Good day, everyone, and welcome to the Jack in the Box Inc. First Quarter Fiscal 2018 Earnings Conference Call. Today's call is being broadcast live over the Internet. A replay of the call will be available on the Jack in the Box corporate website starting today. At this time for opening remarks and introductions, I would like to turn the call over to Carol DiRaimo, Chief Investor Relations and Corporate Communications Officer for Jack in the Box. Please go ahead.

Thank you, Teresa, and good morning, everyone. Joining me on the call today are Chairman and CEO, Lenny Comma; and Executive Vice President and CFO, Jerry Rebel. In our comments this morning, per share amounts refer to diluted earnings per share, and operating earnings per share is defined as diluted earnings per share from continuing operations on a GAAP basis, excluding gains and losses from the sale of company-operated restaurants, restructuring charges, and the impact of tax reform on the company's deferred tax assets as well as the excess tax benefits through share-based compensation arrangements, which are now recorded as a component of income tax expense versus equity previously. Adjusted EBITDA represents net earnings on a GAAP basis excluding discontinued operations, income taxes, interest expense, gains or losses on the sale of company-operated restaurants, impairment and other charges, depreciation and amortization, and the amortization of franchise tenant improvement allowances. Our comments also include other non-GAAP measures including restaurant operating margins, restaurant-level EBITDA, franchise margin, and franchise EBITDA. Please refer to non-GAAP reconciliations included in the last page of the earnings release. Following today's presentation, we'll take questions from the financial community. Please be advised that during the course of our presentation and our question-and-answer session today, we may make forward-looking statements that reflect management's expectations for the future, which are based on current information. Actual results may differ materially from those expectations based on risks to the business. The Safe Harbor statement in the yesterday's news release and the cautionary statement in the company's most recent Form 10-K, are considered a part of this conference call. Material risk factors as well as information relating to company operations are detailed in our most recent 10-K, 10-Q, and other public documents filed with the SEC. These documents are available on the Investors section of our website at www.jackinthebox.com. A few calendar items to note, Jack in the Box management plans to attend the UBS Global Consumer & Retail Conference in Boston on March 8, the Bank of America Merrill Lynch Consumer & Retail Technology Conference in New York on March 14 and the Telsey Advisory Group Spring Consumer Conference in New York on March 21. Our second quarter ends on April 15, and we tentatively plan to announce results on Wednesday May 16 after market close. Our conference call is tentatively scheduled to be held at 8:30 AM Pacific Time on Thursday May 17. And with that, I'll turn the call over to Lenny.

Thank you, Carol, and good morning. We're continuing to work with the Apollo on completing the sale of Qdoba, which we're expecting will occur by April. So, we will not be discussing that brand's performance during our comments this morning. As for Jack in the Box, our financial performance in the first quarter was solid overall and in line with our expectations. System same-store sales decreased slightly in Q1 as we rolled over a 3.1% increase last year, which is our best quarter of fiscal 2017. But we saw sequential improvements in both sales and traffic in Q1. And importantly, company restaurant margins remained strong as a result of our refranchising efforts to offset both commodity and wage inflation. In addition, G&A continued to decline as we focus on becoming a more nimble organization. This morning, I'd like to talk about some of the restaurant initiatives underway through our traffic and sales and to update you on some leadership changes at our company, as well as how I see the flattening of our organizational structure impacting G&A. When it comes to service improvements, whether we're enhancing our restaurant facilities or developing digital solutions, it's imperative that we need our guests' evolving expectations. Within our restaurants, we believe their ways to find efficiency is to ensure that our four-walls economics make sense for our franchisees over the long term. So, we'll be working with them to accelerate the testing with several pieces of new equipment and processes. As for digital, we know that there are complexities to our operations. We've made a mistake. The act we've been successfully testing does exactly what consumers want today. They can easily view our menu, order, schedule pickup and pay. We also want to be able to easily integrate other features with the app when…

Thank you, Lenny. It's been an honor to be part of the Jack team for all these years.

Our new CFO, Lance Tucker start at the end of March. Lance will be joining us from Papa John's International, where he is currently Senior Vice President, Chief Financial Officer and Chief Administrative Officer. Following the expected sale of Qdoba, we'll still need to provide services to that brand, until it becomes completely independent. When that happens, we'll be in a better position to continue restructuring the company and focus exclusively on the Jack in the Box brand. As we continue to restructure the business, we believe we can lower G&A to less than 2% of system-wide sales. As we approach the back half of the year, we expect to be ready to discuss the timing of G&A reductions and other long-term guidance including free cash flow targets. And with that, I'll turn the call over to Jerry for a more detailed look at the first quarter and an update on the guidance for the year. Jerry?

Thank you, Lenny, and good morning everyone. As we noted in the press release, there were several items that made this quarter a bit messier than usual. When you get beyond the noise it was a relatively clean quarter from an operating standpoint. But before I get into the operating results, I will quickly summarize the items that created the noise. First of all, Qdoba results were shown as discontinued operations for all period presented including the Qdoba direct level G&A. However shared service G&A would support both the Jack in the Box brand and the Qdoba brand remains in continuing operations. Second, was the impact to tax reform, which lowered our statutory federal tax rate, but resulted in a one-time non-cash charge relating primarily to the re-valuation of our deferred tax assets. This negatively impacted GAAP EPS by $1.03 per share. Third, there was an accounting change that requires us to now treat excess tax benefits from share-based compensation as a component of the tax provision versus additional paid-in capital in the past. This positively impacted GAAP EPS by $0.03 per share. And lastly, with the increasing focus on EBITDA, we have reclassified all depreciation and amortization to a separate line on the P&L. You can see how this impacted our previously reported metrics including restaurant operating margins and franchise margins in the non-GAAP reconciliations included in the press release. Moving on to our operating results for the quarter. Operating EPS was $1.23 as compared to $1.07 last year, driven primarily by a lower tax rate, a reduction in the share count and a decrease in G&A, which were partially offset by the impact of the franchising. The Tax Act reduced our federal statutory tax rate from 35% to 21% effective January 1, resulting in a blended statutory federal…

Thank you. Thank you. Our first question is from Brian Bittner of Oppenheimer. Your line now is open. Brian Bittner - Oppenheimer & Co., Inc.: Thank you. Lenny, you mentioned working with advisors to adjust your capital structure pro forma. So, if Qdoba closes in April, I think you may expect acting on that in the capital return strategy and when do you think we will get an update from the management team on, if you think about the clean long-term financials and free cash flow targets going forward?

This is Jerry. Let me handle the capital structure piece question first. I think you would expect to have some update from us, assuming like you said, the Qdoba transaction closes in April, I would expect that you'd see something in terms of capital structure within the May meeting. And I think Lenny will take the second part of that question.

Yeah. If we look at long-term guidance overall, and any update to our strategic planning, what you can expect to see happen is in conjunction with Lance joining the company at the end of the March timeframe, the closing of Qdoba in April, you'll see a sense of urgency from us to update those plans and be able to get information out to all of you as soon as possible. So we do want to take one step at a time, get our new CFO in position and work through the close, which again is targeted for April, but want to make sure that happens before we update any long-term plan. So, you'll see, as you've seen in the past from us, whether it be with the restructuring or G&A reduction effort, a sense of urgency on our part to move quickly to get to our new state. Brian Bittner - Oppenheimer & Co., Inc.: Okay. Thanks for that. And just last question. Can you just talk a little bit more about your same store sales guidance of 1% to 2%, what's driving that full year outlook, given it is better than the flattish 1Q results and kind of the flattish 2Q guide? And just any comments on how your single price point value strategy is going would be helpful. Thanks.

Yeah. Let me handle the single price-point strategy. It's I would call it a tactic more than strategy. We had some major competitive activity in particularly in January that we wanted to make sure we were proactive in addressing versus wait till the end of the quarter to see how it played out. So, I think the tactic worked well for us, something that we'll repeat if necessary in the future, but it won't be the only tactic. So, and I don't believe that we'll be consistent with a multiple price-point value promotion going forward, but it certainly has shown us that we have some other tools in the tool belt that we can pull out when necessary. Beyond that, when you look at the confidence for the back half of the year, you know I'd say, I've just spent the last two days, and what's interesting about what I'm about to say is, it's fun being the CEO of this company. It's been a great company to work for. But one of the things I've missed in the last few years is my involvement in the day-to-day operations and marketing decisions, which with Frances' departure, I'm now extremely involved in and getting more intimate with. In the last couple of days, I've had a lot of fun with my franchisees in the kitchen working alongside my marketing group and my R&D group to shore up the back half of this year's marketing calendar. When we look at what we're going to do in Q3, we've got two great offerings. One will be a completely new offering that we've tested. It's a snack item that will come in at a lower price point, but it's a nice quantity of food with pretty exciting packaging and also a very indulgent line…

Next question.

Thank you. Our next question is from Dennis Geiger of UBS. Your line now is open.

Great. Thanks for the question and Jerry, congrats and best of luck. Lenny, just wondering if you could talk a bit more maybe about franchisee sentiment and profitability right now, maybe some of the perceptions around the new value construct, what they're saying. And then just building on that, just as it relates to what you're seeing from a development commitment standpoint, I know there were some commentary, but just how are you thinking about that associated with the refranchisings as we go through the year? Thanks.

Yeah. So, I'll answer the last part of your question first. When we look at the refranchising effort that we are currently initiating, there may be some development agreements that, that happened with that, but that's not the major thrust of that activity. So, unlike what we did last year where we actually slowed down the refranchising activity in order to get development deal signed, this one will look a little different. So, we may marginally get some, an uptick in development, but I wouldn't expect that to be a major driver of our business. When you look at franchisees' sentiment, essentially what they're experiencing is rising labor costs and is putting pressure on their P&Ls and their major focus is really to drive sales and transactions to allow them to lever their business positively. So, we – and that's one of the reasons why I've been excited to get close to the business and close to them in working through those issues. So, again like I said, when you see the type of engagement we experienced over the last two days and it was beyond just the back half of the year, it was also examining what the product pipeline would and could look like going forward to 2019. I would say that our franchisees are optimistic about the future, but also concerned about their current financial health and want to make sure that the franchisor is working side by side with them to ensure that they will have a healthy business over the long-term.

Great. Thanks very much.

As far as – I want to – maybe one last thing with the franchisees. As far as their interest in refranchising that has not waned and their overall financial health is good, but they certainly don't want to see any situation in their margins over time. But we still have a significant interest in – from our franchisees in getting the remaining sites that we'll be refranchising.

Thank you. Next question is from John Glass of Morgan Stanley. Your line is now open. John Glass - Morgan Stanley & Co. LLC: Thanks very much. Just first on the commentary on the current trends, I think you're rolling over some fairly weak comparisons from a year ago, so maybe could you just remind us how a quarter a year ago progressed? And therefore, if you face tougher comparisons in the back half just of this quarter, how you plan to handle that? And Lenny, I think in your comments you talked about tactics in January sort of like that there was – it was contained to January from a competitive intensity standpoint, you don't necessarily have to be as intense going forward. Is that the case? Do you feel like the discounting intensity has waned as we've gotten into February or was that not a correct read of that?

No, I don't think the discounting intensity has waned. But I think we're seeing a couple of things that would tell us it may wane. So, first off, what happened in January was really just us playing a little bit of defense and making sure that we didn't get caught standing flatfooted in the face of what we knew to be is a pretty extensive competitive activity. I don't think that the activity is necessarily going to wane overall. But the tactics that we may deploy against it may be a little different. Our franchisees, what they're seeing is that when we launch premium products well, that's a transaction driver and it's also sales driver. And so, for them, it's really important that there's a balance over time as it is for us a bounce over time in focusing on values and premiums. And in many cases, we found that when we lean into premium such as when we launched the Buttery Jack, we actually are getting more success with that than what seems to be more aggressive play when we lean into value. So, I think you're going to see a healthy balance going forward. When you look at Q1 transactions for our company stores, it improved from down 5.4% to down 2.4%. So we think what we did was the right thing to sort of protect our business and regain some share. But ultimately, when you look at the trends throughout this quarter and into the back half of the year with the lineup that we have in place, we remain optimistic that we can deliver. John Glass - Morgan Stanley & Co. LLC: And just comments about the second quarter a year ago, when I think you were down like 3% this time a year ago, so you're rolling over easier comparisons. How does that – rest of that quarter unfold and are you already lapping tougher compares if you will, so that you've got better confidence of that zero or plus or minus 1%.

Yeah, so John, the trends recently, we're tracking within the guidance that is range versus that down 3%. So there was a lot of chatter last year at this time about the delay in tax refunds. And from what we can see thus far this year there hasn't been any improvement or degradation in those trends, but the back half of the quarter was obviously much more positive than the first part of the quarter last year. John Glass - Morgan Stanley & Co. LLC: Okay. And if I could just sneak one more, the G&A target you're giving now is just the pure G&A versus that had some D&A in it before. So it's not an enormous number, but maybe it's $8 million on an annualized basis, so are you looking more favorably on your G&A for the year or is that just within the wiggle room of the 2.5% to 2.7% of system sales so it's not really material to call out?

Yeah. John, it's Jerry. It's within the wiggle room that we provided within the new range. If you look at what it was last year, it was just under 20 basis points of D&A which was in the G&A category. So the target that we have – a longer-term target that we talked about at ICR is less than 2% of system-wide sales. I'd consider that to be cash G&A. So we exclude the depreciation and amortization and we also think that that's a very consistent reporting approach with the period within the industry here. So that's how we're looking at it. John Glass - Morgan Stanley & Co. LLC: Thanks, and best wishes, Jerry.

Thank you, John.

Thank you. Next question is from David Tarantino, Robert W. Baird. Your line is open. David E. Tarantino - Robert W. Baird & Co., Inc.: Hi, good morning, and my best wishes to you as well Jerry. My question is, I just want to come back to the comp's outlook and I know you mentioned many several factors that give you confidence in the second half. But I guess a question about the environment. Are you assuming that the environment changes or gets better as you move through the year? And I guess, related to that, consumers were starting to see lower taxes in their paychecks. So, I was wondering if you are assuming any benefit from that or if that would be upside relative to your current plans?

Yeah. So, current plans do not assume that there is some catalyst that drives our performance. We do expect the environment to be just as competitive in the back half of the year, as it's been really over the last couple of years. And so, if you look at what we're planning to do in Q3, for example, the two things that we'll be promoting, one more on the premium side and one more of a sort of snack or value item. Both will be price point promotions, which we don't typically do. We typically have one price point promotion out in the marketplace and another that's sort of unpriced typically focused on premium. We will, in this case, have competitive pricing on both of the offerings, as really some of the additional sort of drivers for the offering. So, I think our expectation is that it's going to be a competitive market and we really can't afford to take our foot off the gas. David E. Tarantino - Robert W. Baird & Co., Inc.: Great. That's helpful. And then on the G&A reductions I know you mentioned that we'll get more clarification on the timing of those, but I guess can you give some high level perspective on how that transition services arrangement works? Is the right way to think about this that you could have sort of minimal or low G&A reductions over the – relative to their current run rate over the next year and then you'd see a step down after the transition services arrangement ends?

Yeah. So, let me talk about the transition services fees first. So, well, as I mentioned in my prepared remarks, our shared service G&A even that which currently supports Qdoba is in our continuing operations. Way after we closed the deal, we will begin to receive proceeds from Apollo for the shared services that we're providing for them as part of transition services agreement. It's likely that, that will be shown to offset the G&A, the way we would report that. But even if it doesn't, as we try to figure out exactly how that's going to look going forward, we will be very transparent about showing you what the income level is or the offset is to that G&A from the transition services. We've got a compensation that will be then from Apollo. So you will see a reduction related to that, and at least in the back half of the year or post-closing.

And David, the way you can think about this, what – we'll be working through with Apollo is and once we are able to close on the deal, over time, we'll understand more details about their plans to become independent sort of department by department and as we understand that, it's then will be a catalyst to us putting our go-forward structures in place. David E. Tarantino - Robert W. Baird & Co., Inc.: Right. Thank you very much.

Thank you. Next question is from Chris O'Cull of Stifel. You line now is open. Chris O'Cull - Stifel, Nicolaus & Co., Inc.: Thanks. Jerry, let me join others in congratulating you on a very successful career.

Thanks Chris. Chris O'Cull - Stifel, Nicolaus & Co., Inc.: My question relates to the tenant improvement investments. And Jerry, would you describe how the company is evaluating the return on their portion of the investment? And if there's any changes to the rental rate charged to the franchisee after the investments have been made?

Yeah. So the second part of that question first, there is no change in the rental rate. The extra rental flow-through would come from the increase in the same-store sales that we get from resulting from the remodel. The way that we looked at the kind of improvement allowance, I'll go back to one of the things that Lenny said in his prepared remarks, which is this tiered approach on the overall investment cost, which is based on sales of the higher AUV restaurants, are going to get a higher investment, they'll get a higher tenant improvement allowance and then, of course, the opposite would be true for a lower performing units. But the way that we look at this is, we applied the same investment threshold for the tenant improvement allowance for us that we did for our own remodel investment cost for the company-operated restaurants. And so, and the hurdle that we were looking at there was a 15% return on that investment whether or not it's a tenant improvement allowance or a CapEx for company locations, Chris. Chris O'Cull - Stifel, Nicolaus & Co., Inc.: Okay. And then just – go ahead.

Chris, I just want to add a thought beyond just the financial sort of hurdles that we set for ourselves. It's also important from a competitive standpoint to recognize that many of our peers are accelerating remodels and in order for our brand to remain competitive and relevant in the consumer's mind, we're going to have to make sure that we do invest in these sites. Chris O'Cull - Stifel, Nicolaus & Co., Inc.: No, I understand, thank you. And then Jerry, I heard you say the stores you're keeping at a 24.6% margin this past quarter. Can you tell us what that margin was last year for those stores and how it's been trending?

Yeah, I can tell you at the Analyst Day, the Investor Day that we had, what, almost a couple of years ago now, we were showing those to be around 300 basis points higher than what they're currently trending and that is primarily related to significant wage inflation. And then within the quarter, there is some impact on commodities. Not saying it's a structural change, is in the labor model. The commodities will go up and down over time. Chris O'Cull - Stifel, Nicolaus & Co., Inc.: Thanks.

Thank you. Our next question is from Gregory Francfort of Bank of America Merrill Lynch. Your line now is open.

Hey. I've two questions. One is just on, what will the tax rate be kind of on the normalized go-forward basis? is 25%, 26%, which is what I'm backing into kind of a fair number on a go-forward basis? And then the second question was just a follow up to, to the one that was just asked. What will be I guess the stores you keep post refranchising, what do you expect their restaurant-level margins to be now on an ongoing basis given the change in the D&A? Is it just, is taking 4% and adding it on to sort of what you had previously guided a fair way to think about it?

Yeah. So, Greg, the restaurant operating margins that we've been talking about today is all apples-to-apples to our prior guidance. It's when we talk about the restaurant EBITDA that, that depreciation gets added back. And I think we showed that slide at ICR, which I think I have right in front of me. If you look at fiscal 2017, the stores that we intended to keep at the end of the refranchising would have had a store level margin for fiscal 2017 now before the labor and commodity inflation of 26.1%.

So, if I take 26.1%, add on maybe roughly around 4% and then take out some margin for inflation, that's the right way to think about long-term margins for the company business?

Yes.

Okay.

Long-term EBITDA margin for the business, yes. And then, on the first part of your question, which is by far the easiest of the two questions by the way. You would be looking at that 25% to 26% range, 21% for federal and then roughly 4.5% for state would be what an ongoing rate would look like, everything else being equal beginning in fiscal 2019 for us.

Cool. Thank you. Appreciate it.

Thank you, next question is from Alex Slagle of Jefferies. Your line now is open.

Hey. Thank you. Just a couple guidance questions. One on the one-time franchise fees related to refranchising. Wanted to know whether those are baked into guidance and that maybe in the past you had excluded some of those?

Franchise fees are in the guidance for this year, Alex. And of course, with the revenue recognition accounting change that will be effective for us in our fiscal 2019, you'll see a very different reporting structure, where we haven't yet determined which method of adoption we're going to apply yet. But as we get closer to that implementation, we'll describe what that looks like and how you should expect to see what it looks like going forward, and also what it looked like in the rear-view mirror.

Got it. And then on the refranchising, the cadence in which we assume the remaining transactions are sort of evenly split over the next three quarters or with the nearly 60 signed LOIs, I mean perhaps a little bit more show up in the second, third quarter rather than the end of the year?

It's not a bad way to model it going throughout the balance of the year somewhat ratably. But if you look at, with these roughly 60 LOIs that we have, we have either plus or minus 60 more restaurants to sell beyond that. So, it may be a little faster pace than the end of the year, but following it evenly is not a bad way to go at this point until we get more certain.

Thanks. Thanks and best wishes, Jerry.

Thank you, Alex.

Thank you. Next question is from Andrew Charles of Cowen & Company. Your line now is open. Andrew Charles - Cowen & Co. LLC: Thank you. And Jerry, congratulations on a well-deserved retirement. Lenny, you mentioned the new snack item in the bundle deal coming in Q3. Can you talk about your optimism behind these initiatives in light of the underlying deterioration in sales in January when you utilized a similar tactic?

Yeah. We didn't utilize a similar tactic in January. In January, we put out products that essentially already existed, put price points on them $1 to $5. When you look at what we're doing going forward, the snack item is a completely new item. It has been tested and it tested very favorably in the marketplace where we tested it. It's also a significant amount of food provided at a very reasonable price, so we can see consumer sentiment about it is very positive. It's also extremely indulgent and sort of true to Jack, something that we can deliver from our menu that many others can't. So I wouldn't say that it's anything like what we've done in January. New news tends to play a lot better for us than just price promotion. So that's why we get a little more optimistic about this one. Andrew Charles - Cowen & Co. LLC: Got it. And, Jerry, with G&A at 2.4% of system sales in 1Q is obviously below the full-year guidance range and before obviously the final tranche of refranchising sort of plan for this year really kicking in. Which of the reiterated guidance for 2.5% to 2.7% besides conservatism?

Yeah. I'd really call it primarily timing. If you look historically, the Q1 G&A tends to be lower than the full-year guidance as we just started to ramp up some of those initiatives and whatnot. And then, there's always some play with respect to what mark-to-market on those non-qualified retirement plans do, so there's always some fluctuation there. And then, we had a little delay in some equity grants, which change the timing of that amortization over the balance of the year with a lower amortization of those costs in Q1. Andrew Charles - Cowen & Co. LLC: Got it. If I can sneak one last one in, which of the heavier CapEx in 1Q 2018 versus 1Q 2017 with your company restaurants, does that reflect in new equipment that you talked about testing?

It's really more of the remodel activity that we have within the quarter both on some of the similar remodels that have been completed, some of them are ongoing, and then also some of the IT investments around digital. Andrew Charles - Cowen & Co. LLC: Great. Thank you.

Yeah. It's nothing really – it's not a big impact at this point we've got. Just a small handful of company operation sites that are testing equipment. At this point in time, we'll have somewhere around 15 franchise locations that will get involved in that testing here in the short term. But those will all be marginal in comparison to what the weight of the remodels broke out. Andrew Charles - Cowen & Co. LLC: Thank you.

Thank you. Next question is from Jeff Farmer of Wells Fargo. Your line now is open.

Great. Thanks. Just wanted to add my congratulations to Jerry; impressive long career. Moving to the question, just circling back to one of the first questions, just for some clarity, so when just about when Qdoba sale's complete, what type of information you guys will be providing for us over the longer-term guidance framework and a lot of times we look at what was provided at that May of 2016 Analyst Day, and to best of my knowledge, that was just a lot of information about future CapEx levels. So I could have read that quickly and wrong, but will you be providing both operating cash flow and CapEx numbers, so we can really get a much better understanding of what the free cash flow picture will look like 2018, 2019, 2020, 2021, for example?

In general, the answer to that is yes. We'll provide all of that clarity. And I think the timing of providing that clarity won't fully be determined until we have Lance on board and I have to give him an opportunity to work with us. On deciding all that, but you will have everything from the details on free cash flow, the EBITDA, CapEx, same-store sales, margins, G&A – well, you should be able to build out your models pretty readily.

Okay. And then, last question unrelated. Any surprises, or I would say, lessons learned with how your customers were using, I believe, it was called Value Jack's Way menu, basically, the $1 to $5 price point menu. Anything that surprised you? How are the customers using it? Anything that you can use as you move forward in terms of sort of balancing more the premium product versus interspersing it with value?

I guess, what I would say is, we've been doing a fair amount of research on where consumers historically find the most value on our menu, and not surprisingly, our taco offering has been quite popular. It also turned out to be quite popular within our $1, $2, $4 offering. And if there are lessons learned, it would really be along the lines of what we can do to enhance our sales through featuring tacos. And so that's sort of one big thing. As far as the other offerings, when we have things like breakfast pockets that are sort of new news, they are sort of innovation for us, but they also show up in a value price point, we tend to do a little bit better with those products as well. We take existing products and simply discount them, although we'll get a higher take rate. We also have to be careful about what the impact it is to margins. So those aren't necessarily the most preferred methods. And when we bundle items with a drink, a side, and an entrée, that historically has been our best play. So I think when we come out of this $1 through $5 price timeframe, some of the things that we've seen are right in concert with what we've sort of always known. When we look at behaviorally the consumers' take rate on our taco offerings within that $1 to $5 price points, it gives us some optimism about what we may be able to do with tacos in the future.

All right. Thank you very much.

Thank you. The next question is from Jeff Bernstein of Barclays. Your line now is open.

Great. Thank you very much and good luck on your golf game, Jerry.

He's going to need it. It's a lot of work.

Couple of questions. One, just on the unit growth, and I think we're in the 1% range, driven by franchisees this year. As you think out over the next few years, should you see stable fundamentals via franchisees, some tax savings? I'm assuming there are some significant re-franchising opening commitments. What's kind of your outlook over the next few years? Obviously, you'll give guidance at some point. But directionally, should we just assume a steady uptick in that growth rate and maybe you can provide some context, how many franchise opening commitments do you actually have, or for how many units do you have commitments at this point, so we know what's already in the bag?

I would say, overall, we should wait till we update guidance, and provide more clarity on that. What I will say is that the vast majority of the growth that you see right now in Jack in the Box brand, almost all of it is franchise growth. So a commitment's there. And I think that franchisees are optimistic about the business over the long term. So I don't suspect whether their commitment will go in vain. At the same time, they need to know that – they need to see those numbers show up. And I think what you can see us focusing on both testing new equipment that can drive efficiencies in our kitchen as well as focused on driving top line sales through product inhibition, those are the things that give them a sense of security that their investment will pay off over the long term. But I would say it'd be a little premature to model any significant uptick in growth. I would wait until we have an opportunity to update the long-term plan.

Got it. And then, Lenny, just the broader thoughts on the multi-brand portfolio, many of your peers contemplate whether a single brand or a multi-brand portfolio is the right strategy going from multi to single. I'm just wondering what you think are the greatest benefits you're going to lose from going back down to single on the off-side – on the opposite side of that, I guess, what would be the biggest benefit you think you'd gain from not running a multi-brand portfolio?

I think if we're being completely transparent and honest, the Street never fully embraced Jack in the Box being a multi-branded concept. And so we grew this thing from 86 units to 700-plus units in that entire timeframe 10-plus years. We never fully got acceptance of this business model. At the end of the day, you had competing interest, right? On the one hand, you want an asset-light business; and on the other hand, you have this growth business. And they don't, from an investment community standpoint, work hand-in-hand; they're not clean. So if there's one lesson learned about it, it would be that this type of model in a publicly traded situation probably doesn't make sense because it's just too complex. And so what we lose? I think we lose EBITDA, right? At the end of the day, that you have a business once generating positive cash flow for us that created some efficiencies on the G&A side, and we're going to have to relook at how we run the model going forward. But I think outside of those things net-net moving to one brand will turn out to be a very positive thing for our business. We're going to be a much more agile company with a leaner structure with fewer layers to go through to get things done. And that's sort of where our roots are; it fuels a lot of our innovation. And I experienced that this week, right? We've already begun to engage franchisees differently. We have all these committees that existed for both brands that got managed by brand services leaders as well as brand leaders. And that all flattened down to essentially me and my direct reports working directly with franchisees on the future of the company. It seemed easy. It seemed like we can move much faster than we typically do. And we sat around this same table that I'm at today, talking to you, talking to franchisees about the future and product innovation and also equipment testing. It was amazing how open they were to taking risks that would help us to accelerate our performance. So from that standpoint, I think yesterday when I walked out of two full-day sessions with franchisees, several folks are saying how you doing? Are you tired? You seem extremely energized at this point. And I am, because my franchisees are excited, they're engaged. We're moving much faster. Decisions that would have taken us weeks or months to make, we made in two days. And so net-net, I think our leadership teams would tell you, and I will tell you, this will turn out to be a net positive for us. We're just much closer to the business. And I'm excited personally to be much closer to the business.

Understood. Thanks for the perspective.

You got it.

Thank you. Next question is from Matt McGinley of Evercore. Your line now is open.

Hi. Thanks. First question is on the trend in the remodel process. And I understand there's a lot of factors that go into when you would do that given franchisee profitability, your contributions, the type of remodel. But how do you think that trends over the next four years? Is that something where you do a lot of cheaper lower AUV remodels upfront? Or is it something that this takes four years and you just do a quarter of those remodels per year?

So it won't work the way you described where we do cheaper upfront. It will be dispersed in a way that really has some of the more expensive remodels happening earlier in the process. And then later in the process, I think we'll not only be faster at getting them done, but they will be the less intensive ones. And really, what that comes down to is some of the buildings that we will remodel early in the process just require more work and more time. So they're a little more costly and they have some downtime associated with them. Some of the sites that we will remodel later in the process, we won't have to shut those sites down completely. The drive-throughs will remain open. And we can sort of work around the drive-through to get that work done. So maybe a little more intense and expensive for the earlier remodels is the way you should think about it.

Got it. And for Jerry, I have a question on the tax rate guide for the year. If the adjusted effective rate was 28.8% I believe you said in the first quarter, and the full year guide is still 29%, but in the first quarter, you would have had – most of that quarter would have had the higher 35% federal rate, and for the rest of the year, you should be at the lower 21% federal rate. Why is the guide for the year still 29%?

Yeah. The way that you have to do this is you're really looking at the overall blended rate for the entire year. And that's what the rate is for each quarter. And so what you basically are seeing is for the year and for each quarter is one calendar quarter at 35%, three calendar quarters at 21%. But that is shown evenly throughout the year for each quarter.

Okay.

It's not logical. But that's the way that you have to do it.

Okay. Thank you.

Thank you. Next question is from Robert Derrington of Telsey Advisory Group. Your line now is open.

Yeah. Thank you. Lenny, can you give us a little bit of color about your thought process as you look at the recent Food Truck Series sandwiches you introduced and what the thought is there, and what your initial impression is, what they're doing with the business as far as sales go?

Yeah. So first of all, I'd say the Food Truck Series really represents two things. One, I'd say from an advertising standpoint, Jack's got its swagger back. We had gotten I think a little too conservative in the way we used Jack in our advertising. Frances really along with our Chief Marketing Officer, Iwona, started pushing for us to get a little more aggressive and back to the old personality for Jack. And I think it played really well and I think bringing in Martha Stewart played really well. It's more in line with the persona that helped us cut through a lot of advertising noise, even though we're a regional player. So I think the first headline is on an advertising side, it's worked extremely well. And it's also indicative of what you can expect to see from us going forward. As far as product development, really happy with the Food Truck Series. It has done well for us. But I think we can do even better. And after spending a couple days with my franchisees, if we were to evaluate the Food Truck Series today versus the month past before we launched it, we may have actually doubled down on even more protein on those sandwiches than we're currently offering in order to ramp up the quality in the sandwich. And we looked at similar sandwiches and even line extensions for Food Truck Series these last couple of days, where all of us were lined around really wanting to knock the customer's socks off when they buy these sandwiches. So that might mean price points have to change in the future in order to achieve that level of quality. But I think if we're going to have to be aggressive on the value side, we don't want to lose our brand equities that we built up on the quality side. And so it's going to be important that we continue to put these wow products out there. I would say on scale to 1 to 10, Food Truck Series maybe is a 7. And I think we can get to a 10 if we're willing to commit fully to high quality items going forward.

That's great color. And, Jerry, congratulations. But before you retire, can you get us some restated quarterly numbers to match up with the way you're reporting?

So, well, thank you first of all, Bob. So look, we understand the need for the restated quarterly numbers, which Qdoba as discontinued ops and more importantly the Jack standalone piece. We will get something out there to you. We just can't commit to a time at this point. But we understand the need and we'll get it to you as soon as we can.

Okay. Terrific. Thanks, again.

Thank you. Next question is from Karen Holthouse of Goldman Sachs. Your line now is open. Karen Holthouse - Goldman Sachs & Co. LLC: Hi. One quick housekeeping question on the model. If I try and reconcile for 1Q 2017, G&A that was, or SG&A that was reported last year versus the restated number this year, it looks like it's about $15 million lower. Taking out the D&A that got reallocated and Qdoba advertising, I end up with about a little over $6 million that seems to be allocated to Qdoba. Then I am trying to reconcile that with what you said was sort of a $14.2 million Qdoba allocation back at ICR, because that would seem like that $6 million would annualize to something a lot higher.

Yeah, Karen, so actually, I appreciated getting that information before the call for them to take a look at it. The roughly $6 million that you had as allocated is really not allocated. I had a slightly different number, but we're in the ballpark. That was direct Qdoba brand G&A. And that would be consistent with what the direct Qdoba brand G&A was for the full year, which I think we said that was $14.2 million. The reason that you can't annualize that is because the first quarter of last year, Qdoba had a cost in there for and assumed incentive payment at their target levels. And by the time we got to the end of the year with the Qdoba performance, there was no target level or there really wasn't much of a incentive compensation payment at all. So you really can't look at the roughly $6 million of direct G&A in Q1 and extrapolate that. But the $14.2 million was the right direct Qdoba G&A for last year. Karen Holthouse - Goldman Sachs & Co. LLC: Okay. Great.

And you're close enough for the quarter. Karen Holthouse - Goldman Sachs & Co. LLC: Okay. That makes sense. And then, one of the things we were talking about at this point last year was some weakness in the Hispanic consumer on the back of the election. I know that's a demographic that you over-index to. What are you seeing there? And then, is there – sort of what are you seeing in trends there? And how do you think about sort of spending patterns last year in the, call it, Hispanic consumer comparison in the coming months versus where we are now?

I don't think that we are seeing anything currently that would create concern about the strength of the Hispanic consumer more so than the concerns we would have over an abundance of value in the marketplace and the high take rates associated with that value and the difficulty of breaking through some of that noise at times. But I don't know the specifics about the Hispanic consumer's strength. But we certainly don't have any data points at this point in time that would tell us that something has changed dramatically, but it's certainly something we'll continue to take a look at. Karen Holthouse - Goldman Sachs & Co. LLC: Great. Thank you.

Operator, I think we have time. We're right up on the time, but we'll have time for – we'll take one more question.

Thank you. And our question is from Matthew DiFrisco of Guggenheim Securities. Your line now is open.

Thank you. I just had a clarification and a question. Just did you guys specify earlier in the call what the Jack in the Box brand in 2018 is going to give as far as either operating cash flow or free cash flow in correlation with the CapEx and EBITDA numbers?

We did not, Matt.

Okay. I guess, also, Lenny, when you're looking at the remodels and in years past, other companies, not necessarily you guys, you've done a great job of not having a lot of closings. But other companies that had some closings kick up when they have remodels, and in the context with the inflation, that's out there and the value promotion, do you model in there with the longer-term growth projections, the potential for a pickup and closings? Or have you already sort of vetted the temperature of the franchise network?

I'm not sure if I fully understood your question maybe...

Yeah. Maybe I'll take that one. So, Matt, with the re-franchising that we've done, that's really where a lot of the vetting in terms of closings has come. Our guidance that we give on unit growth is gross and not net. It's typically the stores that we're closing are obviously much lower volume. But when we look at the remodels, we're not going to put in a lot of capital into the stores that we think that is not worthy of those sorts of investments that it's not going to be in the long-term plan.

Yeah. Matt, I would look at this is not necessarily closing because of the remodel, but on some lower performing units, you may see the franchisees choose not to want to sign up for the next lease extension, if it is a substantially lower cash flow generating unit.

Exactly. So to that point, is that another thing to be updated on later as we go further down?

No. I think Carol's right. Any uptick you see is really related to the refranchising some of the lower-performing markets. But the other thing I just described is they're usual and ongoing. And I wouldn't expect to see an uptick from that lull.

Okay. Thank you.

Yes.

Thanks, everyone, for joining us, and congrats to Jerry on his last earnings call. You can go ahead with the course here shortly when Lance joins. So we look forward to seeing all of you in New York and Boston over the next few weeks.

Thank you, speakers. And that concludes today's conference call. Thank you all for joining. You may now disconnect.