Good day, and welcome to the Ingles Markets, Incorporated third quarter conference call. This call is being recorded. At this time for opening remarks and introductions, I’d like to turn the call over to the Chief Financial Officer, Mr. Ron Freeman. Please go ahead, sir.

Thank you. Good morning. Welcome to the Ingles Markets fiscal 2008 third quarter conference call. With me today are Robert Ingle, Founder of our company and Chief Executive Officer; Robert Ingle II, Chairman of the Board; Jim Lanning, President; and Thomas Outlaw, Vice President of Sales and Marketing. Statements made on this call include forward-looking statements as defined by and subject to the Safe Harbor as created by Federal Securities laws. Words such as expect, anticipate, intend, plan, believe, and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties, and assumptions, which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed on this call. Ingles Markets, Incorporated does not undertake to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. For a description of factors that could cause actual results to differ materially from that anticipated by forward-looking statements, you are referred to the company's public filings, including the Form 10-K for the fiscal year ended September 29, 2007. This morning, I’ll provide you with a summary of our third quarter and nine-month results followed by additional comments. After that, we will be pleased to take your questions. Our press release issued this morning is available on our website, www.inglesmarkets.com. We filed our 10-Q for the quarter yesterday afternoon and it is available on our website as well. First, our third quarter results. We are pleased with our third quarter sales and operations results in a difficult economic environment. Our sales increased 13.1% to $835.3 million. Net income increased after you back out last year's sale of a shopping center. Excluding that $4.9 million after-tax gain from third quarter 2007 results, our net income increased…

Thank you, sir. (Operator instructions) We'll go first to Emily Shanks with Lehman Brothers. Jason Trujillo – Lehman Brothers: Hi, good morning. This is actually Jason Trujillo in for Emily. My first question relates to the lines of credit. Regarding the portion that matures in October of this year, has that been refinanced yet?

No, it hasn't. But typically that's a renewal that takes just a couple of days, and we know of no reasons why those wouldn't be renewed. Jason Trujillo – Lehman Brothers: All right, great. Can you give us the amount of those credit lines maturing?

I believe it's $15 million out of the $185 million that matures this year. Jason Trujillo – Lehman Brothers: All right, thank you. That's very helpful. And then moving on to operations, the Lynn [ph] private label, I believe -- last conference call you commented, you hadn't seen much of a shift by your customers to private label. Is that still the case where you're going to see customers move towards private label, just given the rising prices and a weakening economy?

Yes, we have seen increases in private label. The growth in those private label products has been ahead of our sales growth as a whole. Jason Trujillo – Lehman Brothers: Okay. And just generally, do you have plans or a desire to increase the private label penetration from where it is today or are you pretty happy with the current sales mix?

We just want to make sure that the customers have a choice. We do have more private label products this year than we had last year, but we are not going to -- we are going to let the customer decide whether they wish to purchase national brand products versus private label. Our job is to make sure they've got a good selection of both. Jason Trujillo – Lehman Brothers:

The best thing to say there, given the different costs in all of the different departments, is the 5% or so that the Bureau of Labor puts out over the last year is a pretty good benchmark to use. Jason Trujillo – Lehman Brothers: Okay, great. And it sounds like so far you have been able to past those costs through to customers. Are you seeing competitors doing the same thing generally?

Again, we typically do not comment on our competitors' activities, but we are all feeling the same cost pressures. And I think it's important not to focus just on the margin, but also what is happening in the operating costs that are below the margin line. As we mentioned earlier, energy costs whether it's in extra cost to get items to our stores, the extra cost of keeping the lights on and the air conditioning running, and even plastic costs that go into bags and wraps, there is a lot of pressure there as well. Jason Trujillo – Lehman Brothers: All right, great. Thank you very much for the time. I appreciate it.

You're welcome.

(Operator instructions) We'll go to Bryan Hunt with Wachovia. Bryan Hunt – Wachovia: Thank you. And Ron, thanks for the little better detail on this conference call relative to last one on the segment data. First, looking at your cap structure, which you ended your formal comments on, we know you've got 350 of bonds and you've layered on an additional 150 or so of secured financing so far this year. Could you delineate, hopefully for us, maturity schedules of the roughly $317 million of additional debt? And how much can be potentially taken out in the near-term without penalty, call it, in the next 12 months?

Bryan, I don't have those details in front of me. And again, it's a fairly complex calculation. I would think the best thing to do right now is if you go back to last year's 10-K where we’ve got to five-year debt maturities, and then just layer on the new debt and assume that it's all three years or less, then that will give you a pretty good idea for right now. Bryan Hunt – Wachovia: Of the -- I guess going back to that 10-K, there was roughly $31 million that was due this year. Have you taken out a majority of that?

I think our repayments have been around $9 million or so in these nine months. I'm going to try to flip to my cash flow statement right quick. Yes, $9.1 million principal payments; the rest of it has been refinanced. Bryan Hunt – Wachovia: Okay. And looking at CapEx and what you’ve spent year-to-date, you’ve bought 11 properties for development. Are all of those unoccupied at this point in time? Are you doing any construction on any of those?

No, not yet. And some of those are just additional parcels that are adjacent to stores that we already have operational. I think we have ten parcels right now that are completely undeveloped. Bryan Hunt – Wachovia: In inventory? Okay. And then how many parcels do you own, where you operate a store or a shopping center?

I know we have 86 freestanding stores. We also own 73 shopping centers, of which 57 have an Ingles store in them. Bryan Hunt – Wachovia: Okay. And in those remaining 16 or so, how many of those would you say you're actively looking to sell or are you actively looking to sell any of them?

Well, we get offers all the time and inquiries all the time. If there are any gains out there, they will happen when they happen. It's a difficult real estate market right now. Bryan Hunt – Wachovia: All right. Kind of switching gears and looking at forward CapEx, I mean, you said around $200 million baseline. I would imagine with outside looking in with the amount of inventory you have on property today. Looking at it next year, if you're going to spend an additional $200 million, is that mostly going to be on new stores, or is that $200 million bogey kind of a high bogey, given how much you've spent this year?

It's a mix of new stores, replacement stores and remodels. Typically – I mean, similar to what we have done in the last couple of years, but right now those are all identified projects. Bryan Hunt – Wachovia: Okay. And then a question I’ve asked, I'm going to ask again. I've asked for several quarters. I mean, your sales growth is nothing short of phenomenal. I mean, you guys have had the best same-store sales trend I think in the supermarket channel for the last four years consecutively. When you look at that type of growth and the potential growth that you're assuming with new store construction, you've got to be bulging at the seams in your warehouse and your inventory is up I think $20 million or $30 million from the end of the year. Are you running out of space in your warehouse? And are there any plans to add on or build a new warehouse?

First of all, we are operating more efficiently. So we are not bulging at the seams in our current warehouse. I mean, it does get a little tight when you get around the holidays, but part of this increased sales activity does just let you run more efficiently. You're sending out full trucks. We're getting good backhaul opportunities. So we are doing a good job of managing that distribution process. As we’ve said before, we do have adjacent land to the current distribution center that we've purchased. And if the time is right and when the need is there, we've got some options. Bryan Hunt – Wachovia: Okay. If you look at the inventory increase I just mentioned, is that fueled mostly by inflation or are you all doing any forward buying in light of the inflation you are seeing in the market?

The inventory level also includes the store inventories. And we've got 500,000 more square feet of store space than we had this time last year, and you've seen the store count. So, more of it's tied up in the stores than it is in the warehouse. We do look for good buying opportunities when they are out there, but again, things are changing so quickly. It's a chore to keep up with. Bryan Hunt – Wachovia: And going back to the previous questioner, on sales mix, he mentioned about private label and you all said private label is increasing penetration. How about organics? I mean, I know you all have a private label organic line, but are you seeing the very high-end organic products and high-end premium products? Are you seeing those sales deteriorate?

No, we are not. I think -- I don't want to be too broad in the characterization, but the typical organic customer is very concerned about buying organic products and maybe a little price sensitive than other customers. Bryan Hunt – Wachovia: All right. Your average ticket came down. Is that because of the private label increase in mix or is there something else happening there?

Certainly the private label reflects that. Again, I think the increases in our ready to eat offerings have some impact on that as well. If you look at a customer who makes an extra trip to the grocery store to pick up a readymade meal versus going to a restaurant, that can bring your transaction count up, but bring your average transaction down a little bit. Bryan Hunt – Wachovia: Got you. And then my last question -- and I'll get back in the queue. On fuel gallons, your fuel gallons are up roughly 30% year-over-year and it looks like you comped positive on a gallon basis. And your gross profits on groceries were up. And I think you said margin is up 70 bps. Can we infer that your profit per gallon was down pretty significantly year-over-year? Because we’ve seen other convenience store operators report the same thing, the stores that are selling gasoline. I mean, I would assume you saw the same phenomenon and that was partially responsible for the margin deterioration?

Yes, that's true. Bryan Hunt – Wachovia: Can you give us an idea of what your cents per gallon margin is or at least how far it was down year-over-year?

No, we really can't disclose that. Bryan Hunt – Wachovia: Can you confirm that your gallons on a comp basis were up year-over-year?

Yes. Bryan Hunt – Wachovia: And how about pharmacy comps? Are you comp-ing positive in your pharmacies?

We really don't get into that department level detail, so I'd prefer not to answer that one. Bryan Hunt – Wachovia:

You're welcome, Bryan.

(Operator instructions) We go next to Howard Bryerman with Evergreen Investments. Howard Bryerman – Evergreen Investments: Thank you. I apologize if you mentioned this on the call already, but did you -- could you give us the current valuation of your real estate holdings?

We don't have anything other than the book value of our real estate, which is -- let's see if I can get that off of my 10-Q last right quick. Our total book value of fixed assets, which is going to include equipment and everything, is $977 million. And I believe about $560 million of that right now is unencumbered. Howard Bryerman – Evergreen Investments: What's the portion of the $977 million that's just -- okay, I'm with you. And the other thing is I didn't hear what you talked about the current callability of your notes. Did you indicate any sort of future financing plans for those notes?

We are looking at all of our financing options right now. Again, we’ve done some collateralized borrowings during the year. We have a lot of availability under our lines of credit. And we do keep an eye on the bond market. So we’ve got a lot of flexibility. Howard Bryerman – Evergreen Investments: Okay, thank you very much.

You're welcome.

(Operator instructions) We go to Rob Magnuson with Goldman Sachs. Rob Magnuson – Goldman Sachs: Hi, thanks. Could you give -- or did you give the maturity of the new mortgage facility, the new $153 million?

It's not a single facility, it's a number of different mortgage and equipment financings. The maturity range varies as well. Again, generally most of them are repayable without penalty in three years or less, but the maturities are all over the place. Rob Magnuson – Goldman Sachs: I guess -- would you say the majority is beyond three years?

I don't have that detail in front of me, I'm sorry. Rob Magnuson – Goldman Sachs: Okay. And I guess just along that line in terms of mortgage financing, I think you said 6.11% weighted. That seems fairly good given the markets. Are you seeing any change in terms of loan-to-value or rates tenor in the collateralized market for your real estate?

No, that's been pretty consistent over the last nine months that we have been doing this. Rob Magnuson – Goldman Sachs: And year-over-year?

We weren't doing any of these mortgage loans last year, so I'm not really sure what conditions would have been like a year ago. Rob Magnuson – Goldman Sachs: All right. And I guess just broader, if we look at the CapEx and -- 230 for this year, 200 sounds like the running number beyond, I guess how do you guys measure the return on capital? If I look, there is maybe a lot of moving parts this quarter, but EBITDA about flat despite the investments so far. I know a lot is land for future development, but what type of metrics or paybacks? How do you get around the $200 million in CapEx being the correct number?

The $200 million is the correct number just based on looking at our store base and what we want to do over the next three or four years. We really can't go into much detail on our own internal evaluation project of -- or process of one project versus the next. Rob Magnuson – Goldman Sachs: Well, I definitely understand that, but I guess I'm just -- given the cash burn that's associated with $200 million of CapEx, I mean, is it a three to four-year payback? Is that kind of a ballpark that you look at? Is it a cash-on-cash return? Is – you know, just the broad philosophy on CapEx?

I'm sorry, that's again not something that we put in our filings and we generally don't give forward guidance. So I can't address that question for you. Rob Magnuson – Goldman Sachs: Okay.

And at this time, we have no other questions in queue. I’d like to turn the call back to management for additional or closing comments.

Okay, thank you very much. I appreciate everyone joining us today and we've had a good time sharing these good numbers with you and we look forward to seeing you out in our stores. Have a nice day. Thank you.

That does conclude today’s call. Again, thank you for participating. Have a good day.