Peter Koumas - The Wendy's Co. Todd A. Penegor - The Wendy's Co. Gunther Plosch - The Wendy's Co..

Gregory Robert Badishkanian - Citigroup Global Markets, Inc. Dennis Geiger - UBS Securities LLC Jake Rowland Bartlett - SunTrust Robinson Humphrey, Inc. Chris O'Cull - Stifel, Nicolaus & Co., Inc. Nick Setyan - Wedbush Securities, Inc. Jason West - Credit Suisse Securities (USA) LLC Anna Papp - Sanford C. Bernstein & Co. LLC Will Slabaugh - Stephens, Inc.

Matthew DiFrisco - Guggenheim Securities LLC Christopher E. Carril - Morgan Stanley & Co. LLC Matthew Robert McGinley - Evercore Group LLC Andrew Strelzik - BMO Capital Markets (United States) Gregory R. Francfort - Bank of America Merrill Lynch Alexander J. Mergard - JPMorgan Securities LLC Karen Holthouse - Goldman Sachs & Co.

LLC Jon Tower - Wells Fargo Securities LLC Michael W. Gallo - C.L. King & Associates, Inc..

Ladies and gentlemen, thank you for standing by. Welcome to The Wendy's Company Earnings Results Conference Call. I would now turn the conference over to Peter Koumas, Director, Investor Relations. Please go ahead, sir..

Thank you, and good morning, everyone. Today's conference call and webcast will be slightly longer than our typical quarterly call, so we want to make sure we provide enough detail around the results, outlook and long-term goals in the absence of an Investor Day.

The PowerPoint presentation that accompanies today's remarks is available on the Investors Section of our website, www.aboutwendys.com. Before we begin, please take note of the Safe Harbor statement that appears at the end of our earnings release. This disclosure reminds investors that certain information we may discuss today is forward-looking.

Various factors could affect our results and cause those results to differ materially from the projections set forth in our forward-looking statements.

Also, some of today's comments will reference non-GAAP financial measures, such as adjusted EBITDA, adjusted EBITDA margin, adjusted earnings per share, adjusted tax rate, free cash flow and systemwide sales. Investors should refer to our reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures.

Our conference call today will start with an update on key initiatives from our President and Chief Executive Officer, Todd Penegor, followed by a review of our preliminary fourth quarter and full year 2017 results from our Chief Financial Officer, Gunther Plosch. GP will then discuss our 2018 outlook and capital allocation strategy.

We will close our prepared remarks with an update on our 2020 goals from Todd. From there, we will open up the line for questions. With that, I will hand things over to Todd..

the opportunity for incremental throughput during busier day-parts; higher-average checks; and an ability to leverage labor costs. The company is working with our franchisees and vendors on options to accommodate various trade areas.

It's important to remember that our digital evolution would not be possible without our continued investment in our common point-of-sale system. We need to maintain a strong foundation in order to achieve our technology vision going forward. Going into 2018, we remain committed to executing against our roadmap to build an even stronger Wendy's brand.

It all starts with our food and making sure customers are eating food they love by using fresh, honest ingredients that create a cravable taste and is made right every time. What better example is there than the fresh, never frozen beef we've been using in all of our hamburgers since day one.

Value and worth what I pay will continue to be key focus areas for us in 2018. We have to earn the right to charge the prices we do by providing a great experience and meal with Wendy's quality food at a competitive price.

Offers like the 4 for $4 and other price pointed deals are important, but we also have to be focused on making sure all prices across the menu are reasonable, and we are working hard with our franchisees on this topic day-in and day-out.

Service that is friendly, accurate and fast is what is going to create an experience that brings our customers back. We are committed to finding ways to continue to make progress in this vital area.

And lastly, making sure our restaurants are convenient, up-to-date and well-maintained with a comfortable environment will make our restaurants a place our customers love to go.

A big driver for this is our Image Activation program, and we are proud of the progress we have made thus far, but we need to keep pushing and improving to really drive this home with the consumer.

A key determinant of our success is the health of our brand and due to the hard work we have put into these initiatives, our key brand health metrics continue to improve year-over-year.

The Wendy's Way will continue to guide our prioritization and allow us to connect to our franchisees, our operators and our employees in order to delight every customer, period. Now, I'll hand things over to GP, who will give an update on our 2017 results and 2018 financial outlook..

Thanks, Todd. There are a few topics I'm going to cover. First, I will give you an overview of our 2017 preliminary results, then I will go through the details of our 2018 financial outlook. From there, I will give an overview of our capital allocation strategy before handing the presentation back over to Todd.

With that, I will now jump into the quarter four results. Our quarter four restaurant margin came in at 17.5%, which was 130 basis points decrease from the prior year, which was primarily the result of short-term pressures from beef and bacon prices as well as our prior investment in chicken quality.

This was partially offset by lower other operating costs related to workers compensation and medical insurance claims. G&A decreased 15.2% from the prior year, driven by lower professional fees and cost savings related to our system optimization initiative. Adjusted EBITDA grew year-over-year by 14.2% coming in at $104 million.

Our 420-basis-point improvement in adjusted EBITDA margin is a direct result of our higher quality of earnings from our system optimization initiative. Adjusted earnings per share were $0.11 in the fourth quarter of 2017 compared to $0.08 in the fourth quarter of 2016.

Now, we will look at some of our key financial metrics from the full year perspective.

We are extremely proud of our adjusted EBITDA performance in 2017 as we were able to overcome the sold restaurant EBITDA from system optimization of $57 million and replaced this earnings stream with $91 million of higher royalties, net rental income and net franchise fees as well as significant savings in G&A.

2017 represents the final year of lapping over selling our company restaurants through system optimization, which largely contributed to significant adjusted EBITDA margin improvement of 590 basis points in 2017. Our results continue to demonstrate the meaningful impact of our improved quality of earnings.

Adjusted EPS increased year-over-year by $0.03, which was mainly due to our solid adjusted EBITDA growth. The $0.04 of accretion from earnings was partially offset by a slight increase in our tax rate. And share repurchase activity offsets the increase in interest and depreciation.

We were able to more than quadruple our free cash flow this year, which is even more impressive when you consider that our free cash flow was negative just two years ago. Our growth in 2017 was driven by a substantial reduction of capital expenditures of $68 million, mainly as a result of our system optimization initiative.

Also contributing to the year-over-year increase was earnings growth and favorability in our cash taxes due to prior-year tax related to gains from system optimization. Our working capital initiative started in the fourth quarter and provided a $7 million benefit, which helped to offset the cash payments related to our G&A savings initiative.

The majority of the benefit from our core working capital improvements will occur in 2018, which I will discuss a little later. Now, I would like to walk you through our 2018 outlook, which includes the impact from the new revenue recognition standard, other financial statement reclassifications and the new U.S. tax law.

For more information regarding these changes, please reference the publicly available presentation in the supplemental financial information located in the Investors section of the company's website. As a whole, we're expecting a very strong year in 2018 with improvement at both the restaurant and company level.

Key metrics such as adjusted EBITDA, adjusted EPS and free cash flow are expected to grow significantly in 2018. Now, let's take a deeper dive into some of our 2018 expectations. In 2018, we expect adjusted EBITDA to grow approximately 8% to 10% on a recast basis to $420 million to $430 million, and adjusted EBITDA margin to improve to 33% to 34%.

The building blocks of our 2018 plan are fairly simple. Royalties will continue to grow driven by same-restaurant sales and global net new restaurant openings. Other contributors to the year-over-year growth are improving restaurant margins and continued savings in G&A.

Growth in net rental income should also provide a tailwind due to the timing of prior year Buy and Flip activity. After reclassifying training and other restaurant support cost from G&A to cost of sales, our 2017 restaurant margin moved slightly lower by 80 basis points to 16.8%.

From the new 2017 base, we expect company restaurant margins to grow to approximately 17% to 18% in 2018.

In order to offset expected labor inflation of approximately 3% to 4%, and commodity inflation of approximately 1% to 2%, we will need to improve our company same-restaurant sales and focus on cost savings through our design to value (23:14) initiative, pricing will play a role in our sales improvement and we have already implemented a strategic price increase this year of upwards of 1%.

We remain extremely focused on improving the restaurant economic model for the company and our franchisees. Our G&A savings plan continues to be on track as we work towards achieving G&A of 1.5% of systemwide sales by 2020. On a recast basis, G&A was $204 million in 2017 after the reclassification of $5 million from G&A to cost of sales.

From there, we are expecting a reduction in G&A to approximately $195 million in 2018, which is driven by continued execution of our G&A savings plan that was announced in May of last year.

Once we reached our end goal, we will have achieved approximately $100 million in cumulative savings since 2013, which shows we are living after our commitment of becoming an efficient growth company. We're expecting strong adjusted EPS growth in 2018 of 38% to 44% versus the 2017 recast base.

The main drivers were earnings growth and the favorable changes in the U.S. tax law. The largest benefit coming out of U.S. tax law change was the reduction of the corporate federal tax rate from 35% to 21%.

Due to these changes, we expect our total adjusted tax rate, which also includes state, local and foreign taxes to be approximately 23% to 25% in 2018.

Other items to consider are the continuation of our share repurchase strategy, which will provide a slight EPS tailwind as well as some headwinds in interest and depreciation driven by our recent refinancing activity and increased capital leases. Our highly franchised business model continues to prove its cash-generating capabilities.

In 2018, we expect free cash flow of approximately $220 million to $240 million, which is an increase of 29% to 41% compared to 2017. The favorable impact from the U.S. tax law changes and our working capital initiatives are the biggest contributors to our year-over-year improvement, followed closely by core earnings growth.

We're expecting a small tailwind from decreased capital expenditures in 2018, but this will be more than offset by the cash cost related to our G&A savings initiative. After laying out our 2018 expectations, let's now talk about our capital allocation strategy.

You can see that we have a strong track record of returning cash to shareholders and this remains a key priority for us moving forward. In 2017, we returned $196 million to our shareholders through dividends and share repurchases. And going back to 2013, cumulative cash returned has now reached $2.3 billion.

We're also proud to say that over that time period, our quarterly dividend has increased by 250%. One of the keys to our ability to invest back into our business and return cash to shareholders is our flexible capital structure.

As you can see, after we recently refinanced a portion of our securitized debt, our maturities are laddered nicely with our next tranche of debt not coming due until 2022. All of our funded debt has been issued with attractive fixed rates, which protects us against interest rate fluctuations.

In an effort to align our leverage ratio more closely with our securitization covenants, we have adjusted our calculation to count our undrawn $150 million revolver as debt. Under our new method, our pro forma leverage ratio after the closing of our refinancing was 5.9 times.

We continue to be comfortable with leverage levels of up to six times, but expect to naturally delever over time due to our continued earnings growth and scheduled amortization payments.

Our capital allocation priorities remain unchanged as we plan to invest back into the business, sustain an attractive dividend and utilize excess cash to repurchase shares.

In light of our strong free cash flow growth and in accordance with our stated capital allocation policy, we recently announced a significant increase in our quarterly dividend of 21% from $0.07 to $0.085 per share starting with our March dividend payments.

This represents one of the largest dividend increases in our history, and we have now increased our dividend six years in a row. We also announced a new share repurchase authorization for $175 million and similar to 2017, we plan to repurchase shares through the open market.

And with that, I will hand things over to Todd, where he will provide an update on our 2020 goals..

Thanks, GP. At Investor Day last year, we unveiled our new 2020 goals and discussed the path that will get us there. We believe we have unlocked a significant growth story in our business that is truly unparalleled. Our formula for growth hasn't materially changed; however, you may notice some adjustments to our 2020 goals.

We remain confident in our ability to reach $12 billion in global systemwide sales and now expect to have 7,250 global restaurants, which is a slight decrease versus our prior target of 7,500. Our growth initiatives continue to resonate with our franchisees.

There has just been a slight delay in translating the excitement around our programs into more restaurants in the pipeline. We will still reach 7,500 restaurants; it will just be a little later than we had previously expected. We will eclipse the 70% mark for Image Activation and continue to expect remarkable improvement in adjusted EBITDA margin.

Our new target is slightly lower at 37% to 39%, which is driven by the new revenue recognition standard. Lastly, our expectations for cash flow generation have increased and now, our 2020 free cash flow goal sits at approximately $300 million, a $25 million increase versus our prior goal.

With all these changes, let's now walk through a brief reminder of how we plan to achieve these longer-term goals.

We were able to hold our global systemwide sales goal at approximately $12 billion as our AUVs continue to support this goal through same-restaurant sales growth, new restaurant development and the reimaging of our restaurants, which is very telling of the strength of our underlying business.

As I discussed previously, through our focus on providing new innovative solutions and a continued dedication to enhancing financial returns, we believe we have the foundation in place to accelerate growth. We expect to reach approximately 7,250 global restaurants by 2020, with 850 in International and 6,400 in North America.

Image Activation continues to play a meaningful role in our growth story, and we are excited that franchisee adoption remains strong as the consumer continues to respond positively. We are confident that we will achieve our goal of 70% plus by 2020.

Our strong core growth with a revenue CAGR of approximately 5%, as well as improvements in our company restaurant margin and efficiently managing our G&A structure, will drive our adjusted EBITDA margin higher to 37% to 39%.

We are extremely proud of our free cash flow growth thus far, and we're pleased to be able to increase our 2020 goal by $25 million, which was primarily driven by the changes in the U.S. tax law.

Earnings growth derived from our resilient and predicable business model as well as a reduction in our capital expenditures gives us great visibility into reaching free cash flow of $300 million.

Our end purpose is to invest in growth, while returning significant amounts of cash to shareholders and the underlying changes to our goals has only strengthened our capabilities to succeed in doing just that. I'd like to close today's formal remarks by reiterating that our roadmap for growth and to build an even stronger brand is The Wendy's Way.

The entire Wendy's system is inspired by a clear vision. Together with our franchisees and the many thousands of Wendy's team members across the globe, I'm confident that Wendy's will become the world's most thriving and beloved restaurant brand. Our vision is powerful, and it will guide us to build a stronger Wendy's for future generations.

With that, I'll turn the presentation back to Peter before we open it up for Q&A..

Thanks, Todd. I'd like to quickly review some upcoming events on our Investor Relations calendar. First up is the filing of our 2017 10-K, which is planned for next Wednesday, February 28.

GP and I are excited to bring Greg back out on the road with us as we head to the UBS Global Consumer and Retail Conference in Boston on March 7, and then attend the JPMorgan forum on March 8 in Las Vegas. The following week, Todd, GP and I will attend the Bank of America Consumer and Retail Technology Conference in New York.

And then Morgan Stanley will host us on a one day road-show in the mid-Atlantic. Lastly, GP, Greg and Lauren Cutright will participate in the Telsey Spring Consumer Conference via video conference on March 20.

If you are interested in meeting with us at any of these events, please contact the respective sell-side analyst or equity sales contact at the host firm. And then on Wednesday, May 9, we will release our first quarter earnings and host a conference call. With that, we are now ready to take your questions..

And our first question comes from the line of Greg Badishkanian with Citigroup..

Thank you. Just a quick question on value because it seems to have accelerated a little bit in Q1. How do you feel about your 4 for $4 offering? I know you've expanded that.

And also, would you expect the environment to accelerate further throughout the year?.

Yeah Greg, thanks for the question. If you look at where our calendar has lined up and you really go back to the fourth quarter and anytime we put news into our 4 for $4 offering, we've seen a response. We put Double Stack back into the 4 for $4 in the fourth quarter, saw nice response there.

Expanded 4 for $4 in anticipation of a very competitive landscape with eight items now in the 4 for $4. Still early but the results are encouraging, and we're seeing a nice response. And we'd expect, at least through the first half of the year, to see a very competitive landscape on the value front.

And you're seeing, from the competitors, a lot of advertising spend supporting value. We're playing a little different game where we're trying to make sure we not only have a strong value offering, but we also want to have good premium offerings out there.

You're seeing that with our promotional calendar, really focusing on our fresh beef with the Dave's Double. You're seeing that right now with the Smoky Mushroom Bacon Cheeseburger in the market, but we'll also continue to make sure that we've got strong value programs that will resonate with the consumer.

We continue to test, we continue to have a strong toolbox and we have the ability to bring forth other strong programs if we need to do something a little bit different. But we feel good with a nice healthy balance, and you're seeing it in our sustained delivery of same-restaurant sales, 20 straight quarters.

We feel good that we continue to bring predictable, sustainable growth on the top line to the market..

Great. Makes sense, thank you..

Our next question comes from the line of Dennis Geiger with UBS..

Great. Thanks for the question. And good detail on development. Just to kind of dive into that a bit, could you just touch a little bit more on the decision to push out the 250 units beyond 2020.

I can't remember the old split on North America and International targeted units, but does the slower growth, let's just say over the next few years, is that coming from North America or International? And then just building on that, as far as development agreements in North America, can you just talk about how that's trended over the last several quarters, if there's been a change in the number of agreements there? Thank you..

Yeah, thanks for the question, Dennis. Where the real change was was in North American development. So we always had said 850 International restaurants by 2020; we're now at 6,400 in North America. So that number has come down slightly versus original expectations.

And when you look at it, there's still a ton of excitement, right, from the franchise community to continue to grow. But as I said in the prepared remarks, we had about 40% of our system turn over since 2015.

That's healthy for the long run, but it does slow you down in the short run on development commitments and it's more the pacing and the sequencing, so we feel good that we'll get to that 7,500 across the globe, feel good that we'll get to the broader number, but by 2021 versus 2020.

And the good news is we've got strong development agreements, and I can have GP comment on that. We've got over 50% of North America with the development agreements between now and 2020, which gives us the confidence to get to those 6,400 restaurants, and we got the same on International with 40% of those commitments tied to a development agreement.

GP?.

Dennis, the other thing that's important to point out is that we actually maintained our system sales of $12 billion, and you might be wondering how do we do this with less restaurants, and it's really at a tailwind that we have on building strong AUVs in North America, we have reached record AUVs in 2017.

You have seen it, system sales in North America are up 3% this year on the back drop of SRS of 2%, and so we expect that tailwinds to continue behind strong AUV growth. And then that translated into basically unchanged profitability and increased cash flows..

Great. Thanks. And congrats to the Investor Relations team on their well deserved promotions. Thanks..

Thanks..

Thank you..

Our next question comes from the line of Jake Bartlett with SunTrust..

GP, I believe that the guidance is a little higher for 2018 than you had originally given, I think kind of the more, the rough guidance was closer to $190 million. And this is also in the context of the accounting changes lowering G&A.

So, if you could just give us some color on what is driving the slight increase? And also, I believe you confirmed that you're still looking for 1.5%, essentially $180 million by 2020 for G&A, but why wouldn't that be a little bit lower given the kind of changes you just announced or that you're putting through?.

Yeah, hi, Dennis, on G&A, the headline is really, we are on track. The $195 million is in line with what we have guided.

Why do we say it?. The overall program is about $35 million of savings. We said roughly three quarters of it is going to be achieved by 2018, that's basically in the ballpark with $195 million.

I would also point out as part of the tax reform, we have taken the opportunity to make a small investment on the technology side and in people reward programs, so we have a couple of moving pieces at large where we are at our glide path to get down to 1.5%.

It's also worth noting that the accounting restatement of $5 million I referenced to, was contemplated in our overall G&A change plan as we work through that..

Got it.

So, the $180 million is still a valid kind of 2020 number to work with?.

I think the better number to think about it is really 1.5% of system sales..

Okay. And then, Todd, I believe you kind of answered it in your question about the value, but I'm just trying to understand your confidence in accelerating comps from the fourth quarter, just kind of what you reported in the fourth quarter, a little lower than we've been expecting.

But what gives you confidence that things are going to accelerate? Is that confidence that what you've seen with your value and potentially with your kind of premium promotions, or is it your excitement around the future rollout of mobile order and pay or other initiatives? Just trying to get a gauge as to what gives you the confidence on that improvement?.

Hi, Jake. It's really all of the above, right? When you think about having a balanced high-low calendar, we've got nice ideas on the high, we've got good news on the low with the expanded 4 for $4 test, and we've got a continued good pipeline of ideas. Things like we did the last couple of years like $0.50 Frosty, which was a little more disruptive.

We got ideas like that that we could get to if we needed to along the way, and we'll have to keep that balance with whatever the competitive landscape gives us along the way.

But we do have some of the other growth things that really help solidify our growth and you alluded to some of those, right? Technology can play a nice role, so we can better connect to the consumer with mobile order and pay and kiosks in those continued rollouts. We've got a nice program that we are testing with loyalty.

And we do feel very encouraged around what delivery could add over time. We've got 20% of the system up on delivery. We continue to figure out how we build that out with DoorDash and other partners, so all of those things continue to give us confidence.

And what I really like has been our unique point of difference is all about fresh, and we continue to scream that from the rooftops. We've got fresh never frozen North American beef across all of our lineup in our restaurants, always have, always will.

And our new designs really accentuate all the fresh vegetables and the fresh prepared to work that we do, so really a nice way to differentiate in the QSR space when you think about speed, convenience, affordability, but then really having that nice quality halo to set yourself apart..

Great. I appreciate it..

Our next question comes from the line of Chris O'Cull with Stifel..

Thanks. Good morning, guys.

Todd, your comp guidance for 2018 is obviously better than the fourth quarter result and you will be getting less benefit from Image Activation, your price increase seems to be pretty modest, so what gives you confidence that the comp can accelerate to that range?.

Yeah, Chris. So, I think there is a couple of things. Right, we've got the continued IA benefit, right? So, it's 60 basis points, I know a little bit less than the 70 basis points this past year.

But when you start to look at where the consumer is going, there's a little more disposable income starting to pick up, I got a little more confidence that over time the consumer will pick up a bit, but I do really feel confident that we got this nice strong high-low calendar, and a really good focus on our core differentiating point.

You're probably seeing some of our advertising begin to evolve.

So really taking that social voice that we have, really bringing that to the mainstream to really help point out our unique points of difference on why Wendy's is different from a quality perspective and then what we're doing is making sure that with all of the reimaged restaurants and the food-forward approach, that what you see in the restaurant really complements that.

You balance that with technology, you balance that with the work that we're doing to improve customer service in our restaurants, those are all things that continue to drive our business, and we're absolutely focused to continue to drive food I love and continue to make improvements in our core food offerings to drive growth.

So, it's the combination of all of those items, and then having a nice toolbox of ideas around the promotional calendar that we can come to throughout the year to continue to bring in more customers..

Okay. Fair enough.

And then would you elaborate or you, GP, elaborate on the restaurant cost savings you are expecting for 2018? And just maybe put those in relationship to the magnitude of that benefit relative to the size of benefit from menu pricing?.

1% to 2% commodity inflation; and about 4% labor inflation. So, you will probably ask yourself so how can we expand margin, couple of levers, continue to drive traffic to our restaurants to drive leverage. Secondly, I talked about the design-to-value to make sure that we are taking cost out, the consumer is not valuing.

And then all our back-of-the-house and front-of-the-house automation behind kiosk, labor optimization, and last but not least, a new price increase, right.

We have the carryover effect of the price increase we took at the end of the second quarter of last year and we've executed another strategic price increase beginning of this year, and the sum of all of this gives us confidence to expand margin..

GP, just as a follow-up.

What is the size of the benefit of the restaurant cost savings and the productivity improvements you're expecting in 2018?.

We're not going to give details out on that one. I mean we've given already so much detail on restaurant margin, I'm not going to get deeper on that..

Okay. Fair enough. Then just lastly, as a follow-up to the G&A guidance.

Does it contemplate any charges from restructuring like severance?.

Yes, it does. While we have taken on the expense side the majority of our charges really in 2017, if you might remember, the total program on the expense side is costing us between $28 million and $33 million. We have incurred in 2017 about $22 million. So on the expense side, there's a little bit to come.

On the cash flow side, there will be obviously a headwind in 2018. It's about 50% of our cash outflows, which we guided as $23 million to $27 million. So we have a headwind of about $12 million to $13 million in cash in 2018..

Thank you..

Our next question comes from the line of Nick Setyan with Wedbush Securities..

Thank you.

With over $200 million in free cash flow in 2018, with over $170 million in cash on the balance sheet, why not buy back more shares than the $175 million that you announced? Is there an opportunity to bring back some of that cash if it is outside the U.S.?.

Yeah, Nick, I think there's couple of things, and I can have GP chime in if he's got more to say about it, but I think we're really looking at a nice balanced use of our cash, right.

You're seeing nice return to our shareholders through a nice dividend increase of 21% that we announced last week, the reauthorization of another $175 million, but we also want to make sure that we're investing back into our business to drive growth for the long run, whether that's driving new development in North America or international, whether that's expanding into other dayparts across the day, and we're still under-indexing in the snacking daypart, in the late-night daypart.

We want to continue to drive growth. Technology is another great arena where we can continue to invest to better connect to the consumer, create a better customer experience, and drive throughput. So we've got some strategic reserves to invest in growth, and we'll look at over time how we best put that cash to work.

Anything else, GP?.

Yeah, I think you covered it all. A couple of more things to think about. We are competitive from a dividend payout ratio. We are sitting at 62%. So that's clearly north of our policy, which is higher than 50%.

And if you add up – if you assume we are going to stay at the first quarter dividend for the whole year, this combined with the share repurchases, we're returning back about $255 million in cash on the free cash flow midpoint guidance of about $230 million.

So we think what we are proposing is very competitive and should be well-liked with our investors..

Got it.

And in terms of the increase in the North America unit growth in 2018, can you just kind of tell us what the franchise versus the company-owned mix is going to be?.

I mean, most of the growth, right, is really coming from the franchise community. We've always said that we're 5% owner. We'll contribute about 5% of the new development consistent with what the system does.

And what we really do is feeling good that not only the development commitments that we have in North America, but we've got designs out there to support all trade areas.

We continue to improve the economics with the Smart 2.0 (49:23) family that we talked about that has a lower investment and the strong incentive is in place, and it's picking up traction.

And we have a strong not only new franchise pipeline, which is good to have, but we have a lot of fresh blood really looking at this business over the next 20 and 30 years. So you've got out of those things that are helping us, and we're also working hard to mitigate the closures.

So you might have noticed that we talked a Refresh Lite option for our lower AUV restaurants. We're working to make sure that we get an opportunity to stimulate some growth there and keep those open, because if you look at our closures during the course of the last year, the average AUV of a closure is about $1.1 million.

So if we get an opportunity to actually reinvigorate that restaurant because it's in a trade area that is still well established but needs some news, I think all of those things really help us solidify our numbers for 2018..

Got it. Thank you..

Our next question comes from the line of Jason West with Credit Suisse..

Yeah, thanks. Just a couple questions. One, I guess, on the fourth quarter comp, it came in a little bit below consensus expectations.

I don't know if there's anything in there that surprised you or any commentary around weather, anything like that? And as we look at 2018, is there any sort of cadence on the comps that we should be thinking about that you guys have in your models? Thanks..

No. In the fourth quarter, we're always looking for a little more growth. But if you look at the five-year stacks that were out there. I hate talking about five-year stacks but man, we put positive same restaurant sales on top of quarter after quarter after quarter.

And if you look at the last three years, right, we came out with a really strong fourth quarter back in 2015 with the 4 for $4 offering. We worked hard to make sure we could overlap that last year, and we had a really strong reintroduction of our Taco Salad.

We introduced things like chicken tenders and cookies to make sure that we could lap-off over all of that. But if you looked at the pacing and sequencing in the quarter, it did pick up as the quarter went on and bringing some news back into 4 for $4 certainly helped as we added Double Stack back into that.

That's what gives us the confidence as we go into this year. We know that if we provide some news around the 4 for $4 offering, it still can be very relevant and is very relevant to today's consumer.

And now having eight offerings in that, we're very encouraged that we've got a nice offering that works for the consumer first but also works for our franchise community, and we have a good partnership with them to continue to grow on the high-low calendar..

And any thoughts on cadence, I guess, for 2018? It sounds like business was kind of picking up through the quarter.

We could think about it fairly consistent throughout the year?.

Yeah. If you look at our growth across the year, it's fairly consistent. We've built our calendar based on what was in the base and based on what we know about the competitive landscape and the consumer landscape. So we feel like it's very balanced calendar throughout the quarters of the year..

Got it. Thank you..

Our next question comes from the line of Sara Senatore with Bernstein..

Hi, thank you. This is actual Anna Papp representing Sara. So you mentioned year-over-year company restaurant margin compression during the prepared remarks.

Are your franchisees experiencing similar pressures? And does franchisees' profitability affect their ability to invest behind the brand either in terms of the physical stores or investing into price or value? Thank you..

So it's a great question. Our franchise system has enjoyed in 2015 and 2016 record profits and record cash flows. For 2017, we don't quite know yet. We are in this process of kind of analyzing the financial health of our franchisees. I would have thought that they will have had similar pressures on commodity inflation and labor inflation.

They probably will have done a little bit of a better job to offset some of the margin pressures since they traditionally are pricing a little bit more than us. Restaurant economic model is clearly important to drive growth in our system.

And again, if our margin outlook for next year is again representative of what's going on in that system that should give us hope and optimism that the restaurant economic model is well intact at The Wendy's Company..

Okay. Thank you..

Our next question comes from the line of Will Slabaugh with Stephens Inc..

Yeah. Thanks, guys. I wanted to ask about marketing. You've got more aggressive recently in highlighting fresh beef and calling out McDonald's in particular as they're set to launch fresh beef for their Quarter Pounder.

Can you talk about how you plan to spend your media dollars in 2018 versus 2017 from a value and then branded perspective? And if you could talk about the effectiveness you've seen using either TV or digital, as I know digital has been growing for you on both of those that would be helpful as well..

Yeah. Well, I'm not going to disclose our marketing plans and our media support plans. That's a great question. If we look at it, we continue to look at having a nice healthy balance between mainstream media, TV, and in the digital space. We've had a lot of success in the digital space as you know.

I think we're up to about 2.4 million Twitter followers and have a great brand voice there. And it's been fun to take that brand voice to mainstream media and onto TV. We'll continue to scream from the rooftops our unique points of difference, which is really about fresh across all of our lineup, whether it's premium or value.

From an effectiveness standpoint, you've still got a ton of reach when you got onto TV, but you've got to personalize communication when you get into the digital space. So having a nice balance between those, not to dispense 50/50, but having a balance of on how you have those two complement one another is really important.

And a big credit to our team and our agency for really making sure that our messages that hit mainstream TV media are then really complemented and accentuated when you get into the digital space. And that's the power when those two things connect..

Got you.

And if I could follow up on your delivery comment that you made, can you talk about the franchisee buy-in to date with DoorDash or anyone else (56:08) maybe using locally and the franchisee feedback you've been getting so far? And where there is pushback, is it more related to absolute margin of the transactions or questions around incrementality or maybe something else?.

Yeah. Well, we're not seeing any pushback at all, right. We've got a great partner with DoorDash. They've got one dasher per delivery, so we're getting high integrity of the food delivery. What we're seeing, I think, we're at like 4.5, 4.6 stars. So the consumer feels good about the proposition that we're delivering.

We track overall satisfaction metrics, not only in the restaurant but delivery. The overall satisfaction for our delivery is even higher than the satisfaction in the restaurant, surprising or not, but not that surprising when you think about the consumer got it where they wanted it.

The way we've structured the deal with DoorDash is really economically viable for the restaurant, but also we're making sure that it's viable for the consumer, and we're not hearing any pushback. They're feeling good about the prices that we're charging them.

We don't have a big commission haircut at the restaurant level with our DoorDash arrangement like others may have with their delivery providers, and it's been that balance. So we get to really focus on speed of order to delivery, trying to get ourselves under 30 minutes from the time they order to the time the food gets there.

We're slightly over that at the moment, but then making sure that they got a good quantity food experience so they continue to do it. So our franchisees are pushing us to actually roll it out even further, find other partners, fill in more white space. So we feel good about it..

Great. Thanks, guys..

Our next question comes from the line of Matthew DiFrisco with Guggenheim Securities..

Thank you. Just got a couple of follow-up questions here also on bookkeeping.

Did you guys mention when mobile order will be turned on?.

We've got mobile order in a bunch of restaurants today. What we've been doing is really preparing and making sure that they're prepared to turn them all on if we put on a national media message at some point.

And what we've been working hard to do is make sure our restaurants are truly prepared by separating order pay from pickup, and we've made a lot of progress on that. I think what you want to see is us bring it all together, right? We've introduced digital offers in the fourth quarter in December.

That was clearly nice because it's driving a lot of app downloads, so it's going to drive more engagement. We're testing loyalty in a couple of markets right now, which is another great connection point to give a reason to go in and use our digital tools.

And when we've got those pieces ready for a national rollout during the course of this year, and it will be during the course of this year, we can bring all that to life and really turn it all on. So we're well prepared for that..

Right. I'm looking for when you will – by turn it on, I meant the national rollout..

I'm not going to tell – I won't tell you when we're actually doing that. We want to make sure that from a competitive perspective, we do that at a time where we feel good that we can bring that message to life, fully linked into our overall marketing plan..

Okay. And then just, I guess, a follow-up on a lot of the line of questioning with respect to the comp and the comp guidance. Is there anything that you've – I know the question was asked sort of about the fourth quarter.

Were there any anomalies that might not continue that might have weighed on the 1.3% that you don't see occurring now that are considered in your guidance right now, even such as for the shift New Year's day falling into 1Q out of 4Q? Anything in there that sort of just we should consider when you're looking at 1.3% and then the guide going to 2% or better?.

No anomalies along the way. None of the shifting of dates, holidays, any of that. It's a pretty balanced flow of same restaurant sales across the year.

It's a very balanced calendar, and we've got a great toolbox, as I said earlier, with good promotions both on the value and on the premium side and a great core message that we'll continue to talk about throughout the year. So we feel good that we've got the plans in place.

And if you go back over the last three years, we've been averaging about 2% same restaurant sales, whether it's a good consumer environment or a tough consumer environment, or whether it's a tough competitive landscape or not, so we feel good that we've got very strong plans to deliver that 2% to 2.5%..

Okay. And then last question with respect to development, I think you said 50% of the domestic and 40% of the international are covered by agreements.

Can you sort of follow on to that as far as in the coming years, how many agreements have to be updated or re-signed as far as, I guess, how are you going to get – why do you feel confident that the extra 300 restaurants you need to get to your 7,250 goal would come through? Is that from the agreements coming due is what I'm trying to look at?.

Yeah. No, I think there's a combination of things, right. We talk about Franchise Flips. So there's going to be a couple hundred Franchise Flips. We get another opportunity to put some more development agreements over the next couple of years in place as those things transpire. That's an opportunity to continue to do it.

It's really the partnership that we have with our franchise community. We continue to sit down with them, work through joint capital plans, really look at where Wendy's restaurant should be with completed market plans.

And with all the new franchisees that have come into the system, the folks that we're recruiting to bring into the system and our existing franchisees that are feeling good that we've got a strong economic model for the future, it's those things. People want to want to grow without development and commitments.

We don't just need a development commitment, and you've seen that pretty consistent the last couple of years. It's that nice combination and that partnership that continues to drive the growth, and we've got a great working relationship with our franchise community, which I'm proud of..

Great. Thank you..

Our next question comes from the line of John Glass with Morgan Stanley..

Hey, good morning. This is Chris on for John. I was hoping you guys could provide some additional color on the pacing of your performance relative to the category through the 4Q.

I know you had mentioned that you had outperformed the category 12 out of 13 of the weeks, but just curious how that pacing held up until the launch of the, or the expansion of the 4 for $4 menu in January..

Yeah. I mean, clearly, we accelerated in the back-half of the quarter with the news. The proven tool of providing news behind the 4 for $4, we finished basically strong in creating momentum getting into 2018.

And as Todd said a couple of times now, we're going to stick to our playbook of a balanced marketing approach on promoting both our core offerings behind fresh never frozen beef and bringing kind of profitable promotions into the world that help us to drive growth and help drive profitability for our franchisees..

Great. Thanks..

Our next question comes from the line of Matt McGinley with Evercore ISI..

Thanks. On the guidance for the $12 billion in system sales in 2020, I think the old split was roughly about $11 billion in North America and $1 billion international. The 250 unit reduction that you did in North America seems like a big number to offset with the AUV.

So I guess the question is was there a split change there to the FX change in that number, or is it roughly the same as what you had last year?.

Matthew, you're right. The split is roughly the same. You can expect about $11 billion in sales in North America. And as I said already once, right, it's really, the confidence we have is behind strong AUV builds, right. We have record AUVs in North America at $1.61 million.

If we actually do the math on the $11 billion sales and the end count that we have on North American sales, you will find that we don't have to really grow our AUVs very fast to get to our $12 billion in sales or $11 billion in North America..

Okay. And on the unit growth, in international, how far are those development commitments signed? I know it's only 350 units, but in a given year only 40% committed, it seems like a lot to sign given there's only three years left on that.

And then in North America I just want to confirm that it sounded like all of that 250 unit decrease was in new units and there wasn't any change in the assumption for closures. I just want to confirm that..

Yeah. It was really new units on the North American front. So we've had the same assumptions around closures within our model. On International, right, we've got so many different agreements that goes across the globe and development agreements extend way beyond 2020 in a lot of cases, depending on what market we're in and who we're working with.

But we're also working to get into two or three new markets between now and 2020.

So that can drive some growth and we know in those core seven markets that we continue to talk about, Japan, Middle East, Indonesia, Chile, Brazil, Argentina and Mexico, we have big opportunity with the existing partners and scale up and do things even faster than some of the development agreements, and we're seeing that in some of the markets today..

And I think the other thing to add on International is the trend is our friend. Remember, beginning of 2017, we said we're going to grow 12.5%, we actually ended up growing more than 14%. So we actually really have a little bit less to grow until 2020 to get to our number, which is as you pointed out, unchanged at 150 restaurants..

Okay, thank you..

Our next question comes from the line of Andrew Strelzik with BMO Capital Markets..

Good morning, guys. I wanted to ask a question on the remodel pace. You reiterated the 10% annual number, which is obviously very solid. But I guess, I would've thought, you talked about the lower-cost remodel, you've got the tax tailwinds that franchisees should be benefiting from.

Is there a limiting factor to really stepping on the gas pedal with upside to that number or is 10% – how do you think about 10% as may be a hurdle that you could see more or are there limiting factors?.

Great question. I think 10% is the right way to think about it. That is our proven track record. Could we further accelerate, maybe. But for the time being, we don't really see strong signals around it. So we think the pacing is right for us at that point in time..

And Andrew, what we're really trying to do is make sure we balance all the capital requirements that we have for our franchisees. We want them to new build, we want them to reimage, we want them to invest in technology. So they got to really balance that pacing and sequencing and then they just got to balance the human capital element.

When you make those investments in a reimage, you got to make sure your restaurant is absolutely ready to delight that customer, right? You need to bring in those lapsed consumers, you need to bring in new consumers and you need keep them coming to make sure that they're the gift that keeps giving and helps the economic returns, and we've seen that, right? We've been in this reimage program now for five years.

So it's really just working that whole mix of all the investment things that a franchisee has in their portfolio..

Okay. That makes a lot of sense. And then second question. A lot of the – at least from a percentage basis, the unit growth is coming Internationally.

Is there any color that you can provide around new unit economics or those types of metrics on the International side just so we can get a level of comfort there?.

Yeah. No. On the International side, it really varies by market, right? We've got nice strong growth as you guys know in Japan, our franchisee there bought the First Kitchen chain and has been converting that. We've got 26 restaurants converted at the end of the year. We've got 130, either working on sub-franchising.

So there are some opportunities to continue to blow out that market. We're working with some new partners in some markets like in Mexico where we think we can really scale up the growth where we have a proven track record and a proven model. You get down into kind of the Southern Cone, into Chile and Argentina.

We got a great partner focused on growth with a proven model as we've been in that market for a while, and you're seeing nice acceleration of growth in Chile. And then Brazil, we're at the table, right? We've got a 20% ownership.

Tough market, as it has been in depression but long term we really feel like that's a great opportunity to continue to grow our business there too.

So I think it's a nice balance across the country but really focused on a few markets rather than planting a ton of flags where we really think we can scale up the growth with strong franchise partners that have the access to capital and the willingness to grow..

Great. Thank you very much..

Our next question comes from the line of Gregory Francfort with Bank of America..

Hey, guys. I had two questions. And the first is can you just talk about the decision to take a diluted stake in Arby's rather than to post-capital in the combined company? And then my second question is just on pricing. With the 4 for $4, obviously, it's pretty hard to price on that side of the menu.

What sort of pricing level should we expect on the balance of the menu to sort of even out to? I think you said a 1% total pricing level..

So, first, on Arby's. We are very happy with the stake we have in Arby's. It was previously 18.5% ownership, we had a choice to potentially put equity into the deal, and we decided whilst we really cheer on the management team in Inspire Brands, and we hope they will grow.

Our 12.3% stake is a smaller stake in a bigger combined company now, and we rather reserve our cash at that point in time to invest in our own growth initiatives where we have full control for. So hopefully that answered the question on Arby's. Again, as a reminder, since we have the stake, we got distributions that are worth $100 million.

So it's valued at the moment at $325 million. We are happy with this. And I think that hopefully answers your question on Arby's. I think Todd is going to answer the second question..

Yeah, on pricing.

If you look at the work that we've done, we've done a lot of work over the last couple of years to really have some good insights on what are the key value indicators within our restaurant, what are the less of (01:10:39) inelastic or elastic items, and we've really shared that not only with the franchise community, but we're leveraging that on our menu price architecture moves within the company.

If you go into the restaurant, you'll see some things, right? So the $0.99 menu, as you would have known it in the past, has evolved and we moved up some pricing there, but we've also got the 4 for $4 expanded offerings with eight offerings that really provided nice cover for that.

And the rest, for competitive reasons, I won't disclose where we've taken the pricing, but we're doing it the way I'd characterize is smart pricing from a consumer perspective based on the insights and learnings we've got with some support over the last couple of years..

Great. Thank you..

Our next question comes from the line of Alex Mergard with JPMorgan..

Hi, thanks for the question. Quick one on your 2020 CapEx target of $65 million, which was reiterated today.

In light of tax reform, and then some of the franchisee co-investments that you've been doing outside of the U.S., do you see potential for this to drop further from that amount or even asked differently, if it could drop further, would it drop further? Thank you..

We're getting this question a lot, right? We are on the glide path to kind of glide down to $65 million. It's three buckets in this capital plan. One is our own development capital for our own company reimages and own restaurant builds, and there is IT capital and maintenance capital.

So we think we're trying to get to stay proactive on this, making sure we're not falling behind on maintenance. Is there a chance that we potentially drop below it after 2020? Maybe. For the time being, it's the best number we have and the point that you made is right, it's actually unchanged versus the previous guidance we had..

Okay. Appreciate that color. And then one more follow-up on a comment you made before about being more selectively involved in real estate. So of the 200 Franchise Flips that you expect in 2018, could you give us a sense of the number of those that you might sublease to franchisees? Thank you..

Yeah. So first of all, Buy and Flips are really important for us. We have done this now for several years. We continue to do this, and it helps us to rejuvenate our system. In the context of all the G&A alignment that we are doing, it's really a choice we are making to simplify our internal operation.

It's a fair amount of work to put all these potential capital leases, capital lease obligations on to our balance sheet, and we really want to slow this down. Just to be clear, it does not kind of affect our ability to be successful in our Buy and Flip strategy. It's just a slightly different model.

For simplification reasons, we have kind of stepped back a little bit from that aspect of our Buy and Flip transactions..

Thank you..

Our next question comes from the line of Karen Holthouse with Goldman Sachs..

We've had in the past couple of years, you know, some noise on cash versus non-cash taxes, tax reform adds another layer to that.

Could you just help us think through cash versus non-cash taxes in your 2018 guidance? And then even looking out to 2020, if there would be any sort of adjustment between the two?.

Yeah, Karen. So if you look at our bridge that we shared on how we've got our $170 million cash flow in 2017, there was a tailwind of about $48 million on cash taxes. It's really due to the fact of prior year tax related gains from system optimization. So that was in the base and that basically flipped around.

If you then look at our cash flow guidance for 2018, you again see a fair amount of tailwind, on cash taxes, the majority of it is really we are owing less tax to the federal government as part of the rates drop.

And the other thing to think of, there's always a timing difference, right? The last chance you have to pay your taxes to the federal government is always kind of middle of December until you finally do your final expensing and the accrual accounting in your accounts. You always have differences between expenses and cash.

So that's the difference you have every single year. It was just very, very big in 2017 as you compare to 2016..

Well, then, I guess, I can appreciate the P&L and cash taxes are going to drop because of the reduction in the statutory rate but in 2018, on more of an absolute basis, should we be modeling any sort of reversal of that 2017 benefit once you start taking into account immediate expensing of CapEx.

Just how should we be thinking about 2018 alone cash versus non-cash taxes?.

What we have in 2018, there's clearly a mix there. We have slightly overpaid our taxes in 2017, that's really due to the fact that tax reform was put into law after we have paid down the final taxes.

We took the opportunity to do a couple of more tax deductions that were not possible from tax planning that resulted that we're going to get a little bit of a tailwind in 2018 that will potentially reverse out in 2019..

And that's the only thing we should be considering when it relates to cash versus non-cash taxes?.

Yes..

All right. Thank you..

Our next question comes from the line of Jon Tower with Wells Fargo..

Good morning. Just a couple of questions. Todd, I think you hit on this a little bit earlier, but I was hoping you could expand a little bit.

Given that one of your largest competitors and a few others in the space have decided to aggressively invest alongside franchisees and remodeling the store base and considering the cash position that you have as a company at the company, why stick with that, at least 70% Image Activation target by 2020, and not necessarily fund a faster rate of reimaging?.

Yes, I think there's a couple of things, Jon. We've really bumped up our new development incentive. So we've got a very, very strong incentive on new development, and we want to keep focused on not only reimaging but expanding access to our brand.

We feel good on reimaging that we're getting good list and returns, and we got a nice pipeline and the franchisees sees that. So we don't think that's where we need to push our cash to stimulate growth, and we'd rather use it more to help the system on things like technology so we've got a 90-degree lab.

We continue to work hard on making sure we've got a strong platform with our common POS system that then can layer on all of the technology pieces that we talked about earlier in mobile order, pay, kiosk, loyalty, digital offers, and we'd rather invest there to really help support the system because we see a bigger lift, a bigger return than what I think they would already do on their own on the reimaging front..

Okay.

And then moving the eight items to the 4 for $4 menu, does that potentially erode the company's ability to effectively promote more premium items during that time period that these eight items are going to stay on, the 4 for $4?.

Not at all. And if you look at the way that our calendar has set up to start the year that wouldn't have been the case, right. We went to expanded 4 for $4 at the beginning of the year. We've had a core item on Spicy Chicken on to start the year.

We followed that up with the work we did with Super Bowl ad and have in Dave's Double promoted, we've got Smoky Mushroom Bacon Cheeseburger in the market, so we do feel like it's a good strong high-low. And what we really want to do is attract customers to the restaurant, and then let them make the choices across the menu.

And we haven't seen trade down as we've done that. We still see a nice healthy mix between the premium-seeking customer and the value-seeking customer. So it is that nice balance that works for the restaurant economic model and works for the consumer..

Thanks. And then just lastly, a little bit more nuance, but I notice the company same-store sales are negative 1 during the period in the fourth quarter.

Was there anything that call out specifically about that set of stores relative to the franchise base?.

No. It's a little bit of a same trend that we have in the third quarter. We are obviously not happy with it. We started to take action on this, making couple of changes, and we obviously hope that's going to turnaround in the near future.

If you actually take a little bit more of a longer-term view, kind of take a two-year basis, our total system has grown on a two-year basis 3.6%, our company restaurant has grown 2.9% on the year.

So it's a small gap of about 70 basis points, and you can almost fully explain it on a two-year basis on the differences between Image Activation and probably slightly less pricing..

Okay, thank you..

Our next question comes from the line of Michael Gallo with C.L. King..

I want to dig in on the smaller format box where you took some of the cost out and the potential for that to potentially significantly accelerate unit growth assuming that you can see investment to sales cost actually go down? Thanks..

Yeah. No. Great question, Mike. And in the spirit of having a portfolio of restaurant options, so it's not a one size fits all for all trade areas. The team has really worked hard to continue to evolve our Smart Suites of (01:21:00) designs.

We've got 55 seaters, we've got 40 seaters, we've got 28 to 30 seaters, we've got options that you can flex in between. They can fit on smaller footprints, so we got more access to real estate.

And the great news is as we've learned into these different options during the course of 2017 we're still seeing the same AUVs through those restaurants, a little smaller square footage footprint in a lot of cases but for some trade areas, we're still heavy drive through and we want to have more proximity as you start to support delivery over time.

So having that suites (01:21:33) work well, we've been able to take out cost in the spirit of taking things out that don't matter a whole lot to the consumer to really optimize what that look and feels like and then really make sure that it's technology-enabled as we go forward to complement where the consumer wants to go and to really help the restaurant economic model.

So it's a combination of all of those items, and we've got a lot of early adopters as we continue to learn and take learnings from a test restaurant, which you've probably heard us refer to as DisCoM in the past year in the Columbus area, and think about how we take some of the best of elements and evolve that into 2018 against the Smart Suite of (01:22:12) designs, and that's when we talk about Smart 2.0, it's taking those things into effect..

When do you expect you'll start to see enough of those units opening where you will be able to get a real read on the small format box?.

Yes, I mean, we've got a good pipeline right now. It's a smaller footprint design, probably more in Canada than the U. S.

if you go to a 40 seat versus a 55 seat, but I would expect middle of this year, end of the third quarter, we'll have enough out there with our early adopters, we'll start to get an early read, it will still be an early read, but definitely during the course of this year, we'll have a good view to that..

Okay, thank you..

We've reached our allotted time for questions-and-answers. This concludes today's conference call. You may now disconnect..