Good morning and welcome to the Sonic Automotive Third Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer period. (Operator Instructions). As a reminder, ladies and gentlemen, this call is being recorded today, October 26, 2010. Presentation materials which management will be reviewing on the conference call can be accessed on the company’s website at www.sonicautomotive.com by clicking on the “For Investors” tab and choosing “Webcast and Presentation” on the left side of the monitor. At this time, I would like to refer to the Safe Harbor statement under the Private Securities Litigation Reform Act of 1995. During this conference call, management may discuss financial projections, information or expectations about the company’s products or markets, or otherwise make statements about the future. Such statements are forward looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from the statements made. These risks and uncertainties are detailed in the company’s filings with the Securities and Exchange Commission. Thank you. I would now like to introduce Mr. Scott Smith, Co-Founder and President of Sonic Automotive. Mr. Smith you may begin your conference.

Thank you, Brandy. Good morning ladies and gentlemen, I’m Scott Smith Co-Founder, President and Chief Strategic Officer. Welcome to Sonic Automotive’s third quarter 2010 earnings conference call. Joining me on the call today are the company’s Vice Chairman and Chief Financial Officer, Mr. Dave Cosper; our Executive Vice President of Operations, Mr. Jeff Dyke; and Greg Young, our Vice President of Finance. Also joining us today is David Smith, the company’s Vice President. Today, I’ll provide an update on our strategic direction, followed by an overview of the quarter. I’ll then turn the call over to Dave Cosper for a financial review. Jeff Dyke will follow Dave and give an update on our operational trends. Our prepared comments will be a little longer than our typical earnings call, but if you’ll give me a few moments, I think that it’ll be well worth your time. We’ll then open the call up for your questions. Since going public in 1997, Sonic Automotive has gone through several strategic evolutions. Now that we’ve seen some stabilization in the economic front and we’ve completed our balance sheet restructuring, I thought that now would be a good time to review with you, our investors and analysts that follow the company where our strategic focus has been and where it’s going. If you’ll please turn to the first slide, slide number four; in the early stages of Sonic Automotive, our strategy was one of portfolio growth. If you’ll see here on the slide, we were an acquisition company that operated dealerships. Our primary goal was to acquire automotive dealerships to gain a national footprint and scale that would allow us to capture economies of scale, support a regional infrastructure and drive standardized practices and technology throughout the organization. If you’ll turn to slide five please. As…

Thanks Scott, and good morning, everyone. Revenue for the quarter grew to nearly $1.8 billion, up 8.6% from a year-ago. Growth was up 2.7%. We did see some softness in margins. Interest cost savings on our debt were over $3 million for the quarter as we’ll continue to delever the balance sheet and we’re going to see more of this as we go forward. After-tax profit on an adjusted basis was $15.2 million and EPS of $0.27, just ahead of last year and pretty much in line with our expectation. Next slide, please. EBITDA for the quarter was $50 million and a $143 million for the first nine months of the year. For the year in total, we should be over a $190 million, and this is up from the EBITDA levels in 2008 and 2009. So we continue to improve profit and cash generation in the fairly weak industry environment. Next slide, please. SG&A as a percent of growth was 80.3% for the quarter, up slightly from Q2 and in line with our expectation for the year. With respect to compensation that Scott mentioned, we have the make-in-progress throughout the year as shown on the bottom of the slide. Also as Scott mentioned, we’re making some adjustments in compensation presently. This should take hold this quarter and into next year. And, Jeff, is going to talk more about in just a moment. For 2011, we expect that SG&A as a percent of a growth to be below 80%. Next slide. Our total liquidity at quarter-end rose to $148 million, up from $79 million at yearend. We had no borrowings on our revolver. We continued to with our plan to reduce our nonmortgage public debt. And so far this year, we’ve taken out 32 million of our 8.58 notes. This leaves only 43 million of these notes remaining and these mature in 2013. And it’s our intent to take them out prior to that maturity. In addition, we just called the remaining $16 million of our 4.25 convertible notes and we’ll take those out next month. As we’ve indicated many times, owning our land and facilities remains a priority for us. We’re presently working on several opportunities where we’ll either require stores from our landlords or build new facilities as existing leases runoff. And we expect this trend to continue for several years. And, finally, we’ll be paying a $0.025 dividend per quarter going forward. Our business has stabilized, we’re generating cash and we feel a small dividend is appropriate. Importantly, it will not materially impact our plans to reduce our debt or own our properties going forward. Next slide, please. This slide shows our debt covenants and we were comfortably compliant with all of them for the quarter and expect to remain so going forward as we’re generating a lot of cash and reducing our debt. With that, I’ll turn the call over to Jeff.

Thanks Dave, and good morning, everyone. Before commenting on my slides, I’d like to take a minute to comment on Dave’s SG&A slide with respect to compensation. As you’re aware we’ve had several things going on with compensation in 2010. It was our strategy last year during the difficult times to standby our associates and not reduce compensation with across the board compensation cuts or across the board headcount cuts. However, we did let our headcount reduce through natural turnover. Instead, we focused on taking care of our associates during this time and supporting them when they need their company to support them the most. I’m very proud of the fact that our leadership team did not waiver under the pressure to adjust. As a result, our turnover is among the lowest in the industry and our associate loyalty is in at all-time high as we strive to create one of America’s greatest companies to work and shop. In the coming quarters, a combination of increased gross supported by our playbooks, pay plan adjustments, and an improving economy will all benefit Sonic Automotive. We’ve already adjusted compensation models to support our SG&A targets and know exactly what’s left to be done in Q4 from a comp perspective. These adjustments will still allow us to pay our team at or 10% above the market, which is our stated goal, while achieving our company profit and SG&A objectives. Thanks. And now let’s turn to my slides. As mentioned on the previous calls, our attention to associate satisfaction, associate retention and our ability to execute our eSales and pre-owned playbooks continued to contribute to the success of new vehicle sales. As you can see on the new vehicle revenue, if you can see on the slide, new vehicle revenue was up nearly 4%…

Thank you, JD. We appreciate the time that you’ve given to us today to review both our strategic vision and our operational highlights from the quarter. I hope that this has given you a better insight into our company and our future plans. This team has built a solid foundation and positions Sonic Automotive for a prosperous future. A future where the next-generation Sonic leaders can build upon the predictable, repeatable and sustainable business model that this generation started. As we continue to focus our energies on our investment principles and spending priorities, our balance sheet will continue to strengthen and ensure that prosperous features. Before we take questions, I want to take just a minute to thank all of our associates and vendor partners who joined together every day to help us build one of America’s greatest companies to work and shop. Thank you, team, it’s an honor and a privilege to lead our great company. At this time, we’ll open the call and take your questions. Question-and-Answer Session

(Operator Instructions). Your first question comes from the line of Scott Stember with Sidoti & Company. Scott Stember – Sidoti & Company: Good morning.

Hi good morning.

Hi Good morning.

Hi Scott. Scott Stember – Sidoti & Company: Could you talk about how some of the brands performed during the quarter, some of your higher profile brands?

Sure. From a – this is Jeff – from a luxury perspective, BMW was up 5.1%, Cadillac was up 40%, Audi was up 24.5%, Jaguar we’ve got a big mix, that was up 36%. From an import perspective, obviously Hondo and Toyota were down just because of the Cash for Clunker comparison. Ford was up 7%, GM up 11.6%. Scott Stember – Sidoti & Company: Got you. And Jeff did you make some qualitative comments or quantitative comments about how new car sales are trending in October so far? Reports are that they’ve been pretty good.

Yes, they are. They’re very good for us. Our unit volume is trending up anywhere from 15% to 30%, just given the – given the market and that’s just across the board, the volume is very good. It’s nice to see. Scott Stember – Sidoti & Company: Okay. And can you talk about the balance sheet a little bit, Dave, just as far as what is your targeted debt reduction going forward into next year as you continue to generate nice cash flow?

Yes, for sure, we want to go after those 8.58s. There is 43 million of those left. And then, we don’t have a firm target, but it’s over another 100 million beyond that that we just want to take out. And we think it makes sense, because as Scott and Jeff talked about, what we’re doing is focusing on building our base business, not going out and acquiring. So we’re going to take a lot of the capital that we generate and just further improve our balance sheet. And you skip forward – fast forward two, three years, you got very clean balance sheet and a great operating company, and then you can do a lot of interesting things. Scott Stember – Sidoti & Company: And would you guys – at this point not making acquisitions, you announced that you’re going to make a small dividend, can you talk about how share repurchases could eventually fall into this?

Yes, it’s possible. I don’t see it as an eminent kind of thing. I think our priority. You know we want to take care of all our stakeholders and we’ve done fair with our debt holders and we’re going to be providing a small return here, a little less than 1% to our equity holders in terms of dividend. I think share repurchases may have a start in the future, but it’s not eminent. Scott Stember – Sidoti & Company: Got you. Well, that’s all I have right now. Thank you.

Okay, thank you.

Your next question comes from the line of John Murphy with Bank of America Merrill Lynch. John Murphy – Bank of America Merrill Lynch: Good morning, guys.

Hi John.

Good morning. John Murphy – Bank of America Merrill Lynch: Just wondering as we think about SG&A leverage going forward and SG&A as a percent of gross, how we should think about that? And also as you run these playbooks and really try to tie your employees to improve performance I think overtime, really what kind of metrics you use and at what level as you use those metrics to get this SG&A leverage to gross to come through? I mean is this kind of the thing that really at the senior executive level or do you have SG&A to gross target for general managers at stores? I’m just trying to understand how you’ll control this SG&A hopefully as gross come back.

John, Jeff Dyke, I’ll take a stab and answer in the first part of your question here. First of all, we’ve made adjustments this year – we know exactly where our SG&A increase is and it’s sitting at 80%. We know exactly what moves we need to make to bring down below that. For me to target a 77% or 78% number right now is probably not fair, I’m not quite sure kind of what the number is going to end up being. But we’re making adjustments in pay plans, we already have this year, we’ve got a few more adjustments that we’re making in the fourth quarter. We’ll start seeing some fairly significant reduction there in Q4 of this year. And we’ve also tied our compensation plans for our management teams to our budgets, which is the first for us, and we’ve been through this entire year sort of making that work. And so we look forward to rolling out our 2011 budgets with all of our stores and holding them accountable to hitting the goals that we put out there ourselves, and that’s going to help also reduce the SG&A numbers. So it’s not that we don’t know where it is, we know exactly where our SG&A issues are, the column issues. We’ve just had a plan and we’ve been sticking to that plan all year long, and we called that at the begin of the year that we’d be at 80%, that’s exactly where we are. And you’re going to see that actually trend down in Q4 and it will continue to trend down into 2011.

And, John, this is Dave, and I’ve been thinking about it as an investment. And as Jeff said, we consciously have kept our compensation cost up and we’re investing in a number of technologies that are very interesting. And SG&A as a percent of growth is the balance. And we’re investing on the cost side right now, the gross is coming. And as these playbooks mature, there is going to more gross. And you’ll see it shrink overtime.

And we’ve always been a – and this is Jeff again – we’ve always been a leader in SG&A as the gross of a percent. And so it’s just something that we made a conscious decision to do this year and we’ll continue to adjust the pay plans and adjust our plan moving forward. But I think everybody will be relatively pleased with the SG&A as a percent as we move forward. John Murphy – Bank of America Merrill Lynch: Okay. And as we think about going forward though, it’s more sort of efficiency of SG&A going forward as supposed to really cutting it and getting the gross up, so the ratio goes down, is that really how you think about it as opposed to actually making absolute cuts.

No John, actually it’s a combination of both. We’re making adjustments in our pay plans and we’re going to drive incremental gross, and we’ve been doing that. So we are – it’s a combination of both to answer your question. John Murphy – Bank of America Merrill Lynch: Okay.

And it still going to allow us to pay at or above the market and that’s one of our stated goals with our associates. We’re not going to try to get away with what we can on pay. We’re going to pay what we should pay and we’ve been very, very focused on that. John Murphy – Bank of America Merrill Lynch: Got you. Second question just on new vehicle margins, it sounds like inventory across the industry is pretty tight, yet, and we’re seeing this in every place else, the new vehicle margins are pretty light, and there seems to be a lot of competition amongst dealers and some price cutting that’s going on there. I’m just trying to understand why we’re seeing your new vehicle margins so light given your commentary that inventories light and apparently it’s kind of light across the industry. I’m just trying to get into the details there and understand what’s going on.

Hi John, this is Greg. I’ll let Jeff follow-up with some comments here. But I would just caution everyone not to pay too much attention to the overall margin rate, because as you know, there is various components that go into that. If you really look at the underlying detail, I think of the drivers of the decrease in the margin rate was a fairly significant increase in the average selling price of our vehicles, year-over-year they were up about $2600 a vehicle. If you look at our average gross profit dollars per new vehicle, we were pretty much steady right at little over $2100 a vehicle year-over-year. So I think from a gross profit generation perspective, we’re still very strong on the new vehicle side. Some of the average selling price increases are moving the rate around a little bit.

That’s a result of Cash for Clunkers. Last year, there were a lot of import sold, and luxury mix is higher this quarter.

And last year, we saw an import mix at full pop. I mean we were selling everything at sticker. I mean that just that aided last year’s margin percentage number.

Our PUR is among the best in the industry and I don’t see that being an issue at all. John Murphy – Bank of America Merrill Lynch: So $2100 is sort of how we should be thinking at as opposed to a percentage going forward.

Yes, that’s the way I would do it. John Murphy – Bank of America Merrill Lynch: And then just lastly on the new used car system that you’re putting in place. So just wondering sort of how you can juxtapose that versus what you’re doing right now, is your current inventory sort of very decentralized at the store level and we’re going to go to a real centralized system, and just how that’s all going to work going forward, and what the timeline is for implementation?

I mean our inventory is centralized as anybody else is in the industry right now other than CarMax. And we just see so upside in the used car volume and all this is, is if we have system in place today, it’s our system going on steroids or putting a turbo on it, we’re going to know more real-time on pricing analytics and you will see us gradually over the next 18 months to 24 months move to more of a centralized pricing format than having a de-centralized pricing format. So stores play a bigger role in pricing today and it’s a huge opportunity, pricing the car right the first time is the biggest opportunity that we have in this company, and we’ve done a good job with it. I mean our revenue growth and volume growth has been double digit now for seven quarters in a row, but we just see much more upside here. It’s a huge market, there are 40 million cars being sold out there, and we see a lot of upside and we’re going to get it, we’re no way near our full potential from a used car perspective, and these adjustments that we’re making are just improving the systems that we have today. John Murphy – Bank of America Merrill Lynch: And that pricing system will help you out on the buy side of the equation as well as the sell side of the equation for the vehicle?

I think but I’ll tell you inventories and that’s why we’ve introduced our Sonic Buying System and we’ve added the buyers to our system. Inventories are going to get tighter, we’re going to be fighting in a more difficult situation over the next 18 months as off leased cars and certified pre-owned type vehicles are harder to get. So there should be a little margin compression there in that arena, but overall I think our systems are going to allow us. It has allowed us so far to stay ahead. I mean we’ve managed a really tight day supply, 28.5 days which is really solid. And I think we can continue to do that and sell a lot more cars moving forward. John Murphy – Bank of America Merrill Lynch: Great, thank you very much.

Thanks John.

Your next question comes from the line of Aditya Oberoi with Goldman Sachs. Aditya Oberoi – Goldman Sachs: Hi guys.

Hi.

Hi. Aditya Oberoi – Goldman Sachs: Continuing on the used side of the business, your used to new ratio is kind of trending pretty high versus what you guys have done historically. So assuming that the playbook strategy continuous to payoff, do you think this ratio to continue to trend higher from here or will it – are you comfortable in this 0.8, 0.9 kind of range?

Yes, actually, I think – it is Jeff Dyke again – I think if you go back and look at last quarter, I think we were right at 1-to-1, and I think for the second quarter too, and we’re there – we’re at 0.9-to-1 I think for this quarter. And our expectations are that if we sell a new car, we sell a used car, and there is more used cars sold in America than there are new cars, so there was a bigger pool to play in. And we think we can continue to grow our used car business even to a point where we’re selling more used than new. Aditya Oberoi – Goldman Sachs: Got it, great. And the second question was more of a strategic question. I know like associate satisfaction is one of the key focuses of the management team right now. So is there a quantitative way you measure it like two quarters down the line when you say, “Okay, our associate satisfaction is higher than what it is today,” how do you kind of measure it, is it just the attrition levels or there are some other parameters that you kind of look at?

Well, the first one is, is that our turnover is down significantly three years in a row. So – but we also do an associate satisfaction survey from – that a third-party outside company does for us on annual basis. It’s done individually for every associate in the company. And those internal measures are also improving each year. So a combination of those two things is how we measure our employee loyalty and satisfaction. Aditya Oberoi – Goldman Sachs: Okay, great. Thanks a lot, guys.

Your next question comes from the line of Rick Nelson with Stephens Inc. Rick Nelson – Stephens Inc.: Thank you, good morning.

Hi, good morning, Rick. Rick Nelson – Stephens Inc.: I can ask about the EPS target here for the fourth quarter, $0.25 to $0.27, historically fourth quarter sales have been smaller, Q4 versus Q3 you made $0.27. In Q3, I guess what line items are changing there? Is that margin or expenses or is that other factors that are driving this target?

Rick, I think as we got into Q3, we probably did a couple of pennies better than what we thought, so we think there is some just underlying strength in the business. I think some of the compensation items that Jeff mentioned are going to be there and we’re seeing – the used business continue to be very strong, so that’s not a seasonal thing. And then, early indications are that the new car SAR is up a little bit. For October, we’re seeing some strength there. So we’ve moved up a little bit from where we were initially I think when we – couple of quarters back, said, we’d be at $0.90, and we’re going to beat that.

Hi Rick, this is Greg. I think just some of the earnings seasonality may still be a little bit skewed coming out of the downturn in the Cash for Clunkers. If you remember, September of last year fell way off, October fell way off, post Cash for Clunkers. We’re obviously not seeing that phenomenon this year. So that’s what makes us think that Q4 is going to look a whole lot like Q2 and Q3 did, which – and I agree with you normally you don’t see that.

Yes, I mean, our October, Rick, so far is trending in the same sort of atmosphere as our August and our July which is unusual. And so I mean we always have a little bit slowdown in September. So that combined with the moves that we’re making from an SG&A perspective that we talked about already are going to really help the quarter.

Plus our interest costs, they’re going to be a little bit lower. Rick Nelson – Stephens Inc.: Got you, thanks. What sort of time line do you have in terms of debt reduction? If we see no improvement in the up running environment, when do you think we can look at potential acquisitions or we’re at couple of years away from?

Yes, for acquisitions, it’s probably closer to three if I have my way.

I think I would agree with that.

I’m getting something like four years now. Rick Nelson – Stephens Inc.: Is there a target debt ratio you’re looking for before we start to look to acquisitions?

We’re still firming that up. At the moment, it just lowers better. As long as we’re not growing, we’re going to be taking down our debt and paying that dividend. And I think we’ve got some issues with our credit facility that we’ll need to talk to our banks next year about ability to take more debt out. There are some restriction. But early indications and discussions with them are that we can work something out, because we’re sitting on a lot of liquidity and it behooves everybody to have us take some of that debt out.

And we saw it long and hard Rick on this acquisition versus internal growth strategy. And the more and more we’ve looked at it, the more and more we talked to some of our larger investors, the more we just keep leaning towards the significant opportunity we have from an internal operations perspective. We still look at some of the hurdle rates that are out there from an after-tax perspective. We don’t see them being significantly higher than cost of capital and that kind of makes us scratch our head and say, “Why would we want to take on that incremental risk?” We still think that there is a fairly wide delta out there between buyers and sellers when going on the acquisition trail. So with everything that Jeff and Scott have talked about, we just think that the growth for us is really going to be focused internally, and we think it’s there.

Yes, really it’s a risk return tradeoff. If you look at our investment priorities, it’s invested in the base business and it’s not huge dollar investment, it’s an [inaudible] effort and there’s great payout and low risk; buying back our debt, good payout, low risk, owning our property, great payout, very low risk. So we kind of like that. I think we can get very good returns without impacting the risk greatly of our business, in fact improving it. Rick Nelson – Stephens Inc.: Thanks for that. Also, like to ask you about the tax rate that came in a little lower, the year-to-date results.

Yes, let me talk for a minute about that. Year-to-date, it’s a 39.8%. In Q3, it was 37.7%. The year-to-date number of 39.8% is very close to where we were, and back in 2007 it was 39.1%. And so we’re trending down to where we were historically. And what’s happening, some of the states we operate in have state tax system that has you pay even though you may not be so profitable, it’s more of fixed charge. And as our earnings start to improve which they are, that fixed charge becomes a smaller impact. So our rate is actually declining. And somewhere around 40%, 39%, 40% going forward is what we would anticipate, and it’s down from where we’ve been when the earnings were lower. Rick Nelson – Stephens Inc.: Got you. Okay, thanks a lot. Good luck.

Thanks Rick.

(Operator Instructions). At this time there are no further questions. Are there any closing remarks?

Great. Just thank you everyone for joining us today. Bye.

This concludes today’s Sonic Automotive third quarter earnings conference call. You may now disconnect.