Katharine Kenny - Assistant VP, Investor Relations Tom Folliard - President and CEO Keith Browning - CFO

Scott Ciccarelli - RBC Capital Markets Matthew Fassler - Goldman Sachs Rex Henderson - Raymond James Sharon Zackfia - William Blair Hardy Bowen - Arnhold & Bleichroeder Brian Nagel - UBS Bill Armstrong - C.L. King & Associates Matt Nemer - Thomas Weisel Partners Edward Yruma - J.P. Morgan Chase Brad Thomas - Lehman Brothers Willis Taylor- Gagnon and Security

Good morning. My name is Tiffany and I will be your conference operator today. At this time, I would like to welcome everyone to the Third Quarter Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. (Operator Instructions). Thank you. I will now turn the call over to Ms. Kenny. Ma'am, you may begin your conference.

Thank you. Good morning. Thank you all for joining us. My name is Katharine Kenny and I joined CarMax in late October to replace Dandy Barrett who, as you all know, recently retired. While no one can truly replace Dandy, I am very pleased to be here and look forward to meeting all of you. On the call today are Tom Folliard, our President and Chief Executive Officer and Keith Browning, our Executive Vice President and Chief Financial Officer. Before we begin, please let me remind you that our statements today regarding the company's future business plans, prospects and financial performance are forward-looking statements that we make pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current knowledge and assumptions about future events. They involve risks and uncertainties that could cause actual results to differ materially from our expectations. In providing projections and other forward-looking statements, the Company disclaims any intent or obligation to update them. For additional information on important factors that could affect these expectations, please see the Company’s annual report on Form 10-K for the fiscal year ended February 28, 2006 filed with the SEC and our subsequent filings. Now I will turn the call over to Tom.

Thanks, Katherine. Good morning everyone. Thank you for joining us. We are very pleased to report our third quarter earnings, unexpectedly strong as you saw, mostly unexpected, because this is historically our toughest quarter of the year, and because we are coming up against such a strong wholesale and CAF comparison from year ago. As you have read in our press release, our earnings increased 98% to $45.4 million or $0.42 per share compared with $22.9 million or $0.22 per share than last year's third quarter. Total sales increased 24% to $1.77 billion and comp store used units increased 13%. I'll start with sales. First our used vehicle sales benefited from a combination of factors, beginning with of course solid, steady improvement in execution in the stores and robust traffic growth at both our stores and on our website. Used vehicle sales increased 27% which included an 18% increase in total used units sold and the fact that average used car selling prices are up 7%. This increase was primarily a reflection of higher mix of SUVs as we saw in the first and second quarter of this year, also trucks and luxury vehicles compared with the year ago. We also attribute some of the increase in traffic to our web enhancements and the expansion of our internet advertising. On to wholesale, wholesale sales were up 30%. This increase was primarily driven by first the growth in our store base and then particularly strong appraisal traffic in the third quarter. Gross profit compared with last year's third quarter, our gross profit increased in all vehicles categories. Gross profit for both our used and wholesale units benefited from our ongoing car-buying refinements. In addition, our used vehicle margins continued to be supported by our strong sales performance and fewer pricing reductions which resulted in an increase of $140 per unit to $1,898. Our wholesale vehicle gross profit dollars also increased slightly, a pleasant surprise after the unusually strong levels we recorded after Hurricane Katrina last year. On to CAF, CarMax Auto Finance Income increased 14% this quarter, another solid performance especially when you compare it to last year, which included favorable items totaling $6.1 million or $0.03 per share. CAF continues to benefit from our sales growth, expansion in the average amount financed and an increase in the gain on loans originated and sold. The gain spread for the quarter was 4.3% this year, compared with 3.6% last year. This experience was again better than we had projected and resulted from lower funding cost during the quarter. As we do every quarter, we reviewed our loss experience relative to expectations. Losses were modestly higher on our most recent securitizations, as you have seen in our notes, some of which was anticipated. Loss experience on our older pools continued to track better than expected, the net impacts for the quarter was immaterial. We will continue to carefully monitor our loss and delinquency experience. On to SG&A, our results were also positively impacted by better SG&A leverage. Our ratio fell 120 basis points to 10.6% this year, compared to 11.8% last year. Our stock-based compensation cost totaled approximately $0.03 in both this third quarter and last year's third quarter as re-stated. We did benefit this quarter from the timing of roughly $2 million or $3 million of projected relocation cost, which we now expect to record in the fourth quarter. Also remember, the SG&A in the fourth quarter compared with last year will be further impacted by two additional items. First pre-opening expenses, related to three new super stores that we have yet to open, compared to no new openings in the fourth quarter of last year and last year included lower than normal healthcare cost and property taxes. So, on to our expectations, the continuation of our strong performance throughout the first nine months of fiscal '07 has convinced us to once again increase our full year expectations. For the year, we now expect comp store used unit growth in the range of 8% to 9% and earnings per share in the range of $1.75 to $1.85 per share. This represents an increase of 39% to 47% versus last year's restated EPS of $1.26 per share. We continue to expect that stock-based compensation expense will be $0.19 or $0.20 per share this year compared with $0.13 per share last year. Included in our projections are the $0.07 per share of favorable CAF items that we have already reported compared to $0.09 of favorable CAF items recorded in fiscal '06's full year. And as Keith always reminds me, our assumptions always include any unusual weather events in the fourth quarter, I mean exclude, I’m sorry. Onto our growth plan, we continue to be very excited about the sustainable long-term growth plan. We have abundant opportunities for geographic expansion in both, in new large markets as well as mid-sized markets, and opportunities to expand our presence in our current markets. We now expect to open a total of four new stores in the fourth quarter including the Charlottesville store, our small market format, which we opened earlier this month. This will bring our total store openings for the year to 10, representing a 15% increase in our store base for the year. For fiscal '08, we expect a total of 13 store openings, an increase of 17% in our store base, well within our long-term annual store growth plan of 15% to 20%. In terms of timing, we currently project we'll open five stores in the first half of the fiscal year and eight in the second half, but as you know, construction and other delays occur and that could impact the exact timing of these openings. So we'll keep you updated each quarter. Let me take a moment to thank you again for joining us today and for your continuing support of CarMax. I want to thank all of CarMax's associates for their continued hard work and dedication which have allowed us to be so successful, and I'll now open the line up to your questions.

(Operator Instructions). Your first question comes from the line of Scott Ciccarelli with RBC Capital Markets. Scott Ciccarelli - RBC Capital Markets: [RBC] markets, they usually mess up Ciccarelli. A couple of questions here for you guys. First is, has there been any change or do you get any sense from any of your financing vendors on financing approvals. We just see kind of what the banks are doing? They are starting to tighten up credit a little bit. Has that been your experience or is that something that concerns you at all?

No. I mean so far Scott basically, in good times and bad times, CarMax out performances the rest of [lending portfolios]. And so, quite honestly this is the bread and butter for them and we haven’t seen any impact. And in fact, I think layering on the additional competition has actually helped our performance and they continue to buy us strongly as they ever have and approve us strongly as they ever have. Scott Ciccarelli - RBC Capital Markets: Okay. And have you guys ever disclosed what percentage of your sales come from subprime or is financed by some of your subprime vendors, or help us quantify that in some way, shape, form?

We have -- really we only have on one subprime vendor. What we are talking about is our non-prime vendors which are roughly a range of 15% to 20% depending on the time of the year. Scott Ciccarelli - RBC Capital Markets: Okay. Thank you, and then the last one is, you mentioned there were some cost differed from third quarter to fourth quarter. Is there anything outside of that $2 million to $3 million in [realize] any change in the advertising or is that really the only change that we saw in terms of their timing shift?

No, that’s really it. Scott Ciccarelli - RBC Capital Markets: Okay. Great, thanks a lot guys.

Thank you, Scott.

Your next question comes from the line of Matthew Fassler with Goldman Sachs. Matthew Fassler - Goldman Sachs: Thanks a lot and congratulations on a really nice quarter.

Thanks, Matt. Matthew Fassler - Goldman Sachs: I have a couple of questions I would like to ask you. First of all, as you think about wholesale, can you talk about any metrics you could share about the growth that you are seeing in either hit-rate on appraisals or the proportion of cars that you are now sourcing through your own buy side as opposed to auctions, that would also help us kind of understand the growth in the wholesale business?

Well, I think in terms of what we talked about before, we always said that roughly -- that a little more than half of what we retail, we buy through the appraisal link and we ultimately buy more cars than we sell. And as you know, everything that we buy through the appraisal link that doesn't meet our retail parameters is what goes to wholesale. So, we see a big increase in wholesale unit this year, 30% of our -- I mean a 30% of wholesale unit increase over last year. If you look at it for the whole nine months, it's 20% increase compared with the 16% increase in sales. So, we are going to grow wholesale units along with sales, and then we get some additional growth as appraisal traffic grows. And we had a particularly strong appraisal growth number here in the third quarter, which contributed to that. Matthew Fassler - Goldman Sachs: Is that needle of penetration of the proportions of cars that you sold actually, [buy through] your own appraisal process growing, you have kind of said roughly half or slightly more, is that needle moving meaningful higher at this stage?

Yes, it has been moving up pretty steady at a small amount. We have stuck to the more than half. I think when we hit a significant threshold we will let you know of it. There is some seasonality in that too, so it takes really a full year to see where that comes out. We'll see that number move throughout the year. Matthew Fassler - Goldman Sachs: Out of curiosity, are you more comfortable now buying cars, even though you know they are not going to be kind of CarMax quality cars given the success you have seen in wholesale and the backup?

Absolutely. Matthew Fassler - Goldman Sachs: If I could follow-up on that Tom, secondly it's your point to wholesale gross profit dollars per vehicle wholesaled hold up exceptionally well against a pretty tough comparing and they actually made the high number for the year. So, aside from kind of the penetration and the volumes, anything in particular helping to support the profitability of that business?

Well, we see a seasonal movement in wholesale pricing externally that we see every year. We have been at this for 13 years. I was in the wholesale business for three or four years. Before every fall, wholesale prices drop. Last year, we said we saw a more moderate drop, which makes it an easier -- kind of easier inventory management situation for us. And I think, we saw a similar moderation this year in terms of the drop from second quarter to third quarter, so that’s an external factor I think that was somewhat similar to last year and different than what it normally that may be helped us a little bit this third quarter. But I think it's largely driven by the refinements and how we buy and how we sell, and the attendance that we generate in our auctions, and the customer service that we provide in our auctions, I would attribute more of our strong performance to those factors. Matthew Fassler - Goldman Sachs: And then finally on CAF, you yourself made reference to the fact that couple of the more recent securitizations are showing kind of month-to-month metrics that are a little bit off, where their predecessors had been -- I understand then that you are kind of watching those really closely, curious if you have a sense as to what it is about those credits that is causing that to happen, and whether that relates all to, I guess this is the first time in sometime you haven’t had a few of the one time gains from CAF as you've adjusted some of your assumptions upward for gain on sales, is there a linkage between that and then just a little more color if you would on why I think those delinquencies are rising?

Much of that is actually planned Matt. We are always constantly trying to figure out how to drive more sales, and we are trying to figure out how to drive more sales through incremental approvals and CAF. And so, some of that is we changed our CAF scorecard which we've talked about a number of times and we have got some additional approvals out of that. So, some of the change in delinquencies, and some of those other metrics are actually planned. And each quarter, we kind of true-up the whole portfolio and make our best projection going forward. So, I think the fact that we didn’t have anything in either direction this quarter is an indication that, I think this quarter went about like we thought they would when we trued-it up last quarter. Matthew Fassler - Goldman Sachs: So, you would rather get the incremental top-line than book that penny for CAF if you would rather get to sales, understood. Thanks so much Tom

All right.

Your next question comes from the line of Rex Henderson with Raymond James. Rex Henderson - Raymond James: Good morning and my congratulations as well on a really spectacular quarter.

Thank you. Rex Henderson - Raymond James: Couple of follow-up question on CAF and the CAF income, we are seeing some slight deterioration of the delinquency rates, but the spread gain was really very strong this quarter. I am just wondering about where you see that going in the future in light of the credit quality trends?

I would let Keith answer that one.

It really kind of depends on two factors. One, first what does the Fed do, because our cost of funds tries, really actually is geared to what the Fed does and actually tries to guess what the Fed is going to do. And so what happened in the third quarter is where we had made some rate increases at the end of the second quarter anticipating that Fed might make a couple of more moves upwards. The Fed didn’t and in fact our costs of funds softened through the quarter which allowed us to over achieve our expectations. From a quality of earnings as Tom indicated, we've made some conscious decisions that in fact if you were at our Hartford meeting a year ago, we basically said, in hindsight, we were too conservative and we felt like we should be buying deeper. So, we put in a new scorecard, and our goal is to really achieve losses in the range of 2% to 2.5% which we think is very marketable prime portfolio, and we are very comfortable with where we are underwriting. So, the other factor that can affect us is what happens from a competitive perspective. If competitive rates decline then obviously when you look at the gain spread, we may have to react to those. We monitor that regularly based on payoff percentages that our customers tell us how effective we are in setting our rates. So, it could be changes in cost of funds, changes in competitive situation, but quite honestly I don’t see any change in the way we are buying or underwriting because we are very comfortable where we are right now. And I will state that the overall industry has seen an increase in both delinquencies and loss rates and our partners are seeing it, we are seeing it, but we are very comfortable with where we are at right now. Rex Henderson - Raymond James: Okay. Second question on the unit sale, I thought I heard you say that SUVs were a good category for you. I'm just wondering, what you are seeing in that, is that a big part of why the unit same-store sale comp was so strong. Did you see -- is it pricing an SUVs that is making them more affordable and therefore helping your comp or can you give me some color on that?

Well, I think that actually that's more of a reflection of how nimble we are in terms of being able to manage our overall inventory, along with consumer demand. And when you look at -- when I mentioned that earlier on the call, it's really in the comparison to last year the mix of SUVs and luxury vehicles and trucks compared to last year, because there was another consumer reaction to gas prices that impacted us in the third quarter last year. So, we are really just coming around on that, and it's really the comparison of mix this year compared to the mix last year. I wouldn’t say -- I mean that probably contributes a little bit more to ASP than it does to comp sales. Rex Henderson - Raymond James: Okay. All right, thank you very much.

You are welcome.

Your next question comes from the line of Sharon Zackfia with William Blair. Sharon Zackfia - William Blair: Hi good morning.

Hi Sharon. Sharon Zackfia - William Blair: How are you?

Good. How are you? Sharon Zackfia - William Blair: Good. Over the last year it definitely seems like there has been a major inflection point, and the consistency of your business, and certainly and the traffic that you are generating at the stores. Can you talk, and may be let us understand, kind of an order of importance, where do you think that inflection point has come from? Whether it's something you are doing in the stores on an execution standpoint? Whether it's the maturing of the immature stores? Whether it is the shift to more Internet ads and kind of help us figure out what's going on?

You have mentioned a few different things there Sharon and it's probably a combination of all. I think from an outside perceptive looking at our performance this year, it looks like an inflection point. But here at CarMax, it doesn’t feel like an inflection point. It feels like just continuous improvement in each of those areas. As we've mentioned in the first two quarters and was also true in the third quarter, the combination of external factors that normally can kind be all over the board, interest rates, gas prices, new car incentives. They have been relatively stable this year. They are relatively uneventful for the whole nine months. That just makes it easier for us to manage through our inventory and manage through the way we deliver the consumer offers. So, I wouldn’t really say there's any one particular thing. I feel like we have gotten a little bit better every year at just about everything we do. And I think what you see in the first nine months is all of those things coming together in what has turned out to be a somewhat favorable external environment for us. There really isn’t anyone thing there. Sharon Zackfia - William Blair: Okay. Last year in the second half, we talked a lot about the hurricane impact on wholesale sales and how we shouldn’t expect that to be replicated again. I mean is there anything happening in the first nine months of this year that you would caution us, is kind of unsustainable and we should then expect to benefit you on an ongoing basis?

I am not sure I would caution that anything is unsustainable, but what I would remind of is that we are managing the business in total and we are managing it for the long haul. So, we are now looking at wholesale profit in a vacuum. We don’t look at cash profit in a vacuum. We don’t look at gross profit or SG&A in a vacuum. We look at the entire business in as a whole and we look at where we are trying to go for the next five to ten years. We are trying to build the national retailer, we are trying to grow our comp store sales every year and we are trying to continue to invest in the business to continuously improve every area of it. So, each year when we sit down and we try to decide what we are going to do the next year, it's a combination of all those factors and we never look at any one of them and say, lets go drive wholesale profits regardless of the impact it has on something else or lets go drive CAF profit regardless of the impact it has on sales. So, it's been great and terrific for us this year that all of those things have gone exceptionally well, but I would just -- the only caution I'd give you is, as we look at it as total business and where are we trying to go for the next five to ten years. Sharon Zackfia - William Blair: Okay. And then my last question. If you parse out mature versus immature stores, are you seeing the mature stores also accelerate and their comp sales or are we mainly seeing kind of an immature benefit kick-in to the comp?

I’m not sure of what your definition of mature and immature is? Sharon Zackfia - William Blair: But I think your definition had been over four years.

About four or five years. Sharon Zackfia - William Blair: According to the white paper several years ago, and however you want to define it define.

Yes. Well for the first nine months I would say it has been pretty consistently strong across the whole chain. Sharon Zackfia - William Blair: So you have seen an acceleration across the Board.

I’m sorry. Sharon Zackfia - William Blair: So you have seen an acceleration on the comp stores as well.

Well, it's a little bit of an acceleration from a couple of the years prior and this quarter was particularly strong. But we have said 8% to 9% for the year and we set our long-term comps growth strategy -- growth plan is 4% to 8%. So, we are -- it looks like we will come out at the high end of that range this year. But again we're looking at what are we going to do over the next five to ten years. So, this year has been terrific and I think it has been relatively somewhat evenly spread I think across the different types of stores that we have. Sharon Zackfia - William Blair: Okay. Thanks.

Your next question comes from the line of Hardy Bowen with Arnhold & Bleichroeder.

Hey, that was as close as they usually get. Hardy Bowen - Arnhold & Bleichroeder: Right. It's fantastic. We are going to record that one and repeat it. Do you plan to spend more on the Internet in next year or can you really not spend it anymore, is it not profitable to do so? And do you see this is something that’s very successful?

If you have ever worked with a marketing department, Hardy, you can always spend more and I think that’s true on the Internet as well. But we talked about the shift in spend this year away from newspaper towards the Internet. We are pleased so far with the results but it has only been nine months. And I know that feels like a long time, but in terms of really reading the results, it will take a little longer. So, we're heading into the fourth quarter this year. We will evaluating all of our different advertising options for next year and certainly the Internet will be a big part of it. I wouldn’t be able to say right now that we are going to -- what are we going to do for spending, how much is it going to go up? But we're certainly pleased with the results thus far. Hardy Bowen - Arnhold & Bleichroeder: And I presume that we have more customers coming through the door that are coming off of carmax.com at this point in time. Does this improve the close rates? Do you find that happening?

Well again, before we made the shift to Internet spending, each year, more customers who walked through the door had been on carmax.com. So, that’s not like a new -- that’s not a big shift in terms of the customer flow. The customer flow has moved every year more and more towards being internet savvy, more and more towards having done some research before they showed up at the store and we've seen that continue along and that was one of the main reasons we shifted our advertising. In terms of whether or not that improves the close rate, we have a number of different things that we're always working on, I think that’s one of the factors that helps. Hardy Bowen - Arnhold & Bleichroeder: Do you think as we spread units out across the country and have more the customers coming off the internet, the locations or the volume is less sensitive to a great location than it was three years ago, or do you think that’s not the case?

I wish that was the case because then we could go by cheaper sites, but I am not sure that will ever be the case. I think location is always important when you are a retailer, and I think it will continue to be. But if we -- it's not always easy to go and build a big huge used car store. It's not easy to get zoning. So, we have some locations that are less than ideal because that was the only thing we were able to get. So, one of the things we are able to do is, is try to kind of assess what we think would be A plus locations and what we think are kind of B and C locations that we already have in the chain and look at the results there and see if that shifts with movement towards the Internet and maybe that will help us with site selection going forward. But, I think, if we had our choice we would take great a site ten times out of ten. Hardy Bowen - Arnhold & Bleichroeder: Do you think about acquiring property farther ahead of time at this point in time and try to move the expansion rate up, Tom, over the next couple of years?

Well, I think, we have to buy property ahead of our expansion plan just because it's such a long process to get a store open between finding a site, making sure the zoning is in place, getting the store built. That’s a two to three year process for us. So, we don't have any plans right now to increase the speed at which we expand. But in terms of being out in front of it, we have got to be three to five years out in front anyway just to deliver the plan that we have. Hardy Bowen - Arnhold & Bleichroeder: Right. Okay, that’s a great result.

Thank you.

Your next question comes from the line Brian Nagel with UBS. Brian Nagel - UBS: Hi, good morning.

Good morning, Brian. Brian Nagel - UBS: Congratulations on a very good quarter. My question pertains to sales trends, if you could just comment upon maybe the comp trends through the quarter as well as give us some highlights geographically how you may have performed in different regions of the country? Thank you.

We are not going to give any flavor to the quarter. We are going to talk about the quarter in totality and not month-to-month, and we have never discussed our regional performance. Brian Nagel - UBS: Okay. I'll try my second question. How would you -- as you look out at the competitive environment, how would you characterize it right now versus prior years, particularly with respect to some of the traditional new car dealers that are selling used cars?

I would say that it is not really much different. If you look at our comp performance again for the first three quarters of this year, if you look at our comp performance compared to the average of the publicly traded, of the five or six public new car guys, we have continued to gain share regardless of the environment. I think we have built a business that performs well regardless of the external factors that we face, and I think that’s been true again this year. So, competitively I don’t think we have seen a huge difference out there. And if we do, it is regional or it is on a location-by-location basis and it's not consistent across any one competitor nationally. Brian Nagel - UBS: Okay, congratulations again and good luck for the coming quarters.

Thank you.

Your next question comes from the line of Bill Armstrong with C.L. King & Associates. Bill Armstrong - C.L. King & Associates: Good morning, I'll also add my congratulations. I guess one surprising metric was your wholesale -- your gross profit for wholesale vehicle being up from a big quarter a year ago. How do you think you are able to do that?

Well. As I mentioned earlier, I think the external wholesale environment was somewhat favorable this year for the second year in a row. So I think that’s one piece. But again, I would just attribute it to -- we continue to get a better understanding of how to buy better in the appraisal link and we continue to refine our in-store auction process and I have talked about this before. The auction business is a customer service business. It’s a different set of customers than what we see in retail, but those customers have choice and I think we are the best choice out there for the customers that look for the type of product that we sell. We survey our customers every year and we try to see how we are doing from a customer’s service perspective. Our attendance is the highest ratio in the industry with one dealer roughly for every two cars that we run compared to around one for every six. Our flow of units has been extremely consistent, if you go to one of our sales whether it’s a bi-weekly auction or a weekly auction, we have a consistent flow of inventory through there. We run a 98.5% sales rate through our auctions, so if you are the top bidder you get the car. And all of those things together over a very long consistent period of time, I think have contributed to us getting better and better and better at that business. We have talked a bunch about this quarter being a tough comparison and we have talked about it at the beginning of the year and said we didn’t think we would be able to comp it. So, we are very pleased that we're able to do that, and I think, it's just a reflection of the -- again the refinements in our business and how good we have gotten at it. Bill Armstrong - C.L. King & Associates: Your fourth quarter gross profit for wholesale vehicle comparison is even more difficult. Are you expecting a year-over-year decline in that figure?

The fourth quarter actually historically is usually our best quarter in wholesale. One of the reasons we are so nervous about the third quarter this year is because generally the third quarter is our worst quarter in wholesale and that we kind of bucked the trend last year with a good quarter, we are pleased to do it again this year. But the comparison in the fourth quarter is actually less -- makes us less nervous than the comparison did in the third quarter because that has historically been our best quarter. Bill Armstrong - C.L. King & Associates: Right got it. Did you do any step-up in marketing in order to drive appraisal traffic during the quarter?

No. We are in the same marketing program. We are always testing different things in marketing. So, when I say no, that we are always running different types of things on the Internet, different things in terms of points of TV and how much radio we run, and we are always dividing stores into different categories and running them for lengths of time to see what the impact is, and this quarter was no different than any other in terms of running all those tests. But in terms of a specific up-test in appraisals, no. Bill Armstrong - C.L. King & Associates: Okay. As far as subprime and non-prime customers, was there any material increase in sales to those customers that might have accounted for some portion of that 13% comp that you'd generated?

Did you say subprime and non-prime? Bill Armstrong - C.L. King & Associates: Yes.

Subprime as we said earlier is -- Bill Armstrong - C.L. King & Associates: Was the (inaudible) financial business generated from those kinds of customers that helped contribute to that big comp store increase that you had?

No. It was -- it's a spread across prime and non-prime and as Keith mentioned earlier, we virtually do know subprime whatsoever.

And in fact, subprime was down 2% for the quarter. We think that was largely offset by our non-prime lenders that we added during the years. So, the truth is that is fairly consistent.

Right, that's a good point. If you remember we've talked about drive a bunch over the last two years. The drive's comparison which is really the only subprime offering that we have in the store, this year's third quarter compared to last year's third quarter we were down 2% on drive. So, but as Keith mentioned, we think we largely made that up in the other non-primes. Bill Armstrong - C.L. King & Associates: Okay. Are you looking to replace drive and try to get some more of that subprime business?

We are still testing with drive. But we don’t -- we haven't identified any other subprime lenders at this point.

The only other thing I would add is, we are always looking to add to the offering for our consumer, and so we are looking at any alternative available to us to add an additional lender that can add incremental approvals to the consumer. Bill Armstrong - C.L. King & Associates: Right, how many non-prime lenders do you have now?

Six. Bill Armstrong - C.L. King & Associates: Six, okay. Last question, gas prices, look like they are starting to creep up again, do you have a lot of SUVs and trucks in the inventory, and do you have any concerns regarding that, those high gas guzzler type of vehicle sales going forward?

Well, we always have a lot of SUVs and trucks, we kind of have a lot of everything and I think what's been great is I think we have proven that we can manage our inventories through almost any environment, and it would take an awfully big spike in gas prices for us to think that it would have an impact on inventory mix, the way it has in the past. I think what we saw after Katrina the first time, when we had a really big spike in gas prices, and we saw a dramatic impact on our mix. Since then, the fluctuations in gas prices have been far or less impact-full on our actual mix of sales. So, even if they creep up just a little bit, I just don’t feel like the consumer is going to respond as dramatically as they did in the past. Bill Armstrong - C.L. King & Associates: Okay. Thanks and good luck for the fourth quarter.

Thank you.

Your next question comes from the line of Matt Nemer with Thomas Weisel Partners. Matt Nemer - Thomas Weisel Partners: Good morning everyone.

Good morning. Matt Nemer - Thomas Weisel Partners: Good morning. A couple of questions. First, can you -- the change in Internet traffic, is that attributable to AutoTrader and cars.com or is that more page search, or how can you -- can you help break that out for us?

We haven't -- we don’t attribute it the -- we haven't broken down the increase specifically to those different categories. Before we shifted at the beginning of the year, we had pretty good traffic increases on our website. Our website now gets over 4 million hits a month, and that has increased during the year, and I’m sure some of it is attributed to AutoTrader.com and cars.com but some of it's also Google and Yahoo! So, I think is a combination of all those factors. But I would like to point out the number one source of traffic on our website is people going on and typing CarMax directly in. Far and away that's the biggest source of traffic, and we've seen that piece increase as well. Matt Nemer - Thomas Weisel Partners: Okay and then just to follow-up to that, I’m sure you track your marketing cost per vehicle's retail. I’m just wondering how that’s trended and maybe give us some context of how that compares to what you're spending at your new vehicle stores?

Yes. I don’t think we've talked about cost per vehicle.

Please see it at the Annual Report.

Please read the Annual Report. We didn’t -- when we talked about the shift this year, it was more of a shift in spend not an increase in spend. And what we had planned for the year was to run our cost per car sold roughly flat for the year. We are probably, I mean I haven’t actually looked at it, but I'd say we might be just a tad ahead of that because of the big comp number this quarter. But in terms of what did we expect for the year, we expect it to run flat. Matt Nemer - Thomas Weisel Partners: Got it. And then moving onto the wholesale business, have there been any change in buyer fees in that business?

I don’t recall it for me to change this year. But I'll just tell you that we run a Buy Fee program that's very similar to any other auctions, so it's graduated based on the price of the car, and as the external competitive environment has moved, we've kind of moved along with it. So, every year we evaluate that fee and we make some subtle adjustments on different categories of car, and I think we've had a slight increase this year, but it's not been dramatic. Matt Nemer - Thomas Weisel Partners: Okay, and there is no -- there aren’t, have you been adding any ancillary services there or is it still pretty basic, sell the car, there's not transportation or other add-on fees, are there?

The one thing we have added Matt is, we have our finance source available for wholesalers. It's called AFC and it's an arm of ADESA Corporation and they are available in almost everyone -- I think they are available on every one of our auctions. So, dealers can sign up and get financing on wholesale product lines. Its not that they didn’t have those sources available to them before, they just weren’t available on-site, we didn’t have the funding set up as easily between us and ASC and we've made a lot of refinements in that over the last two years. And AFC is a great partner for us and they have done a great job. So, that’s one change, but that has really been kind of slowly coming over the last two years. It's not a dramatic thing that changed this year. That’s the only other offering we have other than the great service and the 98.5% sale rate that I mentioned earlier. Matt Nemer - Thomas Weisel Partners: Okay. That’s helpful.

We’ve always given free donuts.

Is it fair that to say that the price stability has been driven somewhat by the change in the way the model your change ever happens? I think it seems like it's less pronounced in the back half of the year that OEMs are now introducing new vehicles all year long. It's not a seasonal.

You mean for wholesale pricing? Matt Nemer - Thomas Weisel Partners: Yes.

Yes. I think that might be a factor but I wouldn’t plan on it again next year. I just -- I feel like every fall, prices drop and I think they will again next year. And its not that they didn’t drop this year, it was just a little more, a little less precipitous than it normally is. So, I think that has kind of offset it, somewhat but I still expect the fall to be a drop-off in wholesale pricing as we see every year. Matt Nemer - Thomas Weisel Partners: Got it. And then my last question is with regards to the Atlanta buying center, now that’s been open about half a year. Can you give us any flavor as to how that’s doing? Whether you will open more, may be the impact it's having on the local, the others stores in that market?

Yes. Six months still isn’t a very long time for us to really read incrementality of the appraisals and purchases we are getting to the store, largely because we have such a big presence in Atlanta with our other four stores. But on the last call, I said, we are going to open two or three more of these things before we really make a decision about the long-term viability of the concept. So, my guess is we will get a couple more opened next year. We haven't announced it yet, but we have announced where they will be, because we are still -- we are working on a number of different options. But in terms of making a long-term decision about the car buying center, we are always away from that. But we are pleased with the result of Atlanta so far. Matt Nemer - Thomas Weisel Partners: Okay, great. Thanks very much and happy holidays.

All right. Same to you.

(Operator Instructions). Your next question comes from the line Edward Yruma with J.P. Morgan Chase. Edward Yruma - J.P. Morgan Chase: Hi. Congratulations on a great quarter.

Thank you. Edward Yruma - J.P. Morgan Chase: I was wondering if you can give us a quick update, I believe the testing in your hybrid production system? Have you been able to ring cost out of the system and do you expect to roll that out in other stores?

What do you mean by that? Edward Yruma - J.P. Morgan Chase: I believe where you are making I guess certain service steps specialized in specific areas, you were testing at Laurel, I believe?

Yes, well actually not at Laurel, but we are doing a number of different things in terms of continuing to improve efficiency through our reconditioning process. And again that's a continuous process for us. We will be working on it for the rest of our life trying to improve quality, reduce cost and do it faster and do all those three things at the same which don't always go very well together. So, we don't have any specific results to report out of that. I'll just tell you that in terms of those three things speed, quality and cost reduction, we will always be working on those three things, and I think we have made significant improvements since we started and I expect to continue to make improvements over time. Edward Yruma - J.P. Morgan Chase: Great, thank you very much.

You are welcome.

Your next question comes from the line of Brad Thomas with Lehman Brothers Brad Thomas - Lehman Brothers: Thank you. First of all I would like to add my congratulations as well. It has really been a great year for you all.

Thanks Brad. Brad Thomas - Lehman Brothers: I just wanted to get maybe some initial thoughts on 2007, in particular, maybe if you could talk a little bit about, the possibility for more SG&A leverage and then what kind of opportunities you think you still have on the gross profit per vehicle fronts?

We will talk about 2007 at the end of this year. Brad Thomas - Lehman Brothers: Okay, fair enough. Maybe just one last question on 2007, if possible in terms of the store openings, can you give us a sense if you think it will be skewed or more of a balanced opening schedule?

I think I have said -- that is actually eight in the first half and five in the second half or five in the -- five in the fist half and eight in the second half. But I would caution you, we tell you what we expect for the year, we expect 15% to 20% store growth, but I will reiterate what I said about the business in total. We are looking for 15% to 20% store growth for the next 10 years and if things more around during the year, or they move from one quarter to the next, that is not as important to us as it is to deliver the consistent sustainable growth that we talked about. So, we told you what we think is going to happen next year, I fully expect there to be some movement within the year, as there always is with constructions and delays and weather and all the other challenges that we face. Brad Thomas - Lehman Brothers: Okay, great. Well, all my other questions has been answered and congrats again.

Thank you.

Your next question comes from the line of [Willis Taylor with Gagnon and Security]. Willis Taylor- Gagnon and Security: Hi, I was wondering if you could talk about how you are bringing together all the different types of adds that you are doing to build your brand over the long term and how your ability to do that will change as you grow in size?

Well, one of the things that I think you try to do as a retailer is have a consistent theme throughout all the different mediums of advertising, and I think we have tried to make some progress there. So, if you look at the messages that we deliver, so if we are trying to deliver a ''we buy cars'' message, or a ''money back guarantee,'' or a ''big selection'' or ''guaranteed quality,'' you'll see that theme kind of woven throughout. If we are running radio, and we are running a little bit of TV, and we have the internet going, and we have some -- if we have print in some markets, you will see consistent theme throughout that. We’ll also try to carry that theme in to the store with our store signage. So, over the course of a three-month period, you may see that theme match up in the stores. But in terms of bringing it all together, we have a consistent set of messages that we try to deliver and we try to match them up across the different mediums. I hope that answers your question. Willis Taylor- Gagnon and Security: Yes, that’s helpful, and you are doing regional advertising in some areas now?

Well, all of our advertising is regional. We are not a national advertiser yet. So everything that we -- every type of program that we run is specific to the market that it is in. So Richmond could be run in a different program than rally is, and what we’ll do is kind of lump together a set of stores not necessarily by regions, but by a number of different factors and run a similar program. So, we maybe running in terms of a broad program a number of different programs divided amongst the 74 stores and we’ll do that consistently for several months so that we can read the results and see if some combination of factors helps drive traffic and sales. Willis Taylor- Gagnon and Security: Okay. Thank you.

Thank you.

At this time, there are no further questions. Are there any closing remarks?

No, just happy holidays to everyone. I want to once again -- I know we have lots of CarMax Associates on the call, I want to thank all of you for your hard work and dedication, and we will talk to you next quarter. Thanks again.

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