Good day everyone, and welcome to the Jack in the Box Inc. Fourth Quarter Fiscal 2010 Earnings Conference Call. Today’s call is being broadcasted live over the internet. A replay of the call will be available on the Jack in the Box corporate website starting today. (Operator Instructions) At this time, for opening remarks and introductions, I would like to turn the call over to Carol DiRaimo, Vice President of Investor Relations and Corporate Communications for Jack in the Box. Please go ahead.

Thank you, Stacy, and good morning everyone. Joining me on the call today are our Chairman, CEO and President, Linda Lang; Executive Vice President and CFO, Jerry Rebel; and Chief Operating Officer, Lenny Comma who has been promoted to Executive Vice President last week. During this morning’s session, we’ll review the company’s operating results for the fourth quarter of fiscal 2010 and discuss guidance for the first quarter and fiscal 2011. We will refer to non-GAAP measures during our discussion and a reconciliation is posted on our website at investors.jackinthebox.com in the presentations and webcast sections. 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 these expectations based on risks to the business. The Safe Harbor statement in yesterday’s news release and the cautionary statement in the company’s most recent Form 10-Q are considered 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 will be participating in the Credit Suisse Holiday Conference in Orlando on December 7, presenting at Cowen and Company’s Ninth Annual Consumer Conference in New York on January 11. Our first quarter ends on January 23 and we tentatively expect to announce results in the week of February 21. With that, I’ll turn the call over to Linda.

Thank you Carol, and good morning. In the fourth quarter, the 4% decrease in same-store sales at Jack in the Box company restaurants was slightly better than our guidance range, and an improvement from the 9.4% decrease we saw in the third quarter. Of the 540 basis point improvement in sales, we saw a 250 basis points sequential improvement in traffic and a 290 basis points sequential improvement in average check compared to the third quarter. The increase in average check was driven primarily by mix as the promotions we ran during the quarter generated a good response. California remained our best performing market this quarter and we were encouraged to see improvement in Texas, our biggest company market which was on-par with California on a two year basis. We also began reporting Jack in the Box franchise same-store sales this quarter which were down 2.8% versus last year. We remained focused on enhancing the entire guest experience in order to earn their next visit. We believe the investments we have made to deliver more consistent service, improve the quality of our signature products and enhance our facilities are beginning to resonate with our guests. During the fourth quarter at Jack in the Box, we implemented a comprehensive program to improve guest service by delivering a more consistent dining experience. Along with evaluating restaurant performance via our Voice of Guest surveys additional resources are being committed to more closely measure how restaurants are executing the key drivers of guest satisfaction. This is a system-wide effort that is being enthusiastically embraced by both our franchise and company operators. Over the years, we have created one of the most varied and innovative menus in the QSR industry. At the heart of this menu, our core products that have been guest favorites for many years especially among our most frequent customers. By improving these core products, we believe we can reengage lost customers and create an even broader appeal for these guest favorites. We took steps in 2010 to improve several staples on our menu. In April, we introduced new French fries and a new premium blend of coffee named with real Kona beans. Next step were our tacos, which is our top selling menu item. We recently improved our tacos and last Tuesday we had a free taco giveaway at our restaurants. We had an incredible response and generate a trail of more than 4.5 million tacos or more than 2,000 tacos per restaurant. The next improvement impacts several products. We’ve rolled out a new hickory-smoked bacon that really adds flavor to our products ranging from Croissants and Breakfast Sandwiches to Chicken Sandwiches and Premium Burgers. There are still more improvements to come and we’ll be communicating these enhancements in our promotional messaging to make our guests aware of the changes. Another major factor in driving guest satisfaction is the restaurant environment. We’ve been re-imaging our restaurants inside and out with a comprehensive program that is keeping Jack in the Box relevant in the highly competitive QSR landscape. Our restaurants that had been re-imaged have higher attribute ratings than the rest of our system and we’re seeing higher sales at re-imaged locations and markets that also include restaurants that have not been re-imaged. We’ve made tremendous progress towards re-imaging our entire system and are now targeting substantial completion of this program system-wide by the end of 2011. Along with these actions to improve sales, we’re continuing to execute a marketing strategy that focuses on both premium products and value promotions. Our value message in the fourth quarter emphasized a combo meal featuring a new products, the Jack’s Really Big Chicken Sandwich priced at just $3.99 the combo features a new sandwich along with a small fountain drink and a small order of seasoned curly fries. We also have a couple of value promotions planned for the first quarter of fiscal 2011 including two Croissant Sandwiches for just $3. And last week we reintroduced our double-patty Bonus Jack in a combo meal with a small order of fries and a small drink for just $3.99. In addition to the Really Big Chicken Sandwich combo and the new Pastrami Grilled Sandwich we added in August, we expanded our breakfast menu in the fourth quarter with the Breakfast Pita Pocket. Breakfast remained our strongest day part in the quarter. One of the key components of our strategic plan is new unit growth for both brands. In fiscal 2010 a combined 82 Jack in the Box and Qdoba restaurants opened including locations in several of our newest markets. 30% of the new units opened in 2010 were in new markets. These locations continue to perform well with overall AUVs tracking higher than our system average. Just three weeks ago, we opened a restaurant in other new market, Kansas City. Although that restaurant was not part of our class of 2010, opening week sales were more than 125,000 which is an all-time high for our company restaurant. Another key component of our strategic plan is refranchising which remains a critical element in transforming our business model. Over the last five years, we have refranchised 680 restaurants and increased franchise ownership from 25% to nearly 57% of the Jack in the Box system. We’re ahead of our plan in achieving our goal to increase franchise ownership to 70% to 80% of the Jack in the Box system by the end of fiscal 2013. Moving on to Qdoba, we’re pleased to report another strong quarter of positive same-store sales growth as we continue to see an increase in the spending patterns of fast-casual customers. System same-store sales at Qdoba increased 5.6% for the quarter and 2.8% for the full year. During the quarter Qdoba launched a very successful online campaign that attracted new customers and increased the frequency of our existing guests. Qdoba is doing a great job of leveraging social media to drive traffic to our restaurants. During the quarter, we also saw significant growth in Qdoba’s Catering business. Although fiscal 2010 was a very challenging year for Jack in the Box, I’d like to take this opportunity to thank our employees and franchisees for all their hard work over the past year. I’m grateful to each of them for their continuing support and focused in executing our strategic initiative. Before turning the call over to Jerry, I want to reiterate the steps we’re taking to position the company for future sales growth and margin expansions. We’re improving many of our top selling core products. Our marketing strategy for the year continues to emphasize both premium products and value promotions. We’ve implemented a comprehensive system-wide program to improve guest service by delivering a more consistent dining experience. We’re expediting the completion of our restaurant re-image program. We’re expanding the Jack in the Box and Qdoba brands in both existing and new markets. And we’re moving the Jack in the Box brand to a business model that is 70% to 80% franchised. And now let me turn the call over to Jerry.

Thank you Linda and good morning. All of my comments this morning regarding per share amount refers to diluted earnings per share. Reported fourth quarter earnings were $0.07 per share compared to $0.70 last year. And full year EPS was $1.26 versus $2.27 last year. As we announced in late September, we closed 40 Jack in the Box company restaurants located primarily in the Southeastern Texas, and the charges related to these closures reduced EPS by approximately $0.33 for the year. We believe these closures would benefit future earnings, cash flow and returns. Our average unit volumes in 2010 excluding these restaurants would have been approximately 2% higher than the actual number of a $1.297 million. And consolidated restaurant operating margins were negatively impacted by another 70 basis points in 2010 by these restaurants. Late September, we gave an update on the timing of a refranchising deal that we had previously discussed. That transaction to purchase a full market by a new franchisee that a Jack in the Box did not closed in the fourth quarter and is now likely to be broken up into smaller transactions. As we noted previously that was worth about $0.17 per share roughly $25 million of proceeds and about $15 million in overall gains as compared to the guidance we issued. Restaurant operating margins decreased 330 basis points to 12.5% of sales for the quarter. The breakdown is as follows. Food costs were up 90 basis points driven by commodity inflation of approximately 3%. Slightly better than our guidance above 4% and compared to 5.5% deflation in the last year’s fourth quarter. Sales deleverage negatively impacted margins by approximately 110 basis points and higher workers compensation and other insurance costs accounted for approximately 50 basis points of decline versus last year. The remaining 80 basis points was due primarily to higher repairs to maintenance expense as well as additional costs relating guest service initiatives that we talked about in the last quarter. As you saw in the press release, we have reclassified impairment and other charges from SG&A expenses in the income statement. Excluding the charges related to the closure of the 40 restaurants, the two lines combined were in line with our full year guidance for SG&A. SG&A decreased by $17.3 million for the year and with 10.6% of revenues compared with 10.5% last year. With the highlight some items that impacted the full year. The 53rd week added approximately $3.6 million to SG&A. Pension expense increased by $17.6 million due primarily to lower discount rates. Insurance recoveries related to Hurricane Ike resulted in a $4.2 million benefit. Mark-to-market adjustments on investments supporting the company’s non-qualified retirement plans resulted in a year-over-year decrease in SG&A of $3 million. Incremental advertising spending totaled $6.5 million for the year and incentive compensation declined by $6.1 million in fiscal 2010. In addition to these items, our refranchising strategy and planned overhead reductions, lower G&A cost by approximately $14.8 million for the full year. In September, our Board approved to sunset of our pension plan effective December 31, 2015. Participants will no longer accrue benefits after that date and new employees hired after December 31, 2010 will not be eligible to participate in the plan. The objective of this decision was to reduce the overall volatility of our retirement programs and is expected to resolve and lower pension expense and generally lower pension contributions overtime. The financial impact of this decision was immaterial in fiscal year 2010. Moving on to our refranchising strategy. We sold a 108 company Jack in the Box restaurants to franchisees in the fourth quarter and 219 restaurants during the year. The highest number we’ve sold in any year since embarking on this strategy. Fourth quarter transactions included the sales of entire market with lower than average sales and cash flows which generated lower proceeds and gains which is expected to be accretive to future cash flow and earnings. Excluding this transaction average gains and proceeds for the fourth quarter were $352,000 and $510,000 respectively. Our capital expenditures were lower than our full year guidance of a $125 million to $135 million. About half the difference in permanent resulting from lower cost for the 12 new Jack in the Box restaurants opened during the quarter, two restaurants under construction that were purchased by franchisees and lower cost for re-images and capital maintenance projects. The other half is timing related to lower construction-in-progress spending for new restaurant construction and re-images slated for early 2011 completion. Before I review our guidance for fiscal year 2011, let’s talk about our commodity cost outlook for the upcoming year. Overall we expect commodity cost for the full year to increase by 1% to 2%. With higher inflation in the first half of the year, when we are lasting deflation of nearly 7% in the first quarter and 1% in the second quarter. Specific to our major commodity purchases, beef, which accounts nearly 20% of our spend and we are expecting the full year beef costs be up 6% to 7% versus 2010. We expect beef costs to be up approximately 9% in the first quarter compared to a decrease of 19% in the first quarter of 2010. With a favorable price grid to import 90s, we are maximizing the use of domestic fresh 90s with current market prices in the $1.45 to a $1.50 per pound range versus a $1.37 last year. We have 100% of our import 90s covered through January at a $1.58 per pound and 25% coverage through March at a $1.50 per pound versus approximately $1.38 last year and current market prices in the $1.70 range. We expect beef 50s to average in the $0.65 to $0.70 range per pound in Q1 versus $0.57 per pound last year. Pork accounts for about 5% of our spend and is expected to be up approximately 9% for the full year. Again Q1 will be most negative as we compare record high pork prices at the beginning of Q1 to more seasonal prices last year. Cheese also accounts for about 5% of our spend is expected to up 7% to 8% for the year. Major items that are positive bakeries which is 9% of our spend, is expected to be down 4% for the year although the wheat market has increased 20% since June, our wheat and flour coverage has a lot of (inaudible) increase now. We have 55% of our bakery needs covered for December 2010 and contracts to 45% expiring in March 2011 when the wheat market is expected to ease somewhat. Poultry which is about 11% of our spend is expected to be down 2% for the year benefiting from new fixed price contracts which is effect last February and March which are leveled in previous contracts by almost 6%. Thus Q1 will be the most favorable, the soft favorability extending into Q2. As a reminder we have fixed price contracts on shipping [ph] that run through March of 2012. (inaudible) which is about 5% of our spend is expected to be somewhat lower in 2011, if we left difficult growing conditions for tomatoes and lettuce last year. We also have fixed price contracts in place for potatoes which accounts for approximately 8% of our spends and a 100% of our potato needs for the full year are contracted with prices essentially flat versus prior year. Additionally our assumptions include ongoing supply chain savings that we are achieving through contracting and strategic sourcing. We also expect our overall packaging cost to be slightly lower also helping to offset some of the higher commodity costs. Now let’s move on to our guidance for fiscal 2011. For the first quarter, we expect same-store sales for Jack in the Box company restaurants to range from down 1% to up 1% and to increase approximately 4% to 6% at Qdoba system restaurants. And here is our thinking on some of the key components of our full year guidance. Same-store sales are expected to range from down 2% to up 2% at Jack in the Box company restaurants. Same-store sales are expected to increase approximately 2% to 4% at Qdoba system restaurants. Restaurant operating margins for the full year is expected to range 14% to 14.5% depending on same-store sales and commodity inflation. While the closure of the 40 restaurants in the fourth quarter of 2010 would have a positive impact on margins, we expect it to be largely offset by commodity cost inflation of 1% to 2% as well as quality improvements to our core products. SG&A expense is expected in the mid 10% range excluding impairment and other charges. While pension costs are expected to be approximately $3 million lower, we assume $8 million of higher incentive accruals in fiscal 2011 versus 2010. Impairment and other charges which excuse me, impairment and other charges include accelerated depreciation and other costs on the disposition of property and equipment. Commodity purposes, we estimate approximately 70 to 80 basis points for this loss [ph]. Diluted earnings per share are expected to range in a $1.41 to $1.58 per share. Gains from refranchising are expected to contribute from $0.66 to $0.78 per share as compared to $0.65 in 2010. Operating earnings per share which we are defining as diluted EPS on a GAAP basis less gain from refranchising are expected to range from $0.75 to $0.90 per share. Diluted EPS includes approximately $0.10 to $0.12 of incremental re-image incentive payments to franchisees in 2011 as compared to 2010. As a remainder franchisees receive a $20,000 per restaurant expenses from us when they complete their period. Let me walk you through a comparison of our 2010 results to our 2011 guidance which is also provided on the investor relations section of our website. Our reported EPS for fiscal 2010 was a $1.26 per share. Excluding gains from refranchising are $0.65 will resolve in operating earnings that we are defining as $0.51. Adding back charges related to the closure of the 40 stores of $0.33 and excluding the positive impact of Hurricane Ike insurance recoveries of $0.05, the 53rd week $0.03, and the lower tax rate $0.07 would equate to about $0.79 per share on a comparable basis. This compares to our operating earnings guidance of 2011 of $0.75 to $0.90 per share which includes $0.10 to $0.12 of incremental re-image incentive payments. We estimate EPS sensitivity as follows. For every 1% change in Jack in the Box system same-store sales, we estimate the annual impact to earnings of $0.06 to $0.08 per share depending on flow through and assuming stable costs. For every 10 basis point change in restaurant operating margin, the estimated EPS impact is approximately $0.01 to $0.02 per share. That concludes our prepared remarks and now I’d like to turn the call over to Stacy to open it up for questions. Stacy?

Thank you. We are now ready to begin the question-and-answer session. (Operator Instructions). Thank you. Our first question is from John Glass of Morgan Stanley.

Thanks. I wanted to follow-up on the question of the topic of store margins, Jerry, and you talked about how the closing of the stores, the 40 stores is going to be mitigated by price investments and the commodities. But what about the stores that you refranchised, clearly the 108 this quarter had lower margins. What were the benefit should we expect to see in 2011 from those stores now being off of your P&L?

Those are worth, they are worth about 50 basis points.

Okay. So I guess the broader questions is why aren’t we seeing more store level margin improvement just given the refranchising to-date and you’re saying that it’s getting mitigated by these other factors. Do you have a sense of how your franchisees store margins are, the franchisees that have operated for a longer periods of time, are they materially different than your store margins excluding the royalty?

They tend to be a little better than the company margins without regard to the growth event [ph] or I should say prior to the growth events.

Do you have an estimate of how much more, how much better they are able to operate stores versus, you know I’m trying to get a sense of how much of this is just endemic in your model and your – the pressures you’re feeling versus maybe how franchisees can operate versus.

Yes, you’re looking at probably – and it’s in the neighborhood of 100 or 200 basis points and it’s driven by physically higher pricing and also they tend to operate for the low level prices [ph].

Okay, thank you.

Our next question comes from Chris O’Cull of SunTrust. Chris O’Cull: Thanks. My question relates to the improving service in the new survey system. Linda, is there any indication that broadening the menu offerings has created too much operational complexity and is starting to affect service and then I have a follow-up.

Okay. Yes, no there is no indication Chris, that broadening is menu – it’s no more complex the menu than it has been. We have deleted products from the menu to make room for new products as we’ve added those new products. And in terms of the improvement in the service, it’s really let me kind of take a step back and say it’s really the overall guest experience. So if you combine the work that we’re doing and the investments we’re making in improving the guest service execution. So improving the consistency of that, through this system where we provide immediate feedback that is very actionable and it must be responded to immediately that’s going to improve the consistency of our guest experience. Then we talked about the investments we’re making in the product upgrades. Things like the French fry that we upgraded. The coffee that we’re seeing significantly higher sales of coffee as a result of moving to that higher Kona coffee blend. We just launched out an new and improved bacon. And we have other product improvements that are currently in test as well. The last one that we did was a pretty significant improvement in the taco, improving the execution of it adding more cheese, more lettuce, more sauce and we just – that culminated in the big giveaway last week where we really generated a lot of trail that we introduced that product to our customers. And then lastly of course is the re-image. And that we completed the extra re-image, got the benefit in terms of the curb appeal but we were really falling behind in terms of our interior image or dining our facility as it relates to the new fast-casual that were out there McDonalds investing significantly in their re-images as well. And the good news is as we continue to monitor and analyze those restaurants that have been re-image, we are seeing a sales improvement in those restaurants. And many of those restaurants as part of the re-image we are also putting in the new logo which signals a change to our customers. So all of that is really an overall strategy and very comprehensive plan to improve the overall guest experience. Kind of a long winded answer to your question but I think it’s necessary to really talk in the broader sense. Chris O’Cull: No I agree, it was helpful. And then just a follow-up, it seems like most of the restaurants that have successfully promoted value in this environment had done so with a consistent price message such as the dollar menu, the two for twenty. Do you think there is opportunity – I mean is there an opportunity to improve the value messaging at Jack, I mean is there an opportunity to maybe create some more price certainty for some of the consumers?

Yes, we actually had done more of the one dollar or if you recall the pick three for three and what has worked for us generally Chris, is the bundled value meals where we have a unique product offering like the Really Big Chicken Sandwich, like the Bonus Jack that we have now going on this quarter and we pair it with French fries, the beverage maybe tacos are included in that bundle meal. And it’s a very compelling price point. It’s differentiated and it doesn’t erode the margins significantly as what we see with the deep discounting. And so we’ll continue in that strategy in terms of the value offerings to our customers. Chris O’Cull: The last time you all ran Bonus Jack, I know Burger King was running a pretty aggressive promotion. So what are you expecting from the Bonus Jack this year in terms of just driving traffic I know it’s got a pretty strong following.

Yes, we guided down 1% to plus 1% for the quarter. So that’s embedded in our guidance as what our expectations are. And if you – let me just talk about sales real quick. In terms of regional performance we talked about Texas improving on a two-year basis. Texas really did improved quite a bit more than California. California still remains challenged from just a same-store sale basis, they are the best performing but from a two year, we really saw the improvement in Texas, so that’s a positive. Chris O’Cull: Great, thanks.

You’re welcome. Thanks Chris.

Our next question comes from Matthew DiFrisco of Oppenheimer.

Thank you. My question is with respect to the re-imaging contributions to franchisees, I think you’d spend in total $0.06 impacted earnings in 2009. I can’t find how much it was for fourth quarter or the full year for 2010? And then I just wanted to, I guess get a better handle of, you sounded like you were going to be completely done with the re-imaging as of 2011 with a plan. So with one end would be correct to look at this as far as you lose all of that expense which looks like it look could be a couple of pennies plus the $0.10 to $0.12 so maybe $0.13 to $0.15. On top of that I would assume eventually these impairment charges go away with the combination of the remodel being done but also better comps should bring less impairment related charges. So do you think or should we be correct to be conditioned to look at 2012 a year where you’re just going to have a natural earnings power improvement of close to maybe $0.30?

Lots of information on that. Let me see if I can answer all of that. First of all, the re-image contributions for fiscal 2010 were $1.455 million. That will be broken out on the 10-K when we file that in the not too distant future here. And if you look at what we said, $0.10 to $0.12 incrementally in 2011, would equate to an additional $8.5 to $10.5 million of contribution to get that number. You’re also right with respect to that being primarily a 2011 charge. You’re likely to see some spillover into 2012, but it would be substantially less what you’re going to see in fiscal 2011. And I think you’re also correct on the impairment and other charge line as what we’re looking at for next year is roughly 70 to 80 basis points coming off of about a 90 basis point charge here in 2010 with just around $21 million. That included about $4.5 million of impairment on other restaurants that were not cash flowing positively. The remainder was due primarily to write offs and such associated with asset disposition. Most of that was due to re-images. You’ll expect to see that piece of that charge go up in 2011 as we do intend to re-image more restaurants. But you’re right, that will fall off. It won’t fall off completely, but it will be down substantially in 2012.

Okay. And then I guess in your comparability of EPS you were trying to help us understand that. I missed it. Did you back out also then the re-imaging contributions to franchisees, because it seems like it was more burdensome in ‘09 and about half of what it was in 2010 then. 2010 was half of ‘09.

What I did was, I just took the 2010 as a base with the $1.455 million in there. I didn’t back it out or adjust the 2009. And what I did in comparison to 2011 was just simply to mention that our $0.75 to $0.90 for operating EPS includes an incremental $0.10 to $0.12. So I didn’t want to suppose what you guys should do with that, but I did want to make sure to give you all the data.

Right, but comparability for 2009 to 2010, 2010 benefited by $0.03 by having less re-imaging contributions.

If that’s the right number. I don’t have that right in front of me here, but if you were looking at this, this 10-K then the answer to that would be yes. About $0.03, yes.

OK. Thank you very much.

You bet.

Our next question comes from Jeffrey Bernstein of Barclays Capital.

Great, thank you. Just one question and one follow up. The question is more on the refranchising. I guess looking at all the units that were franchised this quarter, it would seem like the gains are slow, and obviously there’s one market that’s weighing that down. I was just wondering if you could talk as you look out over the next two plus years and finish off refranchising, would you expect that more of the markets going forward are going to be more of these lower performing markets as we get down to the end or would you expect perhaps lower multiples on those markets? I’m just wondering whether you can give some color on the remaining markets perhaps a little color on the reason that last franchise transaction didn’t work, whether it’s financing issues related. Trying just to size up the refranchising pipeline over the next couple of years. And then I had a follow up. Thanks.

Okay. Jeff you have a lot in there, so if I forget to answer part of it, just let me know that I did and I’ll jump back in on that. But here’s the way that I think I would look at the refranchising gains flowing in. Remind everybody that what we’ve said in the past, which is still true today, that the gains, the average gains and proceeds are largely driven by the cash flow of the restaurant that we sell. And certainly this year was no exception to that, and I expect that there will be no exception to that going forward. It might be a little helpful if I dive into some of the details here to give you some additional perspective on what we saw in fiscal 2010 versus 2009. So in 2010, we sold 104 restaurants that had lower than average cash flows and unit sales volumes, or about 47% of the total that we sold in 2010. That’s a little higher on a percentage basis than what we sold in 2009, but if you look at the higher performing restaurants, restaurants that had substantially higher AUV’s and substantially higher cash flows, and our 2010 total represented 22% of our total units sold had those higher cash flows. Only 2% of the restaurants sold in 2010 had that. So what you saw in 2009 and prior was the higher sales volumes from these other restaurants were offsetting the lower performing unit gains. We didn’t see that in 2010 because we didn’t sell that many higher performing units here. If you look at the 104 units that we sold that had lower than average cash flows, there were five deals. We generated a little more than $25 million in proceeds on those deals and if you look individually and collectively, they are going to be accretive to future operating EPS. And we estimate that to be about $0.04 to $0.05 accretive. So we’re generating additional cash flow and instead of being dilutive like many refranchising transactions are, these are accretive. And so when you think about how do we use the refranchising cash flow, typically we’ve been repurchasing stock on that. We repurchased $97 million worth of stock this year, or about 4.9 million shares. This $25 million that we had from these lower than average unit volumes and the lower gains, generated about 1.3 million shares repurchased. So we’re going to generate on these transactions $0.04 to $0.05 accretion on EPS and bought back 1.3 million shares. So we can look at this as it’s driving down the average gain, but I think if you look at what the benefits of the business is, and what the benefits to the shareholders is, these are absolutely fantastic deals. We want to continue with these. Now what we’ve also said in the past is that we can afford to be patient and we don’t have to sell restaurants to franchisees to pay down debt or to be compliant with debt covenants. That continues to be true. I can assure you that we will continue to be patient particularly with selling the better performing units. We’re not going to take a discount on those. We’re not going to reduce the multiple. We’re going to get fair value on those. And if that means that we don’t sell those that means that we won’t sell those. So some of that thinking is included in our 2011 guidance as you see where the average gain is around $300,000 a unit, and that comes from that thinking. And in addition, you asked the question about how many more restaurants. If you look at we need to sell – to get to the midpoint of our range of about 400 restaurants left to sell between now and the end of 2013.

And would you say that out of that 400 left to sell, what percentage of those are above the system average versus below.

Well if you can look at what we’re forecasting for 2011, we’re not anticipating any of these being above system average. Otherwise, the average unit gain would be substantially higher. And so again, we’re going to be very conservative on the selling of those restaurants, making sure that we get full value for those and not taking a multiple discount on those higher performing units.

Okay. And then just a clarification. I know you had made a couple of comments about California and Texas. Just looking for a little bit more color. Perhaps the sequential cost through the quarter. I’m a little confused. I know you said California was your best market in terms of I guess that was the absolute comp, but yet you were disappointed. Maybe you were talking about one year versus two year. I’m just wondering if you can talk about just sizing up what California and Texas are on the comp spectrum, when those markets have turned positive on a one or two year basis. Thanks.

California on an absolute basis for the quarter was better performing than Texas, but on a two-year basis, California slightly weakened and Texas improved. So they actually on a two-year basis, they are now the same in terms of sales. So California, we don’t – unemployment in California is still very high. A lot of uncertainty in California because of the budget situation, but there is new leadership in place so we’ll see what happens there.

Great. Thank you.

Our next question comes from Keith Seigner of Credit Suisse.

Thank you. Just a quick question on Qdoba] actually. The guidance builds in quite a step up in franchising growth. I was just wondering if you could give us an update about what the pipeline for unit growth on the franchise side of the Qdoba system looks like maybe with the timing of those unit openings looks like for this year to give us some sense of where the run rate is at the end of the year. And then also, have there been any changes in the fees/royalty structure, any incentives on Qdoba, anything along those lines would be helpful. Thank you.

Sure. If you recall, in 2010 we really slowed down the growth of Qdoba, and especially if you compare the 21 franchise locations versus almost 40 in ‘09 and almost 60 in ‘08 for Qdoba franchise new unit growth, and the reason for that was one, a lack of available credit for the franchisees; two, the lack of available sites because of the pull back in development of those lifestyle centers where it makes sense to put a Qdoba; and three, the sales performance was more challenging four quarters ago, three quarters ago. Since that time, the financing is more readily available. There is some secondary commercial real estate that is becoming available and there are some pretty good deals out there. And then the turnaround in the Qdoba business is really getting the franchisees to feel more bullish about growth with Qdoba. So that’s why Jerry feels very confident in the unit growth for Qdoba franchisees ramping up in fiscal 2011.

Keith, on the incentives or changing any of the structure, we’ve identified some what we refer to as target markets where we want the franchisee to develop. We have for the two year timeframe, reduced their royalties from 5% to 2.5% and we’ve lowered the franchise fee from $30,000 down to $15,000 for those locations. But those are target markets and we haven’t said what they are. But the other ones though, regular existing markets or the non-target markets continue to have the existing full royalty and franchisee fee rates.

Okay. And then one really quick follow up. The EPS guidance, does that factor in any share repurchases. I know you actually increased the authorization here. I was just wondering if the EPS guidance itself actually factors in any repurchases.

It does.

It does. Okay. Thanks.

Our next question comes from Jeff Omohundro of Wells Fargo.

Thanks. Just one more question on breakfast if you don’t mind. I appreciate the comments about Dacono performance, but could you expand a bit more on the expanded breakfast menu how for example the Pita performed, and we’ve stepped up competitive activity at breakfast. Do you see increasing support, media support, marketing support through the year? Thanks.

Sure. Good morning Jeff. Actually breakfast was our strongest day part and in fact increased the mix at the breakfast day part, so we’ll continue our strategy of supporting breakfast with new product introductions. We have a two for three breakfast croissant so possibly some value promotions at the breakfast day part, but certainly the improved coffee, the grilled breakfast sandwich that was our line extension of the grill breakfast platform and the breakfast pita all helped with that. And in addition to that, the new bacon, the improved bacon is on several of our breakfast items, and that also is very appealing to the consumers.

And in terms of media support in the new year?

I won’t give details on our marketing plans, but there will be continued media support around the breakfast day part.

Very good. Thanks.

Thank you.

Our next question comes from Rachel Rothman of Susquehanna.

Hello, this is Jake Bartlett in for Rachel. I just had a question on the impairment charges. You said it was going to be about 70 to 80 basis points. When I back out the other impairment charges not related to re-imaging, it’s about 70 basis points in 2010 yet there more stores being re-imaged in 2011, so I’m just trying to reconcile that, why it doesn’t go up significantly from 2010 level.

It’s actually it is 90 basis points in 2010, the $21 million. But that includes $4.5 million of just impairment of other restaurants that were not associated with the closures, and we’re not expecting that to repeat itself, but then add to that the additional write off for the additional re-imaging.

Right, but if I back out that $4.5 million I get about 70 basis points in 2010 so it doesn’t accelerate very much. And maybe if you could give us an idea of how many re-images you did in 2010 versus what you expect to do in 2011. I calculated about 200 but that might be wrong.

I think that’s where you’re going wrong. We have 114 that we did in 2010. We expect to do about 150 plus or minus in 2011. Keep in mind that will depend somewhat on the pace in which we are completing some of these refranchising transactions.

So 150 left to complete your whole system. I thought you were...

150 left to complete the company units, write offs associated with franchisees re-imaging their restaurants.

So 110. A question about the franchise growth at Jack In The Box and I think it was about five to ten units. Is that just being pressured by the fact that you’re refranchising so many stores, and that’s kind of taking some of the demand away or is it financing pressures? If you could kind of characterize the slow down there.

The biggest piece of the slowdown is the focus on the franchisees completing their restaurant re-image program, and it really is as simple as that.

Okay. And then lastly, you talked about being patient with your best performing stores. You can wait to sell those, but why not be patient with the worse performing stores here and just waiting for those to recover. I assume that they’re a victim of the current state of affairs in the economy and such. Wouldn’t you be getting a pretty good lift just with improvement in the economy on those stores?

I guess one would ask how patient do you want us to be? We generated about $25 million in proceeds. That’s going to be $0.04 to $0.05 accretive. So I’m not sure that waiting is going to make that transaction look significantly different. Clearly, we have the benefit of seeing the details of each and every single one of these transactions. You guys don’t have that, but what you’re talking about is exactly what we look at. In addition to the price we look at the timing. Do we think it’s going to get better or do we think this is a great deal for us? Clearly from the 104 lower performing units that we sold this year, we thought that that was a great deal for us, and also keep it mind it is an opportunity for us to reduce overhead.

Right. Got it. I guess I’m just looking at how many refranchising in the year was higher than your expectations and you still saw a big transaction fall out. So it seems like you’re kind of going faster than you had expected a year ago. On that point, is it possible, how much you said in the press release you’re ahead of schedule with re-franchising? Do you expect to be ahead of the end of 2013 to actually finish this up?

Well we expect to finish it by the end of 2013. I think it just depends on how fast we’re able to move the remaining markets.

Okay. Thank you very much.

Our next question comes from Paul Westra from Cowen & Company.

Hi, good morning. Just a quick question on, if you could comment on what you’re seeing in probably your best performing markets. I was hoping, are you sort of getting what you had hoped as far as the potential guest check increases and it’s philosophical, but I’m looking to maybe have you comment on is the remodeling efforts and you obviously hope to position Jack in a higher USR even into the fast casual space. Are you seeing in your best market recoveries now that all the things you hoped for as far as guest check and maybe even dine in sales, or is it still too early to tell that. Maybe the recession has sort of changed consumer behavior for the longer term.

Let me give you on the mix and traffic and check. Actually we did improve check significantly this last quarter. Quarter three we had really lost on mix or in check because we had that very aggressive three for $3.00 – pick three for $3.00, and so moving off of that really helped with the check, and sequentially, we also saw an improvement in traffic as well. In some of the California markets we’ve actually turned positive so that’s very good. I mentioned before that in Texas we had from a two year cum basis had really picked up quite a few basis points in the Texas market, and especially in the market in which we went in and did several re-images. So we are beginning to see the positive improvement in terms of sales from those re-images.

The follow up, if your best performing stores, maybe your best performing markets that are the best off economically, are you see sort of the change in consumer behavior you hoped for as far as the multiyear strategic plan of sort of – are you seeing the mix shift on the menu as you hoped?

Yeah, we saw a very nice response to the grilled pastrami sandwich. A very nice response, so we still believe kind of the future strategy for those that have money in their pocket, for those that can afford it, the differentiated premium products that have a pretty compelling price point relative to the other fast casual players out there, are getting a good response. However, we do still have some economically challenged markets that we have to continue to offer value, and those I don’t believe there’s going to be a significant catalyst in those markets until really unemployment picks up. And if you compare Jack In The Box to Qdoba, the difference in the customer base is really very – if you look at the trend of sales, both Jack In The Box and Qdoba had six quarters of negative same store sales. Qdoba, we went in about a year before Jack In The Box in terms of the down sales, and Qdoba has come out nicely. Their customers are coming back and the catering business was up significantly, so businesses are beginning to invest in catering events as well. So a difference in the customer base and you see that in retail as well. The higher end retailers coming back, very high growth. Some of the economic news in terms of retail hiring and holiday shopping is – there is some positive news out there. So we’ll just wait and see.

And then lastly, I had a question – your range of same store sales in your best and worst markets, is that roughly staying the same or is it widening? Related question.

Without getting into the specifics, I think it is a pretty broad range right now. I’d say it’s probably widening.

Great. Thank you.

Thank you.

Our next question comes from Steven Barlow with Bank of America Securities.

Thank you. This is actually Joe Buckley with a couple of questions. You mentioned traffic and check improving in the fourth quarter. I think you were referring sequential to the third quarter. Could you talk year over year, what you’re seeing in traffic and check?

Yes, I was talking Joe sequentially. I don’t know if I have that breakdown. Hold on. You know what; we’ll have to get back to you because I don’t want to answer by just looking at the notes here real quick.

Okay. That’s fair. I can get that off line. But then a separate question on the projected restaurant margin range. The 14% to 14.5% seems pretty narrow given a four point range for comp guidance, and it seems even narrower if you’re picking up 50 basis points from the low performing markets that you refranchised. Can you talk about what am I missing thinking about that. If you were at that higher range of your comp guidance, why wouldn’t the margins be significantly higher, and maybe even at the low end of the comp guidance, you’re getting 50 basis points head start from the refranchising. Why would we see margins in that range?

I think there’s a few things going on there. One is, I did talk about the product improvement piece. I’ll tell you that’s worth about 40 basis points where we’re looking at it right now, just to give you that kind of detail. We’re also looking at 1% to 2% commodity inflation, which is also going to offset that as well. And we’re not likely to get the leverage that we got this year on some of the labor changes. If you may recall, we had been in a mode of reducing labor over time and we had been getting the benefit of that through the first three and a half quarters of 2010. We won’t be reducing labor out of the restaurants next year at all, and so we’re not going to get the benefit of that going into next year either. And then of course we do have the guest service improvements that we are continuing to work on. So I think you have to take all of that into consideration which is what we did in that 14% to 14.5% range.

Okay. Thank you.

Operator, I think we have time for one more question.

Our final question comes from Matt Van Vliet of Stifel Nicolaus.

Yes, thank you. On for Steve West today. One question on the larger refranchising deal that you discussed of essentially breaking up into separate pieces. Is that just due to making the deal easier or are you going to have multiple buyers here now, or what if any details could you provide us on that.

Sure. The franchisee that ended up not completing that large market transaction will very likely be a franchisee of Jack In The Box. We’ll probably start with just selling him a portion of those restaurants this year. The deal fell out primarily because of the structure he was looking at with financing where he decided at the end of the day he didn’t like the structure that he was working with on this financing. It wasn’t what you would call a traditional financing structure. He decided to not go forward with that and the move with the smaller transaction with more traditional financing, which at the end of the day probably worked out best for him anyway. So it’s very likely though that we may see this market be split up into smaller deals with perhaps multiple franchisees.

And I guess following up on that, does this give you an opportunity to maybe in the long run have better gains for that market that you’re splitting up or is that not necessarily a piece of the pie here.

No, I don’t think so. The market cash flows is what the market cash flows, and so we were doing what we believe was the market based price into the franchisee on the full market deal, and we expect to do market based pricing going forward. I wouldn’t expect to see any significant change on that.

Okay. And then just one more question on the breakfast day part. You commented on it as the best day part of order. How does that compare to I guess maybe a two year basis compared to the other day parts. Is this kind of like we’re seeing with California on a magnitude basis? It’s the best, but comp’ing over something “easy” comps or where is the I guess two year trend on each day part if you could.

We don’t typically provide that but I will tell though that the two year trend on breakfast is also better than the other day parts. We’re not seeing – it’s not just a roll over. We’re just creating the better and improving day part here, excuse me, the best performing day part in breakfast.

Okay. Thank you.

Thank you everyone for joining us and we’ll speak to you next quarter. Thank you.

This concludes today’s presentation. Thank you for your participation. You may now disconnect.