I think was alluded to it, that among the things that we're looking at in our expansion plans are modified ownership models.

Thank you.

Thank you and we also have a follow-up question from Martha Shelton with Itau BBA.

Thanks again for the question. Just thinking about the master franchise agreement, it’s just -- I want to make sure that I'm understanding this properly and in characterizing it. It sounds to me like the MSA with McDonald's, it really sounds like a very cooperative agreement between you and McDonald's Corporation. What I mean by that is it sounds to me, and tell me if I'm interpreting this correctly, gross openings are flexible. I understand that as per MSA 250 unit openings were expected from 2014 to 2016, and it sounds, if I'm reading this right, it sounds like maybe that's subject to negotiation as well as the royalty step up. So I want to make sure that I'm reading that right. And then secondly I wanted to get a sense for franchisees, their appetite and their capacity for new store openings, thanks.

Yeah, hi Martha. Look, the relationship that we have with McDonald's could not be better. I mean we are great partners. We're very happy and I’m very thankful that we're franchises with this great brand. As you said the 2014 to 2016 opening plan was made in 2013. And the economies were totally different then. Argentina today is in technical default, Brazil is in recession and Venezuela is in an economic crisis and that's a big percentage of our EBITDA in our company. So those territories. So just like it's going on with the corporation all over the world there is a temporary reduction and we're always conversing with the company about this. So that said and I think the second part of your question was the appetite of franchisees; franchisees are in most cases and most countries very, very -- where we have them, they are very interested in growing their business. So as long as they have strong balance sheets, where they can come in to the business without added -- where they have a proven track record, we will grow and we’ll want to grow with them as long as it’s a strategic fit with what we're doing. So and there has been a lot of indication for this.

Great, thank you so much.

Great. Thank you and at this time I would like to turn the conference back over to management for any closing comments.

Well, thank you all for being with us. I believe it's St. Patrick's Day in the U.S. So happy St. Patrick's Day. Thank you for your questions and your attention and 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 may have. So hopefully you have a good day and happy St. Patrick’s Day. Thank you.

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