Good morning, and welcome to the Sonic Automotive first 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, April 27, 2010. Presentation materials, which management will be reviewing on the conference call, can be accessed on the company’s Web site 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 projection, 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 those 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.

Great. Thank you. Good morning, ladies and gentlemen. I am Scott Smith, the company’s President, Chief Strategic Officer and Co-Founder. Welcome to Sonic Automotive’s first quarter 2010 earnings conference call. Joining me on the call today are the company’s Vice President, David Smith; Vice Chairman and Chief Financial Officer, Dave Cosper; our Executive Vice President 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 the first slide. Today, I will discuss an overview of the quarter, and then turn the call over to Dave for a more detailed financial review. Jeff Dyke will follow Dave and give an update on our operational trends, and then I will summarize and make closing comments and we will open the call for your questions. If you turn to the slide, Overall Results – Q1; at Sonic Automotive, we are building one of the best companies in America to work and shop. We have a culture focused on making associate satisfaction our number one priority. We believe that happy associates lead to happy customers and higher returns for our shareholders. One year ago, in the first quarter of 2009, we launched a large-scale plan to improve communications with our associates and reduced our associate turnover. In 2008, our total annual associate turnover was 56%. Today, we are tracking less than 25% with our long-term goal of being less than 15%. With lower turnover, our training and playbooks are gaining traction and our execution is improving. We ended 2009 with 83% of our dealership exceeding national averages for their respective manufacturers and customer satisfaction scores. Our goal is to have all of our dealerships exceed national average in CSI. Operating results for the quarter continued to prove the validity…

Thanks, Scott. Good morning everybody. Revenue for the quarter approached $1.6 million, up 13% from last year. Gross profit was $269 million, up nearly 9% from last year. And finally operating profit at $35.9 million was 2.3% of revenue. Profit after tax from continuing operations was $7.5 million, up from $4.1 million a year ago. And although it's a substantial improvement, I think we could have earned more in the quarter. From a profit perspective, we got off to a slow start in January, as Scott mentioned, and which followed a very strong December. Things improved in February, and March was extremely strong. We are seeing that strength continue in April and feel good about our sales momentum, cost structure and profit. EPS for the quarter was $0.14, up from $0.10 a year ago. Next slide please. This slide shows our SG&A. And SG&A as a percent of gross was 83.5% for the quarter, up 10 basis points from 2009. We made good improvement in advertising, other fixed and variable costs and rent and rent related, and as Scott mentioned, this was offset by higher compensation costs. We are making some adjustments to our compensation practices to one, ensure we are at least market competitive, and two, to drive behaviors and performance that we desire. We are also increasing our investment in training and systems to support our people. And our strategy is working, and I see it in the March numbers; as Scott mentioned, we were down nearly 200 basis points in March versus 2009. Restructuring the business to generate revenue and not playing defense, our sales performance in all our business lines is showing that and the profits are materializing. What's more, our associates are happier, turnover is down and customer satisfaction is rising. Next slide please. Scott…

Thanks Dave, and good morning everyone. As mentioned on previous calls, our attention to associate satisfaction, associate retention and our inability to execute our eSales and pre-owned playbooks continue to contribute to the success of our new vehicle sales. While we saw year-over-year gains in each of the three months in the quarter, our year-over-year revenue and percent gains grew with each month of the quarter accumulating in a March increase of 18% over prior year. What is really exciting is our growth in April was tracking up in unit volume 26%, as we continue to implement and execute our new vehicle playbook. As part of our playbook execution, we added in-store and/or regional eSales offices in several regions this quarter, which added to our SG&A as we ramp up this new structure which will play a significant role in our traffic management execution. Returns from our initial eSales concept rolled out in the fourth quarter are really starting to show fantastic returns, but we do have about a four-month to five-month ramp up period before we begin to see the returns as eSales personnel come on line. Total new retail volume was up 21,484 units, a year-over-year increase of 10%. We continue to manage all new car inventory ordering on a centralized basis and are proud to report our new car day supply is in outstanding shape at 54 days, significantly better than last year’s 74 days. We are up from the fourth quarter of 49 days as we have increased our inventory by a few days to support the upcoming selling season. On a quarter-to-date basis, new vehicle margin was 7.1%, up 30 basis points from prior year. And as you can see on the slide, gross profit per unit was up $179 or 7.8%, and gross profit…

Thank you, JD, for the operational update. I just have few more comments before we’ll open the call up for your questions. I would like to tie this all together for you by providing a glimpse into what we see in our future over the next 3 years to 5 years. There are a couple areas in SG&A that may be of particular interest to you. It's important for you to understand that we will invest over $20 million in training and new technology this year alone will help us achieve our goals. We are building apps that will enhance our customers experience and enable our associates to become more efficient. We are also exploring ways to compensate our associates in more customer-centric ways which will lead to some SG&A fluctuation as we saw in January of this year, although February and March were much more predictable as Dave described earlier. We are expanding our new car playbook to include many of the processes that have proven to be beneficial on the pre-owned side and we expect these additions to the Sonic Automotive improve market share in the new vehicle volume levels over time. We are well on our way to achieving our pre-owned goal of averaging over 100 units per store per month, which Jeff mentioned, and which will add $1.1 billion in incremental revenue and over 100 million in incremental gross, not including the effect on fixed and F&I. We're also making progress towards our goal of 100% fixed absorption, which will add an incremental $250 million in revenue and $125 million in gross. We challenged our F&I teams to achieve two products per vehicle sold in F&I. Today, we have many stores well over the two products goal and look for the remainder of our stores to…

(Operator instructions) Your first question comes from the line of Rick Nelson with Stephens. Rick Nelson – Stephens Inc.:

Hi, Rick. Rick Nelson – Stephens Inc.: I'd like to follow-up on the SG&A. I know you mentioned that your plan differs from the other auto dealers. I am wondering if you could talk about that and what the recent adjustments were to SG&A. And if the SAAR hits your forecast, where would you expect SG&A to gross to be for the year?

Hi Rick, it’s Jeff Dyke. How are you? Rick Nelson – Stephens Inc.: Hi, thanks. Good.

I expect our SG&A to be in line on a full-year basis. But we did start off the year a little bit slow in terms of new car volume and just a little bit of a hangover from December. And that’s what caused the SG&A fluctuation. It was primarily built into January. February is much more normalized and March was actually fantastic. So we expect the year to be a good year, got off to a slow start and implemented a lot of things that we’ve been holding back on last year that we really wanted to get up and running this year. And that all started January 1 and it caused a little bit of a slowdown from an SG&A perspective. Rick Nelson – Stephens Inc.: Would you expect that expense ratio to narrow?

Yes, absolutely, and we saw that happening in the quarter. And that will continue to happen as we move through the year. Rick Nelson – Stephens Inc.: Year over year, I think you mentioned you were down 200 basis points in March. Is that the magnitude of improvement that you're expecting for the year?

No – Rick, this is Greg. I think in March it was a little bit higher than 11 million SAAR. So if we are still planning on that 11 million SAAR level for the year I don’t expect to see quite the same level of improvement that we saw in March. And as Jeff and Dave mentioned to the extent we see the recovery coming and the new vehicle environment moves up, then yes, we would certainly ratchet down our expectations even further on SG&A. But I think in an 11 million SAAR, you are kind of still in that 80% to 81% range. Rick Nelson – Stephens Inc.: Okay. Thank you. That’s helpful. And at 11 million units, could you indicate you're comfortable with the low end of the First Call estimates?

That’s pretty much what I signaled, Rick. Yes. Rick Nelson – Stephens Inc.: Okay. And then also I would like to follow up on the Toyota impact to service and parts. You reported 2.8% of same-store growth that have looked like ex Toyota and if we could go through the segments on customer pay warranty internal as well, that would be helpful.

If you add Mercedes back in there they are absolutely offsetting each other so we feel real good about where we are on a fixed operations perspective. We are making great progress and that’s why I told you are going to see – we should see sequential growth and improvement as we move forward throughout the year on fixed ops. Rick Nelson – Stephens Inc.: Even with the declines in units and operation?

Rick Nelson – Stephens Inc.: Thank you, and good luck.

Thank you very much.

Your next question comes from the line of Matthew Fassler with Goldman Sachs. Marc Andre – Goldman Sachs: Hi, this is actually Marc Andre [ph] filling in for Matt. Just one quick follow up on SG&A. When you talked about exploring ways to compensate associates more in a more customer-centric ways, what exactly does that mean? Is that increasing variable compensation, and just want to know how we should think about it going forward.

Mark, this is Jeff Dyke. We are right in the middle of that. We’ve worked on all of our Managers pay plans and General Mangers pay plans and between now and I'd say the middle of next year we'll work on the balance of all of our associates. I hesitate to sort of speak out about how we are structuring this pay plans because that’s kind of what we think is a competitive advantage to us. So I can just highlight to you that they are going to be more customer-centric and in getting our associates to do the right thing, not that they have in the past but making sure that we are doing the right thing to get our customers in and out of our facilities as quickly and possible with the best experience that they could possibly have from retail perspective. Marc Andre – Goldman Sachs: Got it. That’s great. Thank you very much.

Your next question comes from the line of Himanshu Patel with JPMorgan. Ryan Brinkman – JPMorgan: Hi, this is Ryan Brinkman for Himanshu Patel. Given the very strong retail used unit volume performance in the first quarter and then in the fourth quarter of last year, in terms of thinking about how much opportunity that remains in this area? What do you think is the normalized ratio of used vehicles to new vehicles sold in your stores once new vehicle sales normalize and all of your used vehicle sales improvement initiatives are fully implemented?

Well, great question. And we just had our best used car quarter ever as the new vehicle SAAR improved throughout the first quarter and April has been nothing short of that. Actually we are gaining momentum. There is just total upside. We’ve given a baseline to our stores that we are going to average 100 units per store per month and we are well on our way of achieving our goal. That’s going to add a ton of revenue to the bottom line, but that’s just the beginning stages. You look at CarMax, they sell nearly 300 cars per store. There are 40 million used cars sold in America each year. There is a ton of upside here and we are just beginning to take advantage of it. There is a lot of room for growth and we are just really getting into the business and you mentioned in the fourth quarter we’ve had four straight quarters of double-digit growth and they’ve gotten bigger every quarter. And we look for the second quarter to be the same. Ryan Brinkman – JPMorgan: Great, thanks. And then just quickly too, I think last quarter you mentioned on that call that SG&A costs were roughly 58% variable and 42% fixed at that point in time, and you had helped us by breaking down the compensation amount between fixed comp and variable comp. Is there a similar type breakout that you could provide this quarter or if not perhaps just generally help us in terms of how to think about the most recent split in terms of fixed versus variable SG&A?

I don’t think so – this is Greg, Ryan – I don’t think at this point that we want to breakout the variable fixed component. As Jeff said, we are in the middle of adjusting some of pay plans, and some of that between fixed and variable may float around a little bit as we go through that process. I think the initial guidance that we gave there on some of those fixed costs and stuff would still stand true. But I don't think we really want to go into more detail looking forward at this point on the compensation makeup.

Yes, this is Dave. I think it’s important to note that what we are trying to do with compensation is not going to be some structural penalty going forward. Our objective is to be competitive or slightly more than competitive with the market. And as Jeff had mentioned to really drive the behaviors that we need to satisfy our customers and grow our business. So we are not going to see the issues that we saw in January going forward. We are going to be competitive and we are going to be very sales efficient. Ryan Brinkman – JPMorgan: Okay, and then just from sort of a high level overview, you guys have always been very progressive in terms of how you treated you sales force and your associates and how you thought about them in turnover, and you really kind of the first to talk about a lot of those things. Are you may be thinking about sort of reading between the lines and you mentioned CarMax earlier, maybe sort of compensating your employees more along the lines that CarMax has as opposed to a traditional new slashed used vehicle retailer?

No, would love to answer that question for you but again that's a little bit of a competitive advantage to us I think. You can expect us to continue to be very progressive and innovative from a compensation perspective and how we treat our associates and very much focused on making that our number one priority reducing turnover. But you guys see it all the time, the best performing companies in any industry have the lowest turnover. They are below 10% and this company has (inaudible) there. We're going to make that happen and if there's some short-term lumps in order to make that happen then so be it, but we are headed in the right direction, and our turnover is going to get where it needs to be and as a result we are going to create one of America’s great companies to work at and shop.

By the way, the sales are going to be there, and so are the profits, importantly. Ryan Brinkman – JPMorgan: All right. Great, guys. Thanks a lot.

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: You'd mentioned something or factor increasing your SG&A costs was the addition of seven used car buyers in the quarter. I am just wondering, obviously used cars are a focus for you. Just wondering if there's anything going on structurally in the used car market that's shifting or changing that makes you think you need to add buyers and I am assuming those buyers are going to auction to source vehicles. I'm just trying to understand why the new addition of all these buyers is coming in.

Yes, that’s a great question. Here is the problem. The problem is the traditional model when you start selling that many cars you can’t trade for and we're not going to trade for as enough cars to offset the volumes that we are seeing. And we can’t send personnel out of the store to go out and buy. So we think that we can buy better with a trained buying force and you talked about CarMax earlier, that’s how they supply their inventory. They got a lot of customers that bring them cars. But at the end of the day they’ve got a very good buying organization and we are building something, not the exact same, but something similar. And you are going to see that expand over the next year and a half to two years at this company. We cannot meet our volume goals in our volume target when you are selling 50, 60, 70, and 80 and 100 cars per store, per month; that’s one thing. But when you start selling 200, 250 and 300 cars, which we are experiencing you can’t keep up with it unless you have a buying organization to support that kind of volume. And that’s where we are headed and so it is an investment that we are willing to make today to make sure that we hit those goals. John Murphy – Bank of America Merrill Lynch: And if we think about the other investments or costs that might come in with increasing this used focus, I mean, obviously the buyers are component of it. Do you feel like your real estate in you systems is sufficient to really handle that kind of an increase? Or there is some additional costs that would come in or issues that might come in as you expand on used cars.

We have plenty of room and plenty of parking spaces and there is no issue with our real estate in order to be able to handle twice the amount of volume we are doing today. That’s not an issue whatsoever.

There's some technology spending that we'll be doing to handle improvements in some of our systems. But it’s not massive.

Yes, Scott talked to you about some of the increases in SG&A spending that we are doing. Some of that is built around improving our used vehicle operating system and those are just enhancements to what we already have today, which we think we have a competitive advantage on any way. John Murphy – Bank of America Merrill Lynch: Got you. And then on show room traffic, I know you talked about this a little bit during the call but just wondering what you are seeing in show room traffic through the quarter and into April? And then also the availability of financing to customers are up when they come into the show room and what the close rates have been trending really through the first quarter and maybe into April as well.

January show room traffic was light. It was down in terms of walking traffic, something like 11%, but as the quarter went on and progressed our traffic gradually increased and then when we got to March, obviously we got a big bang both from our virtually dealership, Web site leads coming in as well as walking traffic and then April has been even better. So we are really seeing a really nice bang for our buck from March and April. So hopefully things continue the way they are and the numbers will pick up even more than we are calling out. John Murphy – Bank of America Merrill Lynch: And close rates on those show room traffic and they’ve been improving because of an increased availability of financing?

That’s somewhere in the 22% range. John Murphy – Bank of America Merrill Lynch: And that’s an improvement from the beginning of the year?

John Murphy – Bank of America Merrill Lynch: Got you. Then lastly, I mean, I know pretty much everybody in the industry has been backing off their acquisition targets and their focus on acquisitions, yet we’ve been hearing from some of your competitors that they have been making acquisitions at a pretty high rate in the first quarter. Just wondering what you are seeing in the acquisition market, if there were any potential opportunities that would be very cost effective for you in the near term or through the rest of this year?

John, this is Dave. We are not looking for any major acquisitions or divestitures, frankly. We've got a couple tuck-ins here and there, new points with many, but our top priority is going to be generate cash and reduce leverage. And going out maybe a couple of years, we will start thinking about it, but frankly we see a lot of upside in the base business and that's really what the operating team is focused on is just bringing out the value out of the assets that we already have. I don’t think we’ve done the best job at up till now. And so we are going to go after that first generate cash and then when we are ready for acquisitions, we want to be able to open the wallet and pay cash for it. We don't want to ramp up that. So that’s what our thinking is. John Murphy – Bank of America Merrill Lynch: Great. Thank you very much guys.

Thank you.

Your next question comes from the line of Stuart Quan with Zander Capital. Stuart Quan – Zander Capital: Hi, guys. I just want to follow up on the SG&A questions. As far as the personnel expense, it was up almost $14 million sequentially. How much of that was at the store level versus regional versus corporate?

Yes. Stuart, I don’t have that break down in front of me on the sequential number thing. And most of it was at the store level.

75% to 80% of it at the store level.

Sequentially our gross was up, so you would expect some of that comp. And I know it was up as a percentage of gross also, as Jeff mentioned, some of that January effect and some of the baseline compensation adjustments that we were making. But most of it would have been at store level. Stuart Quan – Zander Capital: Is there a bigger component of fixed compensation that’s being paid at the store level to the sales to the sales associates?

No. I mean obviously then the dollar amount is higher just because we sold a lot more cars year over year and had higher fixed year over year when you look at on a dollar basis. But there is no more higher percentage of fixed comp than we had in previous quarters. We’ve added headcount in some areas and Mike had talked about the buying organization, the eSales office and the way that we’re handling traffic so forth and so on is all addition to this year from last year.

The way I have been thinking about it is comp costs were up. I think we restructured for even better revenue performance than what we displayed. And the revenue started slow in January and then accelerated in February and March. In March, the revenue caught up with – the revenue and cost were in balance. So we really hit our stride and that's continuing in April. Stuart Quan – Zander Capital: And then just second question on parts and service, what do you recognize on reconditioning a used car versus dealer prep on a new car?

In terms of price? Stuart Quan – Zander Capital: Dollars per vehicle.

I think it’s in the $750, $800 range on a used car and significantly less than that on a new car. Yes, maybe $200 on a new car. Stuart Quan – Zander Capital: Got it. Thank you.

Your next question comes from the line of Derrick Wenger with Jefferies & Co. Derrick Wenger – Jefferies & Co.: I am sorry if I missed it. 2010 capital expenditures, did you give an outlook for that?

Yes, let me just flip to that slide. Net of mortgages, it was $37.8 million. Derrick Wenger – Jefferies & Co.: For fiscal year ’10?

Correct. Derrick Wenger – Jefferies & Co.: Net of mortgages. Okay, thank you.

Okay.

(Operator instructions) Your next question comes from the line of Colin Langan with UBS. Colin Langan – UBS: Good morning.

Hi, Colin. Colin Langan – UBS: You commented that you had an 11 SAAR, the SG&A ratio could get to 80%, 81%. What kind of leverage do you have if the SAAR recovers to where we were in the past, 15, 16? Can you get us to, you know, past 76% or even lower now that you've done a lot of restructuring in the downturn.

Yes, I can see 76%.

Yes, I think if we get up north of the $12 million range we start trending down into that high 70s very quickly the way we structured things now. Colin Langan – UBS: Okay. And what about, I apologize if I missed those. Your retail sales were up 10%, but the US market was up 16%. What was the factor of why it sort of underperformed the US market?

Let me start on that. I started looking at our volume versus others versus industry. We didn’t fall as much as others and the rebound has not been as quick on the new car side. The US is a completely different story. We never fell and it's been straight up.

I mean our mix maybe a little bit different than everybody else. We’ve got a higher mix of luxury and luxury did not fall off, you know as far as everybody else. So it did not have as much of the upside potential as some of the domestic – some of the dealers that are weighted more from a domestic perspective.

Domestic stores didn’t pop up nicely.

Colin Langan – UBS: Okay, so you think luxury mix sort of helped you underperform in Q1 relative to the US?

I just think it didn’t fall off as far last year. So the year over year comparisons, it’s a tougher comp than it is when you are comping Ford or domestic mix. It’s just mix. Colin Langan – UBS: Okay. Thanks for your help.

At this time, there are no further questions. I would like to turn the call back over to Mr. Smith for any closing remarks.

Well, thanks. It was just a fantastic quarter for us. We are so excited about where we are going and really look forward to our next quarters call. Have a great day.

Thank you.

Ladies and Gentlemen, this concludes today's Sonic Automotive first quarter earnings conference call. You may now disconnect.