This is a summary of the first quarter fiscal 2007 earnings call as conducted by AutoNation (AN: chart) on April 26, 2007

Management

- Chairman & CEO: Mike Jackson
- President & COO: Mike Maroone
- CFO: Mike Short
- VP, IR: John Zimmerman

Key Investors Issues:

- Earnings of $77.6 million or 37 cents per share, were down 11% from $87.2 million or 33 cents per share in the prior year
- Sales dropped 3.9% to $4.4 billion from $4.57 billion in 2006.
- AutoNation repurchased 2.3 million shares of stock for $50 million.

First Quarter Highlights

Earnings of $77.6 million or 37 cents per share, were a decrease of 11% from $87.2 million or 33 cents per share in the prior year as EPS were positively affected by share repurchases as sales fell 3.9% to $4.4 billion from $4.57 billion in 2006.

- Repurchases includes the $1.15 billion April 2006 share buyback and certain tax adjustments.
- These were substantially offset by a decline in new vehicle sales, especially in California and Florida.
- Industry new vehicle retail sales for California and Florida were off approximately 13% based on CNW Research data.
- Net income from continuing operations was impacted by an after-tax $9 million increase in other interest expense in 2007, primarily due to the additional debt incurred in connection with the April 2006 $1.15 billion share buyback.
- Other interest expense was higher this quarter versus last year due to the increased debt levels related to the April 2006 recapitalization.

Operating profit for the first quarter was $187 million, down 7% from $202 million in 2006.

- SG&A as a percentage of gross profit increased 90 basis points to 71.5% from 70.6% a year ago.
- Although AutoNation made headway during the quarter in managing variable costs, especially advertising and compensation, it experienced a deleveraging of the fixed cost structure due to the decline in vehicle sales.
- The EPS impact of higher interest expense was more than offset by the 19% reduction in shares outstanding. due to the $50 million share equity tender offer for a net benefit of 4 cents per share in the quarter from the recapitalization.
- The firm had losses from discontinued operations of $5.3 million net of taxes or 3 cents per share related to the divestiture of several stores during the quarter.

AutoNation repurchased 2.3 million shares of stock for $50 million.

- 5.3 million shares of common stock were issued upon the exercise of stock options, resulting in proceeds of $76 million.
- As of March 31, 2007, there were 13.9 million stock options outstanding, representing a 6.6% option overhang.
- The firm reinvested $42 million in the business through capital expenditures during the quarter.

AutoNation reported operating margin of 4.3%, along with improvement in variable expenses, growth in customer pay parts and service and an increase in F&I PVR.

- According to CNW the industry decline at retail was 5% and the firm’s new retail volume of 79,000 units reflected a decrease of 8% on a revenue basis and 9.5% on a unit basis.
- With anticipated softness in California and Florida as their housing markets struggle, work on controlling variable expenses, specifically advertising and compensation, along with aggressive inventory management takes on increased importance.
- AutoNation reduced new vehicle inventory by 15% down nearly 11,000 units on a total store basis compared to a year ago, driven by a sizable reduction in domestic units.

The new vehicle inventory stood at 61,300 units, which translates to a new vehicle day supply of 52 days versus 54 days a year ago, a two day reduction.

- On the used side, the day supply of 38 days represented a 3-day reduction compared to a year ago.
- Same-store parts and service revenue increased 1% in the quarter.
- Of note was a 5% increase in customer pay parts and service compared to the same period a year ago.
- The ongoing growth in this area is attributed to extensive training of fixed operation associates, coupled with the service drive process and service marketing initiatives.
- Customer paid gains in the quarter were offset by a drop in warranty revenue, due in large part to improving quality.

Same-store F&I gross profit per vehicle retail of $1118, increased by $80 year-over-year.

- The firm\''s preferred lender network, OEM service contract alliances and strong product penetration continue to drive growth in this area.
- During the period, the firm divested five stores with an annual run-rate of $167 million.
- As at March 31 stores numbered 254, representing 327 franchises and 37 brands in 16 states.
- The corporate development team is actively pursuing opportunities that meet the market brand criteria, as well as the return on investment threshold.
- The Board of Directors has approved an additional $500 million for a repurchase of common stock, which is part of the ongoing strategy to redeploy capital to enhance shareholder value.

Fiscal Year 2007 Outlook

- AutoNation expects the market to remain very competitive and challenging, with industry sales of new vehicles expected to be in the low 16 million units for new vehicles.
- Capital expenditures are forecasted to be $140 million, excluding acquisition-related spending, land purchased for future sites or lease buyouts.
- Combined spending on acquisitions and share repurchases should be $400 million.

Key questions and answers from the first quarter fiscal 2007 earnings call as conducted by AutoNation on April 26, 2007

John Murphy (Merrill Lynch): What is your comment on the cadence of sales through the quarter in general and maybe specifically in Florida and California?