In the quarter, the firm recorded a pretax charge of $6.3 million or 4 cents per share in severance costs related to its position eliminations and asset write-offs associated with shutting down the Advance TV Network.

On a reported basis, the SG&A rate for the quarter was up 37 basis points. However, excluding the severance and asset write-offs, the firm leveraged SG&A by 18 basis points as compared to last year. This was an improvement of 62 basis points over the 44 basis points of de-leverage witnessed in the first half of 2007.

Over the past quarter, the firm has taken a number of steps to further reduce its expense structure.

The firm has identified additional expense initiatives that will reduce SG&A by more than $20 million in 2008. These are in addition to the $50 million in expense reduction initiatives that it announced in conjunction with its last quarterly earnings report.

These expense reductions include savings in advertising and marketing, store occupancy, utilities, transportation expense, non-merchandise purchasing costs, and an additional 30 positions in field and store support center that have been eliminated. These new initiatives will impact 2007 to a minimal degree but will favorably impact 2008 by $20 million.

The management believes the expense reductions it has put in place will not compromise future sales growth. The firm’s priority is to drive the top line while lowering its expense rate. In fourth quarter 2007, as a result of the expense reduction initiatives that it has implemented, it expects to leverage SG&A within its same store sales guidance of zero to 2%.

Interest expense, net of interest income, was $7.6 million in the quarter compared to $9.1 million last year.

Interest expense decreased from last year as a result of less debt outstanding and lower borrowing costs. Our borrowing costs in the quarter was approximately 6%.

In third quarter last year, in conjunction with the refinancing of credit facility, the firm recorded a net pre tax gain of $1 million which was recorded in the gain on extinguishment of debt line on the income statement.

The third quarter income tax rate was 36.4% as compared to 37.6% last year.

Both this year and last year’s income tax included a benefit from a successful completion of state income tax audits. In addition, this year included the benefit of additional federal and state tax credits.

For the quarter, inventory increased 5.4% on a sales increase of 5.3%.

This was a significant improvement over the second quarter and reflects the firm’s focused plan to improve inventory productivity while increasing parts availability. Even with the significant investment in additional parts inventory, the firm expects that inventory will grow only slightly higher than sales in the fourth quarter.

The company expects to fund the majority of its investment in additional parts availability through several inventory reduction initiatives. The firm expects that its parts availability initiative will require an investment of approximately 5% of its total inventory; however, the company expects to offset most of this incremental investment through the rebalancing of inventory in selected categories and stores and other inventory reduction actions. The company expects that the net incremental investment, net of accounts payable, will be less than 1% of total inventory.

The accounts payable to inventory ratio was 55.9% compared to 55.4% last year. The firm continues to see opportunity to grow the AP ratio. As a result of working with suppliers, the firm expects that this ratio will exceed the prior year’s corresponding ratio for the fourth quarter.

The capital expenditures were $31 million for the quarter and $147 million year-to-date.

This compares to $201 million year-to-date last year or a reduction of $54 million. the firm now estimates capital expenditures for 2007 to be $215 million to $225 million, a reduction from previous guidance of $230 million to $240 million.

The 2007 capital expenditures break down as follows:
- $110 million for store development which includes new, relocated and remodeled stores;
- $70 million in maintenance capital for stores, distribution centers and corporate infrastructure, primarily IT-related;
- $15 million for new IT and logistics initiatives;
- and $25 million for the ninth distribution center in Indiana.
As a result of fewer new store openings in 2007 and 2008 than originally planned, the firm has pushed the opening of its next distribution center to the beginning of 2010.

In the quarter, the firm repurchased 6.2 million shares or approximately 6% of its total outstanding at an average price of $33.26, for a total expenditure of $207 million.

In the last three years, the firm has repurchased over 18 million shares at a cost of nearly $600 million. The firm now has $335 million left on the share repurchase authorization approved by the board of directors on August 2007. As a result of share repurchases, the fully diluted third quarter share count was 103.2 million shares, a reduction of more than 4 million shares from second quarter.