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 27, 2009. 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 presentations on the right side of the monitor. At this time I would like to refer to the Safe Harbor statement under the Private Security Litigation Reform Act of 1995. During this conference call, management may discuss financial projections, information of 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, President of Sonic Automotive Incorporated. Mr. Smith, you may begin.

Thank you. Good morning, ladies and gentlemen and fellow share holders, I am Scott Smith, President, Chief Strategic Officer. Welcome to Sonic Automotive's third quarter 2009 conference call. Joining me on the call today are the Company's Vice Chairman and Chief Financial Officer, Dave Cosper, our Executive VP of operations, Jeff Dyke; Rachel Richards, our Vice President of Retail Strategy and Greg Young our Vice President of Finance. If you please turn to first slide. Today I'll be discussing an overview of the quarter and then I'll turn the call over to David Cosper for detailed financial review. Jeff Dyke will follow Dave, and give an update on our operational trends and then we'll open the call for your questions. If you'll turn to the third slide, overall results of Q3; I'm very pleased with our performance this quarter. You're going to hear a lot of great things on the call today. For the quarter, we made money and generated a lot of cash. Our operating margin was 3% and we continue to leverage our cost reductions. Our inventories are in good shape and we cleaned up our balance sheet. And we also benefited from the CARS program and collected nearly all of the $25 million receivable that we had from for government. I want to quickly summarize what we've accomplished at Sonic Automotive this year. We completed the debt restructuring earlier this year, when the capital markets were essentially closed. As the year progresses, the markets began to saw an open, we were able to complete a very successful equity and debt offering in the third quarter. Dave will go into greater detail on the offering, but I think our existing bond holders in the market in general responded so favorably to this offering, because they understood that we…

Thanks, Scott and good morning everyone. This slide shows our third quarter results for 2009 compared to last year. Both periods have been adjusted to exclude unusual charges, reconciliations to the GAAP results are shown in the appendix. As you can see, although revenue was down nearly a $100 million, gross profit was essentially flat. Thanks to good cost control, we were able to achieve an operating margin of 3% for the quarter, up from 2.3% a year ago. Bottom line, we are in 10.9 million after tax for the quarter compared with 6 million last year. We improved year-to-year, even though non-cash interest was up $7 million. In terms of diluted earnings per share, we're at $0.21 for the quarter, $0.06 better than a year ago. And as you can see, our core share count is up substantially this year. Next slide please. This slide shows the sequential improvement in profits through the year. And as shown, our pretax profits that have improved from just under 7 million in the first quarter to nearly 19 million in the third quarter. These numbers have been adjusted to exclude unusual charges that are principally related to our debt restructuring and impairments. This improvement has been made in a relatively flat industry environment. Our many business initiatives are gaining attraction. And Jeff Dyke will talk about these initiatives in a few moments. Noted on the bottom of the slide is the substantial amount of non-cash interest included in our earnings. Further detail on components of interest expense is provided in the appendix. For next year, the non-cash expense associated with our revolver in our 4.25 notes will be substantially lower and non-cash interest on a 6% notes will be gone. We expect non-cash interest on our new 5% notes to be about…

All right. Thanks Dave and good morning everyone. As Scott has mentioned on every call, this is a people business and we intend to continue to drive associate satisfaction as our number one priority. I'm going to thank all of our Sonic Automotive associates for the opportunity to represent you on this call and to present the fantastic progress we're making as a team. We've been talking to you about associate satisfaction and as you can see on this slide, the hard work that our team has put into developing our culture is really beginning to pay up for our company. Today, our company turnover is just over 34% as we marched towards our goal of 10% or less turnover. It's important to understand how critical this is to where Sonic Automotive is headed, with turnover at normal levels for automotive retailing in excess of 50%. Training associates and implementing operating playbooks is a recipe for failure. As turnover has declined, our training dollars are going further and our long tenured associates are better equipped to implement our operating strategies at a higher level. The results from this effort have driven our customer satisfaction levels to all-time highs and 84% of our stores are at or above national average in customer satisfaction as measured by our manufacture partners. With associate and customer satisfaction on the rise of record pace and turnover reducing at record pace, the product of these events has improved operational excellence. I'm proud to present to you our operational slides for Q3, 2009. Next slide please. Our new vehicle market share continues to improve. September marked the eight straight month of market share growth year-over-year as a company. September also marked the single largest market share month in our company's history as all regions improved as you…

Thank you, J.D. We've accomplished a lot of Sonic Automotive this year. Our balance sheet is in a much better shape and we're able to focus on our business and grow our cash flow in current environment. We continue to see the benefits of patient consistent rollout of our operating initiatives in our playbooks. And our focus on our associates is evident in the improvement in our associate satisfaction turnover overtime as business and cash flow improves, we plan on maintaining our focus on our investment principals and reducing our debt and when prudent, hopefully phasing back in our for our associates. We reported a lot of great news today, I'm extremely proud of all of our associates. And before I end the call, I'd like to say thanks to each and everyone of our outstanding associates to continue to work so diligently to make all of our success of the team possible. Thank you, team; it's a honor, privilege to lead our company. At this time we'd like to open the call and take your questions.

(Operator Instructions). Your first question comes from Matthew Fassler with Goldman Sachs.

Hi. It's actually Marc Andre filling in for Matt. Just quick question first, could you talk about your view of new margins going forward following after Cash For Clunkers and as inventories are building up, what are the trends you're seeing there? And then a quick follow-up would be; on the use margin side going forward, what would be the net impact from your strategy in used and maybe potentially lower price at some point as these sales pick up and maybe supply coming back, that will be great. Thank you.

Okay. Marc, it's Jeff Dyke. First of all in the new car side, our new car margins are fairly stable, actually grew last quarter. The great news for us is our new car inventory is in really good shape. And I think that's going to play a role for us over the next quarter. I do not see new car margins backing up and we're not seeing that in October. From used car perspective, our used car inventory is in great shape. We are not at risk having cars having to go to auction in the fourth quarter. As a matter of fact, we're in such a good shape going into November and December that while everybody else is going to selling cars, we should be able to buy some cars at pretty cheap prices, which is part of our strategy on an annualized basis. We now just try to come into the fourth quarter with lighter inventories. We are a little late reacting in this year, but going into November, I see us 28 to 30 days, which is going to allow us to buy cars and we are seeing the auctions softening up. Prices are going to come down. And we're going to be in really good shape to be able to buy some cars cheaper so that we can bolster margins at the quarter ends and into the first quarter of next year.

Great. Very helpful. If I may -- just one other follow-up would be, the 10.5 million SAR for 2010. Can you talk about the underlying assumptions behind that, just because we've been hearing numbers from different sources of Ohio and -- Powers and all that, if you could comment, that'd be great.

Yeah. This is Dave. We're not experts on this. We just pick that number I think we're comfortable with it. I think we've proven we can be profitable at a 9.5 SAR and if it's 10.5, we're going to be more profitable and if the other guys are right, I'll take that too. We're just planning our business conservatively.

Got it. Thank you very much.

(Operator Instructions). Your next question comes from line of Rick Nelson with Stephens.

Thank you.

Hi Rick.

Hi. October sales and how they are tracking I guess relative to September and where you see inventories today? I know you were depleted coming out of the quarter, but are building we know in the industry.

Yeah, Rick, this is Jeff Dyke. Our new car volume is up from September and so is our used car volume. So, we did 6300, 6400 cars; and in September, we're going to do over 7,000 in October and about the same for used, will be one-to-one. And again, our inventory is in great shape. And coming out of August, we were really tight and we want to be tight on new car inventories, because we're not quite sure what's going to happen with the SAR. But if it stays down in the 9 to 9.5 range, we're going to be in good shape. And if it's goes up to 10, we're -- it's not going to be a problem for us to continue our market share growth. And again, to comment on the used car inventories, we're in terrific shape and that's not going to cause us any issues between now and the end of the quarter.

Okay. Jeff, you don't see that as a fall up in pricing auction and then some of the backup and supplying auction as negative for the used car bids?

Actually, if you manage your used car inventory right, like I think we have done and we demonstrated we've done over the last few years, it's a positive for us, because as our inventories -- as we start shrinking our inventories in August, what everybody else out there trying to sell inventory, they're selling it cheap and it puts us in a position to buy inventory and that's exactly what we do every year. And if you go back and look at Sonic Automotive's performance, December, January, February, typically are our highest used car margin months and that's just supported around that strategy.

Got you. And Dave, if you could tell us what's in discontinued operations in terms of revenues and numbers of dealers and the composition?

Yeah. How are you doing, Rick. I think it's the moment we've got 15 locations in discuss (ph). And on the quarterly revenue, it's about a 180 million and now that the sell rig on the debt situation, we're going to take a look at that in the next couple of months and position stores in there that I don't think we wanted there, ongoing. You remember, we have some stores for sale and try and generate some cash. And now that we're on the other side of the major debt issues, I think we're going to re-look at that. And so that 15 location is likely to drop, I don't know, may be five, seven, something like that; not a very big number of stores in there ongoing in my view.

And with the debt situation significantly improved, what are your thoughts about acquisitions?

I'm still -- I'm a little gun-shy and very conservative. I think we're as a team going to generate cash, run our business very efficiently and little away some debt. Our next maturity is 2013, that's a lot of time. But you know what, no time like the presence to start wagon way and some of that. I do see acquisitions in the future at some point, but not tomorrow.

All right. Thank you. Good luck.

Thank You.

Your next question comes from the line of Himanshu Patel with J.P. Morgan.

Hello. I'm sorry. This is Ryan Brinkman for Himanshu.

Hi.

Hi, Ryan. We got you now.

Okay. Great. I was just wondering if you have an estimate as to clean, normalized combined cash and non-cash interest expense on a go-forward basis. It looks like you gave a little guidance on individual securities and I do not aggregate that that I was just wondering if you have an estimate as to clean interest expense on a go forward?

Hey Ryan, this is Greg. There is a slide in the appendix on slide 26 that gives you the year-over-year make up of the interest both regular interest and the non-cash along with all of the deferred loan cost ammonization that we've been running through the P&L this year. I haven't added it up going forward. I can tell you quickly, if you look at that page, obviously 4.25s to 5.25s in the fix all go away with their associated discounted ammonization and non-cash interest charges. So the only thing we will have going forward are the 275 million of 8 and 5/8 notes, and the new 5% notes that are out there. And it's certainly on that slide, the non-cash associated with those new notes will be about a $1.5 million a quarter. And then to the extent we have any interest on our revolver, right now that balance is zero. And you can pick up the mortgage interest of that slide, so I think if you look at page 26, you'll be able to get to a fairly decent number. We did have some -- you can see on the revolver side, there is almost 2 to 2.5 million on a year-over-year basis rolling through our interest expense, a lot of that was related to the amortization of some of the debt restructuring cost we incurred back in May, all of that which will be gone going forward in 2010.

Okay. And do those roll off by 4Q or not until the revolver is roughly renegotiated?

They'll still be in there for most of the fourth quarter, then they will roll off till the revolver in which we negotiated.

Okay, great. And then, I guess we are also hearing from other sources that maybe the percentage of used vehicles placed at auction that our selling has potentially lessened compared to even just a month or two ago; and that maybe prices at the wholesale level have decreased a little bit. I see that your wholesale gross margin last picked up just fractionally and that's not very material for you, but I was wondering if you've seen any flow through of this to your retail operations if you would expect pressures that retail for used vehicles to may be decline marginally here?

We have seen the auction prices coming down, and that's what there happened every year. So, this is cyclical, it happens every year. And we are adjusting our retail prices, as we do every year heading into the fourth quarter, especially end of September, October and really the first couple of weeks of November. We adjust with the market, so the prices do come down. But then it's a wonderful thing, it's towards the middle of December, they start popping back up and we have a good run for over last two weeks of December and all into the first quarter. So this is something Ryan, that's just a very normal process, it's happens every year. And our inventories are in really good shape and we try to take advantage of it each year, when there are other dealers out there that just don't manage there inventories well.

Okay. All right. Thanks for the help guys.

Sure.

Your next question comes from the line of Stuart Wong with Denar (ph) Capital.

All right. Hi guys. Was there any one time SG&A costs in the P&L associated with your offerings?

No, not in SG&A. There is -- you can see the 11 million pre-tax gain only through interesting expense related to the 6% like SG&A and then there is another gain down in other income that we are in contract.

Everybody, we pulled a number of appendix to pages at the end of our debt because there is a lot of one-time things from all the restructuring and non-cash interest et cetera. So we've laid out in some detail, the EPS calculations, the share amounts; that should help us understand it.

Right. Okay. And secondly I think Jeff had mentioned something about used up 35% in October, what -- did I miss you on that or what was that metric related to?

That's our unit volume and that's what we're tracking right now today. We're tracking up about 35% year-over-year.

Okay. In October for used units?

Yes.

Okay. Thank you.

Your next question comes from the line of Jordan Hymowitz with Philadelphia Financial.

Good quarter. Couple of quick questions, The SAR rate of 11.5 in the quarter -- second quarter, can you quantify that between the retail and fleet, because I'm sure that retail mix is much greater which helped the profitability?

Jordan, on 11.5 SAR mix?

For Q3.

Okay, for Q3. Yeah, I mean very, very little fleet, just almost zero. It's really driven more by the Cash For Clunkers.

And what is the normal mix of these, about 20% as for 08?

No, it's not even that. It's probably 10%.

10%? So in your 10.5 SAR next year, with that about 10% fleet?

Yeah, somewhere in there and it could be even a little less than that, may be towards 5%.

Okay. The second question is, do you have any impact -- could you with the new capital rates and what interest rates do you guys, like every 25 basis point increase is worth the EPS at this point?

Well, a lot of our variable rate debt now is on the floor plan and it's pretty much fully hedged. So it's not a lot of exposure to the agro (ph) with the hedges.

What happened there, we have had four things; thank to a year ago strategy of being roughly 50% hedged, but our inventory balances are down 40%. So around it's fully hedged.

All right. That's great.

So at the moment, that would real impact from interest rates moving and moving any time soon.

And how long do the hedges last for?

They are still out there for another two to three years, yeah.

Okay. So you have plenty of room there. Okay. The other question; what was the share base at the end of the quarter as opposed to the average? In other words, what share base would you be using for next quarter?

It will be in that 63 million range.

Okay. Thank you, very much.

Thank you, John.

Your next question comes from the line of John Hayden (ph) with Gill Capital Partners.

Hey guys.

Hi, John.

I noticed on your balance sheet, you have about 106 of restricted.

Yes.

And I was just wondering what that those remarked for?

Yeah, it's remarked for debt retirement. Actually tomorrow 86 or 87 million of that, so we may be begins the 6% notes that we put on in May. Then there is another 17 million of outstanding debt of our 4.25s convertible contributable notes that will take out?

We did our public offering in September and so on and we had a 30 day call period on the 6% note, so we couldn't wait about a month to take them out. So we thus grow the cash.

And that's tomorrow.

Yeah.

Okay. And you said, you were little high scheduled in your SG&A plan?

We're right on a track actually.

Okay. So when do you expect to have the entire 135 out?

Probably fourth quarter, I mean this quarter, we'll just keep working on. And I don't think that the job ever stops when SG&A could step the pops in and we just go ahead continuously.

What do you see is a good kind of maintenance level?

You mean, like a percent of gross?

Yeah.

Well, I'd like to see it fall and I'd like to see gross come up frankly. I mean when the new car comes back, may be in the 75% range ongoing.

I think if growths comes out, then the SAR start to head up where 10.5 to 11 million, you'll get back into that mid 70 range. But until you get back to that SAR level, you're going to be somewhere in the high 70s.

Okay, great. Thank you.

Your next comes from the line of Derrick Langer with Jefferies & Company. Derrick Langer - Jefferies & Company: Just two things, what is available in the bank facilities and what are the letter of credits against it, and then the CapEx outlook for this year and next?

Yeah, I think CapEx will probably be in the 8 million range, 7 to 8 million again for the fourth quarter. For next year we've got a couple of major projects that are on hold at the moment. And given our improved balance sheet structure, we're looking to get some mortgage funding wind up, so we can resume spending on those. So there won't be huge drain on cash but there will be some CapEx as we push those projects forward. Yes about our credit line we have -- I think it's about 77 to 80 million of letters of credit, about total availability under the revolver capacities like 200 and 205 million, something like that. We've got roughly a 100 million available at September 30. Derrick Langer - Jefferies & Company: Okay.

That included 20 million outstanding in September 30, which is now gone so.

So there was 20 million now at 9.30.

Yeah, that is now at zero, Greg is right. Derrick Langer - Jefferies & Company: Okay. And what was the magnitude of that CapEx spending in 10.

It could be 40 million something like that, 40, 45 million.

With some mortgages on there.

With some mortgages.

I think active mortgages were still in that 25 million range; 25 to 30. Derrick Langer - Jefferies & Company: Okay. Okay, great. Thank you.

(Operator Instructions). Your next comes from the line of John Murphy with Banc of America.

Good morning, guys.

Hey John.

I just want to ask the SG&A question a different way, the 135 million target that you guys are focused on for this year. How much of that has been achieved year-to-date? Is the large majority, or is there another 10, 15 billion left in the fourth quarter?

I think most of it's there. I think it's a little Cash For Clunkers obviously ramped up our compensation. But that's a good thing as you get gross to go with it. We had targeting 50 million of variable savings largely in compensation areas.

Got it.

And we're most focused on the fixed side. And that's where we've have got the bulk of savings on that side. There is a little bit more to come. We're still working on service loaners and a few other areas but the saving that we've got in areas like advertising, it have been very strong and I see them staying -- that cost, staying out as volume comes back.

Okay. And then if we think about next year with this 10.5 million unit SAR forecast that you guys were thinking about for next year, which is only up very slightly. Are there other cost actions or other business mix shifts that you think you might need to make next year, because then that's still a pretty tough market?

I think it is, but I think Jeff is going to find on this little further. I think we'll just keep going on the used cars. We have had great success there, although I think there's more opportunity. And then in the fixed area, we're really just getting started in some of our initiatives there. And that's the most profitable part of our business. And I see that helping greatly.

Yeah, John it's Jeff Dyke, I mean Dave said it right. We're limiting our exposure to the new car side and the swings we've been very comfortable now in the 10 to 10.5 SAR range, even less it may be. But our used car business quarter-after-quarter-after-quarter and our processes and playbook have proven that the strategy is working. And we're three and a half years into the used car strategy with still more room to grow. As you remember, I told you, we're averaging about 60 cars per store per month and we believe that number is get to 100 cars per store per month. And then in the fixed operation side, we're just getting started. We've got some nice growth there in terms of margins. But we really hadn't turned on the revenue into there yet and that's something over the next couple of quarters that we think will start ringing through.

Okay. And then just last thing, you may have hit this before, so I apologize. But in the new vehicle market, what you guys are seeing on pricing? Are you seeing any incentive or ramp ups or any more competition on your low rate financing rather incentives in the market?

We're not at all. It's certainly something that would help. But candlelight come out with the least program on their two new models. That's about it there. And there has been some incentives here there, but nothing out other then ordinary I can tell you and it's something that we've certainly like to see. Toyota has had some stuff going on from an advertising perspective and they've had some incentives, but nothing huge and certainly nothing on the finance side.

And now just the last question actually on financing, what are you guys seeing about the ability to get consumers finance? Are you still seeing required high or big down payments and low loan to values? I mean, what are you seeing on the loans that are being written in your dealerships. And are there enough -- is there enough credit available?

Certainly, the credit is out there, we're selling cars. And -- but it's nothing different than it's been over the last three or four quarters. I mean, it's been a difficult that carries or less and sure, I mean, it's tougher to get vehicles financed but we're still selling cars. There is plenty of credit out there and you -- make sure you structure your business appropriately and we're doing that.

But if that ease, would you be able to -- do you think you'd be able to sell more vehicles or is that just vanishes at this point?

You would be able to in the lower tier customers. But I think John, we've grown the used unit in the quarter by 25%, so -- tougher ones to get financed. And we're getting a lot of good support from our lenders.

Okay. Great. Thank you very much.

Your next question comes from the line of Derrick Langer with Jefferies & Company. Derrick Langer - Jefferies & Company: Sorry, I just can't get the third quarter CapEx number?

It was $8 million. Derrick Langer - Jefferies & Company: Okay, thank you.

At this time, there are no further questions. Mr. Smith, do you have any closing remarks.

Well, I'd just like to thank everybody for their interest in our company. It's a good time for Sonic Automotive right now. We've gotten monkey off of our back with the short-term solution with our refinancing and we're really going to focus our attention going forward on our operations and our fixed staffs and our associates and I think it's -- we've got some bright skies promise. I thank everyone for their time today, and take care.

Thank you. This concludes today's conference call. You may now disconnect.