Katharine Kenny – Vice President, Investor Relations Thomas J. Folliard - President and Chief Executive Officer Keith Browning - Chief Financial Officer

Rod Lache – Deutsche Bank Securities Brian Nagel – Oppenheimer & Co. Rex Henderson – Raymond James Sharon Zackfia – William Blair & Company Analyst for Matthew Fassler – Goldman Sachs Himanshu Patel – J.P. Morgan Bill Armstrong – CL King & Associates Craig Kennison - Robert W. Baird & Co. Sam Yake – BGB Securities Scot Ciccarelli – RBC Capital Markets Rich Kwas - Wachovia Capital Markets Gentry Klein - Littlejohn & Co.

At this time I would like to welcome everyone to the first quarter FY2010 conference call. (Operator Instructions) I would now like to turn the call over to Ms. Kenny.

Thank you. Good morning. Thanks for joining our fiscal 2010 first quarter earnings conference call. On the call with me today are Tom Folliard, our President and Chief Executive Officer, and Keith Browning, our Executive Vice President and Chief Financial Officer. Before we begin, 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 that 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 2009 filed with the SEC. Thomas J. Folliard: Good morning and welcome to our first quarter conference call. Despite the difficult economic conditions, we are pleased to report some signs of improvement in our fiscal 2010 first quarter results. While it is difficult for me to call negative 17% used unit comps an improvement, it was certainly a sequential step in the right direction after a negative 26% comps in the fourth quarter of fiscal 2009. The majority of this improvement was due to better sales execution, although traffic did increase modestly during the quarter. Given the weak environment and the fact that we have temporarily suspended store growth, we are focused even more on enhancing our execution, both in the store and with leads generated online. Regarding cash, we complete a $1.0 billion securitization in April. As projected, we took a CAF [CarMax Auto Financing] adjustment this quarter related to higher funding costs. This was partially offset by a positive movement in market valuations on our sub bonds. We had no material adjustments related to any of our loss assumptions. Keith will give you some more detail in a few minutes on CAF. Now let me review some of our key financial results. First, sales: In the first quarter total sales decreased 17% to $1.83 billion compared with $2.21 billion in the first quarter of fiscal 2009; Used vehicle revenues decreased 15% for the quarter due to the combination of a 13% decrease in unit sales and a 2% decrease in average selling price; Year-over-year we saw a recovery in SUVs as a percentage of sales. SUVs increased by approximately 7% whereas compact and mid-sized cars and trucks decreased by about 5%; Wholesale revenues decreased by about 29% as units fell by 25% and average selling price declined by 6%; While our appraisal traffic remained law our buy rate did improve compared to the first quarter of last year, partially due to improved industry wholesale prices which allowed us to make more attractive offers to customers. On to gross profit: In the first quarter our total gross profit per unit increased by $347 to $2,911 dollars compared with $2,564 in the first quarter of last year; Used vehicle gross profit per unit increased by $259 to $2,001 from $1,742 in the first quarter of fiscal 2009. This was partially a reflection of the abnormally low gross profit recorded last year but other contributors included this year's more favorable wholesale marketplace and the early success of our efforts to shrink reconditioning costs. We estimate the cost reduction in reconditioning was approximately $100 per car. Wholesale gross profit per unit grew to $904 this quarter from $784 last year, also due to the improved wholesale environment and the continuation of strong dealer-to-car ratios at our auctions. On the CarMax Auto Finance, I'll ask Keith to add some confusion to the results that we reported this morning.

We previously announced the first quarter earnings at CAF would be negatively impacted by higher funding comps of between $60.0 million and $85.0 million related to the $1.2 billion outstanding in the warehouse facility at fiscal year end. However, due to significantly improved credit spreads recently evidenced in the market for sub bonds, the adjustment totaled approximately $58.0 million, slightly below the bottom of this previously estimated range. In addition, we recorded a favorable mark-to-market adjustment on the bonds we held from securitizations completed in calendar of 2008 of approximately $12.0 million. This adjustment, combined with others, principally a decrease in prepayment speed assumptions, resulted in an overall favorable adjustment of over $17.0 million. Current period CAF income decreased from last year due to a variety of factors, including higher estimated warehouse credit enhancement levels and facility funding costs that we will expect will be required when we renew or replace this facility in July; CarMax's lower sales; CAF's lower penetration; and a higher discount rate assumption. During the quarter we continued to slow the overall rate of CAF originations by routing more credit applications to our third-party lenders, as well as tightening standards for some consumer segments. Although this strategy had a modestly negative impact on comparable store sales, we believe it is imprudent to operate at a lower origination rate until we have more clarity in those credit market trends. At May 31, [2009], we had $636.0 million of capacity utilized in the warehouse facility. Now I will turn the call back over to Tom. Thomas J. Folliard: On our SG&A, net of the impact of litigation adjustments, first quarter SG&A expenses fell by approximately $22.0 million compared to the first quarter of last year. SG&A expenses fell as a result of a number of factors, including the elimination of costs related to growth such as relocation and preopening, a reduction in advertising expense, and a decrease in variable selling expenses. Net income decreased slightly to $28.7 million from $29.6 million in last year's first quarter. Dilute EPS was $0.13 for both quarters. Let me just summarize by saying that we're pleased with the progress we've made on our key initiatives, including increasing operational effectiveness and reducing waste. We are also pleased with our overall performance during the worst environment our company has ever experienced. During this time we have been able to maintain our gross profit while still offering great values to our customers. We have reduced advertising expense while still developing some new well-received campaigns, focused on CarMax's superior consumer offer. We have utilized our unique inventory management and car-buying systems to respond quickly to changes in wholesale values and customer demand and aggressively manage our inventory levels accordingly. And we've also continued to reduce overhead to adapt to our temporarily reduced sales level. We are intensely focused on continuing improvement in all of these areas and on making permanent business enhancements that will serve us well in all economic environments. In closing, let me thank all of you for your interest and support of CarMax, but most importantly, I would like to thank our over 13,000 CarMax associates for all that they do every day. Now we would be happy to take your questions.

(Operator Instructions) Your first question comes from Rod Lache – Deutsche Bank Securities. Rod Lache – Deutsche Bank Securities: I guess first a couple of questions on CAF. Can you just roughly go through the math on this 0.7% gain? What kind of provisions and what kind of warehouse cost of funds you're assuming now? And also, you had a 16.5% credit enhancement in the last securitization. Talk a little bit about the capital required to support the business going forward, whether you see any opportunities to sell subordinated tranches. And then just lastly, any thoughts, preliminary thoughts, on the impact of the financial overhaul on CAF?

That was one question, right Rod?

As far as current period originations, we did have to make an estimate. We looked at what our last public securitization was and incorporated that as part of the estimate, as well as looking at our current status of negotiations on renewing or replacing the conduit. And so it was really split into almost 50/50 an increase in impact on the gain percent from the higher enhancement levels that we think we'll have pay. We don't know what those are yet and so we're not comfortable in disclosing how much they are. And we also estimate that the cost of the facility itself will be up about 150 basis points so it's really kind of the combination of those two pieces that drove the gain percentage down. And as far as outlook, I guess what I would say is that there is positive outlook in the fact that the spreads did come down on sub bonds. We don't know whether they will continue to decline or not but it does give us some hope that there may be a market in the future for those. But the same reason why we slowed down originations is that we are allowing ourselves time for the market to continue to correct itself and try to make sure that we can sustain CAF because it's critical to our operations and we will see what the market brings to us. But right now we are kind of cautiously optimistic, I guess. The government regulations, I have taken a quick look at it. Quite honestly, CAF is a finance company and currently is governed by all the states. That will continue. I think that there is likely to be some spill-over effect on CAF from just the overall regulations that are going to impact the banks and the non-banks and that also CAF will fall under the purview of the new consumer financial protection agency. And the impact of all of this remains to be seen because it's just a proposal right now and we'll just have to wait and see. But that's my current top-level view. Rod Lache – Deutsche Bank Securities: If you were unable to, if you record gain on sale, would you think that, from an accounting perspective, you would restate history and bring everything back on balance sheet or would that sort of be a clean break? Do you have any preliminary thoughts on that?

Just so you know, also the FASB has already issued 166 and 167 which are restatements for the old gain on sale proposals of 140 and FIN 46. So there's already a requirement that's going to be imposed on CarMax to change its accounting starting next fiscal year. So regardless of this agency, it looks like we will most likely not be able to do gain on sale accounting beginning next fiscal year. Whether we can restate or not and what the impact is, those are two very big documents and we are currently waiting. There is a very recent pronouncement that came out earlier this month. And so when we're ready we'll try to help people understand but in all likelihood all of the receivables will go on the balance sheet and that will earn income over the life of the loans. Rod Lache – Deutsche Bank Securities: Any thoughts on the Clunkers Bill and sustainability of the grosses? Thomas J. Folliard: We saw the bill pass yesterday and it's gone through various changes but the bill that looks like it will go through is down to $1.0 billion. It ends at the end of September. The average incentive is around $4,000. So I think the amount of potential impacted sales has come down pretty significantly. But in our history, when there have been incentives that have driven consumer demand and brought people out into the marketplace, we have historically benefitted. If you go back to the zero-zero-zero promotion after 9/11, it drew a bunch of people into the market. Some of those people found out that the incentives didn't work quite right for them. We ended up having the best positive comp we've ever had in the history of the company, at positive 29%. And then the next big incentive that worked was the employee pricing a couple of summers later. And I think many folks thought that we would suffer because of that incentive but when consumers are driven into the marketplace, I think many are driven out there that think this incentive might work for them but then they get excited about buying a car and our history has been we've benefited from any incentive that has driven consumers into the marketplace.

Your next question comes from Brian Nagel – Oppenheimer & Co. Brian Nagel – Oppenheimer & Co.: Tom, more of a strategic question to start off, but as we look at what's happening in your industry, an obviously very fluid situation, but with the dealer closings and potential dealer closings, how do you think those impact CarMax intermediate or longer term? Thomas J. Folliard: Well, until we really see where the closures are and what ultimately becomes of those dealers, it's difficult to say what the impact will be on us. I will tell you that I'm very confident in our consumer offer. I think it has proven to be superior. I think we have proven to be the market share winner in every market that we operate in. And we have always said that our biggest competition are new car dealers who also sell used cars and you would have to believe that there will be less of those when this is all said and done. So I think there is a case to be made that it could potentially be a positive for us. But either way I have a lot of confidence in our consumer offer and our ability to navigate through it. Brian Nagel – Oppenheimer & Co.: We did see a sequential improvement in Q4 to Q1, your sales. Can you give us an indication of how sales in the quarter tracked? Thomas J. Folliard: We're not going to talk about sales through the quarter, but obviously as the quarter finished up and we were going against the positive 1 comp, we ended up better than we did in the fourth quarter. Brian Nagel – Oppenheimer & Co.: You mentioned in the press release and again in your prepared comments about the benefits about some of the cost initiatives in your reconditioning process. I know that this is something you've talked about for a while and I just want to see how far along are we in this, in sort of say, realizing the benefits of this? Thomas J. Folliard: Well, it's a long-term initiative for us. I expect to get benefits over a very long period of time. We are pleased that over the last year we've been able to pull out approximately $100 in costs on a cost-per-car basis and our quality scores have actually gone up during that same time. So we are pleased so far with the results but it's a big deal for us. There's a lot of process, there's a lot of people, there's a lot of labor involved and I just think it's more of a marathon than it is a sprint. And I couldn't really give you an estimate of what the long-term benefits are but I feel really good about we've done so far. Brian Nagel – Oppenheimer & Co.: A $100 on a base of how much you typically spend on a car for reconditioning? Thomas J. Folliard: Well, it's $100 on around $1,500.

Your next question comes from Rex Henderson – Raymond James. Rex Henderson – Raymond James: Keith, could you give me a little color on the carrying value of the subordinated tranches on the balance sheet now, and kind of how much discount is built into that now?

Rex, give us a call, we'll follow up with you. Rex Henderson – Raymond James: Tom, in the past you've talked a little bit about market share and I was just wondering kind of what you saw in terms of market share this quarter. I know last quarter you said you thought you lost a little bit. How did that track this quarter? Thomas J. Folliard: You know, one of the difficulties that we've talked about is how kind of sketchy the data is around market share. We actually only have data through April so we don't even have data yet through the quarter. The reason we had it at the end of the first quarter is because there is a big delay for our year-end announcement so therefore we had it through February. In this case we only have it through April. And it's so volatile, we're going to move towards talking about market share on an annual basis. I will tell you, however, that we have seen some positive signs in the data, with an indication that we grew some share in April. But I hesitate to put a lot of reliance on this because the period covered is just too short. And so there's just a lot of inherent volatility around short-term data. And going forward, we're going to talk about market share on an annual basis.

Your next question comes from Sharon Zackfia – William Blair & Company. Sharon Zackfia – William Blair & Company: Tom, on execution, is that really just a function of volume to growth and how then move some of your managers in training to sales people and so on, or is there something more going on there with systems? Can you give us some idea on whether the conversions picked up some? Thomas J. Folliard: I can tell you that it's a difficult thing for us to put one explanation for our conversion going up. We are obviously very pleased that we are getting some execution improvement. We have some increased focus on new training programs that we have out there for our sales consultants and our sales managers and we feel like we're getting some early nice results from that. There's also some theory that in this economy we are really not seeing the just shoppers or tire kickers and that if customers show up at the store they are a little bit more serious about buying cars than maybe they were in the past and that could help some. We have been able to build our inventory, which we said at the end of the fourth quarter we had gotten a little behind. We have made quite a bit of progress there so I think that also helped conversion. We still have great availability of credit at CarMax and I think that message has gotten out there a little bit better. We have had some nice pickup from our advertising campaign that have really focused on the economy and the recession and why CarMax is a smart place to buy. So I don't really think it's one thing; I think it's a number of different things. Sharon Zackfia – William Blair & Company: On the advertising spend, which you've curtailed, is that a timing issue or should we expect a curtailment all year? How is that affecting your impressions? I think you can get more bang for your buck these days, so I guess I'm asking how much less visible are you out there for the public as well? Thomas J. Folliard: One thing we have been able to measure in the past is what's called share of voice, so despite the fact that we're down, our competitors are down as well. And we don't have the data for the first quarter. I hope we spend more money on advertising through the year. I hope that sales come back in a way that allows us to spend more money on advertising. If that doesn't happen, however, the savings that we saw in the first quarter are absolutely sustainable. And we are going to continue to measure that share of voice and make sure that we are being heard in a scale that's bigger than the competition. And from the fourth quarter we felt like that was true. Sharon Zackfia – William Blair & Company: And on the warehouse renewal, are you going to have the same size warehouse or is that in flux as well? Thomas J. Folliard: We're in the midst of still working on that and as soon as we have that answer we will let everybody know. I will tell you that we probably don't need as big a warehouse as we had before, with lower sales and no growth so we want to size the warehouse accordingly with our needs. You know, a bigger warehouse costs us more money so we will take that into account. Sharon Zackfia – William Blair & Company: Any chance you want to comment on June? Thomas J. Folliard: No. But thank you for asking.

Your next question comes from Analyst for Matthew Fassler – Goldman Sachs. Analyst for Matthew Fassler – Goldman Sachs: Just two quick questions. First, conceptually, what is the capacity to finance the sub bonds retained on the balance sheet longer term, if you had to do it? And also could you be using the proceeds from loans rolling off to do so? The other thing is could you give us more color around the increase in service revenues and why there was higher service-related customer traffic?

The capacity, as we've indicated at the enhancement levels of our last public deal was something that is not sustainable for the long term. We could certainly continue to originate for the next year. It's one of the reasons why we have dialed back our originations and why we have made adjustments in our overall origination strategy and done some credit tightening. So like I said earlier, we are optimistic that the market is moving favorably but we are holding back just to make sure that we can ride it out and that we can continue to keep CAF running. Thomas J. Folliard: I'll comment on the service revenue. It's really largely consumer-driven. We haven't been running like an aggressive campaign to drive additional service revenue. The fact that our service revenue is up is I think is a combination of maybe some people keeping their cars a little bit longer and the fact that we have more capacity in our stores because of our lower sales volume. So, that makes a difference in getting people in for an appointment. If somebody calls for an appointment and you can't see them for five days or somebody calls in and you can see them right away, then that makes a difference in your revenues.

Your next question comes from Himanshu Patel – J.P. Morgan. Himanshu Patel – J.P. Morgan: What is your outlook on wholesale volumes now that traffic on the used retail side seems to be at least stabilizing? And this spread between used retail volumes and new car sales, I know new is pretty small for you, but it's gotten pretty wide in the last couple of quarters. I'm just wondering if you have thoughts on what that sort of implies? Do you think there is a general trade down happening where consumers are leaving the used car market and moving towards used or would you actually say that this is perhaps indicative of kind of a broader recovery and what's happening in the used car market now is sort of eventually going to show up on the new car market as well? Thomas J. Folliard: I didn't really get that question. Are you asking about the spread in pricing between our average retails and? Himanshu Patel – J.P. Morgan: Just volumes. If you look this quarter, you know, your volumes on used retail were down 13%. I think industry new car sales in the comparable months were down about 42%. Last quarter your volumes on used retail were down 21%, the industry new volumes were down, again, about 38% during that period. So clearly used is outperforming new and it's outperforming by even a greater degree this quarter and I'm just wondering if you had some color on what that may indicate. Thomas J. Folliard: I really couldn't say on that. It doesn't feel like outperformance to us when we continue to run negative comps. So I think the fact that used cars are performing less bad than new cars, I guess is a plus. But there's a lot more used cars sold. It's a lower price range. I think there are some indications that some people who maybe would have bought a new car are buying a used car but when new car run rates right now hit a half million, there's just not as many customers out there buying cars to begin with. So maybe there is a little bit of a shift but again, both used and new are negative. Himanshu Patel – J.P. Morgan: On the first question, any thoughts on wholesale volumes and the outlook there? Thomas J. Folliard: It's really difficult to project volumes. You saw our volumes in wholesale were down more than our volumes in retail and that's driven by not only do we have less improvement in conversion of our customer traffic, the traffic was still down a little bit more. So that kind of translates into our appraisal traffic. But we've also seen our appraisal traffic not really pick up like our retail traffic has. So I think that's another indication that consumers are keeping their cars longer. Himanshu Patel – J.P. Morgan: When you step back and think about the timing of resuming store growth longer term, what are the things you are looking for? Do you firmly need to get into positive volume territory to be able to restart that? Thomas J. Folliard: Right now we are focused on execution, we are focused on expense, we are focused on eliminating waste, we are focused on taking costs out of our reconditioning process. We are intensely focused on improving the customer experience to make some positive movement on our competitive advantages. In terms of restarting growth, we really want to see a trend that we can believe in over a longer period of time. I couldn't give you an estimate of what that time is but we want to see sales pick up and we want to see them stay up and we want to be confident in that trend. And I think we want to see some more clarity around the credit markets as well. So, it's a number of different factors; we don't have like a set line in the sand that says when we cross this we're going to start growing stores again. Himanshu Patel – J.P. Morgan: On the warehouse facility renegotiation, is it fair to say that the commitment size will be cut and you just don't know how much or is it possible that it could actually be retained at its current level? Thomas J. Folliard: We're in the middle of negotiating that. We will let you know as soon as it's done.

Your next question comes from Bill Armstrong – CL King & Associates. Bill Armstrong – CL King & Associates: It sounds like on the prospects for the renewal of the warehouse is not a matter of if, it's really just a matter of how big it's going to be and how much you'll have to pay. Is that fair?

Yes, we're highly confident we will get it renewed. Bill Armstrong – CL King & Associates: Advertising spend, could you tell us by how much it was actually reduced and in what areas of media? Thomas J. Folliard: We don't have that here and I don't think we've talked about that in that level of detail but I can tell you that it's kind of across the board in terms of the reduction. It's not like we picked one particular avenue and dropped it there. It's a pretty strategic methodology the way we approached it, in terms of where we would cut and how. And we are continuing to run markets at a higher advertising rate, in some markets, to hopefully see some traffic changes there and if it works we'd go back and spend that money. I can tell you that we've spent zero dollars on newspaper. Last year we didn't have very spend on newspaper but the spend that we did have as only in our grand opening market, of which we didn't have any this quarter. So we spent nothing on newspapers and the cuts have been across where we spend most of our money, which is TV and search engine advertising. Bill Armstrong – CL King & Associates: And can you tell us the dollar amounts of the reduction, year-over-year? Thomas J. Folliard: Year-over-year we're down about 30% on advertising. Bill Armstrong – CL King & Associates: You know, Pontiac is being eliminated at some point, it sounds like over the next year or so. What do you think the impact will be on your business as the elimination of a major brand. And maybe if you step back, I think Oldsmobile was eliminated a few years ago. What was your experience then? Thomas J. Folliard: I don't know if you'd consider Pontiac a major brand. For us it's a tiny, tiny percentage of sales and I think it will be picked up by other stuff, so we won't notice. And just the fact that the brand is eliminated doesn't mean that there are still not used cars out there to be bought and sold. And we 're going to buy and sell whatever the consumer wants to buy. And I don't think the elimination of Pontiac could have any impact on us whatsoever.

Your next question comes from Craig Kennison - Robert W. Baird & Co. Craig Kennison - Robert W. Baird & Co.: The $2,000 gross profit per used car, is that a sustainable number. That's the second straight quarter about $2,000. Thomas J. Folliard: Well, remember I said some of it was because we had a kind of a bad quarter last year. It's actually sequentially down slightly from the fourth quarter. And we're always going to manage our margins and kind of in what we think is in the overall best interest of the shareholders. I can't tell you if that's really sustainable for the year because we would move it if we felt like it would drive sales. You know, we've been in a pretty challenging environment in terms of depreciation and then appreciation we've seen over the course of this year, and we felt like we had the opportunity to make some margin and not have to drive margin down to drive sales coming out of the fourth quarter. So in terms of its sustainability, we'll manage it as we go, like we always do. Craig Kennison - Robert W. Baird & Co.: Can you talk about trends in origination fees? Do you anticipate any pressure on the prime or sub-prime origination fees that you earn?

We're not getting any indications of that at this point.

Your next question comes from Sam Yake – BGB Securities. Sam Yake – BGB Securities: I have a question about the gross margin. This is the second quarter in a row that it's been real healthy and I wondered if there is any change in strategy or as you pull more cost out of the reconditioning process are you going to give that back to consumers or are you going to retain it? Thomas J. Folliard: Well, like I said, we're going to manage it as it goes and if you're keeping score at home, it's actually the third quarter in a row of good margins. But I just think it's a testament to our ability to manage our inventory and our superior car-buying process and analytical models and our ability to really gauge consumer demand and manage our inventory turns. It's the third consecutive quarter that we've improved our turns year-over-year. Obviously if you turn your inventory faster it gives you the opportunity to make a little bit more margin, so not only did we raise our inventory during the quarter, but again, we improved our turn. So I think in the most volatile market we've ever seen, over the last three quarters, each of those quarters we've improved our margins year-over-year and we've improved our turns year-over-year. So I think it's just a testament to the inventory management model and how aggressively focused we are on that. Craig Kennison - Robert W. Baird & Co.: I guess what I'm looking at is that generally you have said in the past that if you pull costs out and get more efficient you have a bias to kind of give that back to the consumer. Are you still standing behind that type of statement? Thomas J. Folliard: Yes, I am, as long as we believe that that will help us drive incremental sales. And we have felt over the last few quarters that our ability to maintain margin has not hurt our sales, and that we have been passing on great prices to our consumers as well. But another way to think of it is that some of the savings we got has allowed us to maintain some of that margin but I feel like the consumers have still benefitted because we turn our inventories so quickly.

Your next question comes from Scot Ciccarelli – RBC Capital Markets. Scot Ciccarelli – RBC Capital Markets: Another question on the gross profit, Tom. Did you benefit from improved vehicle pricing during the course of the quarter, let's call it the timing delta from when you buy something to when you sold it, or is it really more related to the reconditioning side? Thomas J. Folliard: It's probably some of both. In an appreciating environment you can hold your prices a little bit better because after you sell something the acquisition, you know the replacement value is kind of going up. Now we saw it very steep in the fourth quarter and we really felt like it benefitted us there but we've seen kind of a steadier appreciation during the first quarter and that helped some. And the reconditioning savings helps as well. Scot Ciccarelli – RBC Capital Markets: And the reconditioning savings, is that labor-related or is there something else in there? Thomas J. Folliard: It's a combination of things. So it's not just labor. It's labor, it's supplies. You know, some of it is that we were over-processing some of the repairs. I'm not exactly sure the percentage of it that was labor, but some is labor, some is supplies. Scot Ciccarelli – RBC Capital Markets: You have had headcount reductions within the reconditioning group. If sales start to improve, is it fair to assume you have to add labor back into that model or is just the process better and so we really shouldn't see that? Thomas J. Folliard: Hopefully we have to add. Hopefully sales are going in a way that we have to add back. We'd be thrilled. And you know, we've got ourselves in a staffing position right now that we're pretty comfortable with, and now we're hiring in our stores to replace turnover. So when we are staffed appropriately, we are pretty much always hiring because we're hiring to replace turnover. So once we get back in that hiring mode, which we are kind of in now, we're pretty good at adding and then coming back down on staffing through attrition. You know, you've seen our seasonality over the years as 10% to 15% up and down over the course of the year, and we've historically been able to move our staffing accordingly. So if sales comes back we feel very confident in our ability to move staffing with it. Scot Ciccarelli – RBC Capital Markets: Any kind of regional or geography comments you want to provide us in terms of color on the trends? Thomas J. Folliard: No.

Your next question comes from Rich Kwas - Wachovia Capital Markets. Rich Kwas - Wachovia Capital Markets: On the "other" line, gross profit, gross margin was up meaningfully year-over-year. What's driving that?

Wholesale you mean? Thomas J. Folliard: Are you talking about wholesale? Rich Kwas - Wachovia Capital Markets: No, I'm talking about other. You know, the "other" line item. I know it's pretty small but margins are going up there. Just curious what's going on. You know, the warranty line, etc.

Part of it is that we did adjust pricing over last year and we're getting the benefit of a little bit better margin on some of our warranties. We have initiated a CAF product that started late in the quarter that is adding a little bit of value there. And then service revenues, as we talked about, are up and that's a stronger gross profit margin. Rich Kwas - Wachovia Capital Markets: Tom, did you say you're not really spending any advertising on service, right? Thomas J. Folliard: That's correct. Rich Kwas - Wachovia Capital Markets: So this is just coming through. Thomas J. Folliard: We have a really big customer base, especially in our older stores. And we probably do more service on a per-store basis than people realize. And I do think that folks are tending to hold their car a little bit longer. And remember, more than half of what we sell, we sell an extended warranty on, which they can get those cars serviced at our store. So just with the extra capacity I think it is showing up in our revenues. Rich Kwas - Wachovia Capital Markets: Keith, just moving back to the gain on sales, I know that it's still a bit fluid but as we think about it with the 0.7% this quarter, going forward what would really drive that significantly from where you were in the first quarter? I know the negotiation is fluid but I mean, as we think about, is there really a high probability that's going to deviate much?

Quite honestly, we hope it does. We hope that we can get the enhancements down and that the market continues to improve by the time we actually lock in something. But as I indicated, the enhancements are as much of that as the increase in cost. And so, we'll tell you when we get it done but right now I don't know. Rich Kwas - Wachovia Capital Markets: But given that it's a few weeks away, seemingly, a month away or so, it's assuming that not much is going to change.

My only response to that is the market on sub bonds moved dramatically over just a few weeks. So really timing can make a difference on this, but we'll see.

Your next question comes from Gentry Klein - Littlejohn & Co. Gentry Klein - Littlejohn & Co.: Can you talk a little bit about the residual values of used Chrysler vehicles, given their bankruptcy? Thomas J. Folliard: Sure. We were a little nervous about that, the bankruptcy both on Chrysler and General Motors and we had made some movements in our inventory during the end of the fourth quarter, beginning of the first quarter, in anticipation for perhaps where consumers decided that they wanted to buy Chryslers. But I can tell you that since it's happened, we have seen zero impact, on residual values or sales, for us. Chrysler was about 20% of our total sales and it's still about 20% of our total sales. And we've seen very little impact at all in the residual values. Gentry Klein - Littlejohn & Co.: And it's also my understanding that some of the rental companies which you are buying the vehicles from, like Hertz and Avis, are running their vehicles for longer. Is this having any impact on the residual values of these vehicles given that they probably are a bit older than what you're used to selling? Thomas J. Folliard: Yes, it probably would but that's a tiny percentage of our sales, so it's not as impactful as you might think. Gentry Klein - Littlejohn & Co.: And given that they are running these cars for long and they may not be selling you as many cars right now, when they do go to the market in volume, which I'm guessing is at the end of the year, is this going to have any major impact on you at all? Thomas J. Folliard: It's a very small percentage of our sales to begin with so no. And it doesn't matter when the turn in prime is, they always go to auction in volume. So it'd be nothing new for them to go to the auction in volume. The only difference would be they would have higher mileage, which would drive the price down, and if we were to buy them, it is more of a commodity than other product and we have historically made less margin on those cars. But again, it's a very small percentage of our sales.

There are no further questions in the queue. Thomas J. Folliard: Thank you very much for joining us. And one more thanks to all of our CarMax associates who have allowed us to not only to survive in this environment but to outperform the competition as well.

This concludes today’s conference call.