Question-and-Answer Session
Operator
(Operator Instructions) We will pause for just a moment to compile the Q&A roster. Your first question comes from Rick Nelson – Stephens Inc.
Rick Nelson – Stephens Inc.
You referred to improvement in October, looking more like July and August. What is contributing to that? Is it Houston bouncing back or is it other factors?
B. Scott Smith
It’s certainly improving a little bit for September, Rick, and I think that was the nature of my comments. It’s close but maybe a little soft in what we saw in July, but more like a July, August run rate. Houston is picking up, our service is very strong there. Jeff, you may want to comment on new sales there.
Jeff Dyke
Rick, the Houston market is certainly making a difference both from a new perspective and used cars. We’ve got pent up demand in the Texas market and that’s starting to play out a little bit. We expect that to continue to play out as we go across the fourth quarter.
Rick Nelson – Stephens Inc.
Dave, in terms of market [inaudible], are your covenants going to prevent you from doing much more in terms of buying out some of the leases?
David P. Cosper
Not the covenants per se, there is an overall basket capped at $200 million in the credit facility that we negotiated with the syndicate. We’re at $115 million, $120 million, something like that so there’s a fair bit of headway to go so I don’t see that being an issue.
Rick Nelson – Stephens Inc.
The cost cuts of $12 million, that’s an annualized run rate I take it. How much of that would show up here in the fourth quarter?
B. Scott Smith
About 25% or 30% of that.
David P. Cosper
Actually the regional structure.
B. Scott Smith
The regional structure is done and that would be probably, it’s still 25% or 30% because we did it in the middle of the year. We’ll pick half of the regional structure redo for the last six months of the year.
David P. Cosper
But all for the fourth quarter.
B. Scott Smith
Yes.
Rick Nelson – Stephens Inc.
The asset impairments, can you identify the dealers that those are associated with? Are they primarily domestic stores?
David P. Cosper
They are in fact, yes, across the board.
Rick Nelson – Stephens Inc.
In terms of service and parts, are you seeing any evidence that the consumer is trading down to shopping less expensive alternatives to the dealer?
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