This summary is based on the first quarter fiscal 2008 earnings call conducted by AutoNation, Inc. (AN: chart) on April 24, 2008.

Management:

VP, IR: John Zimmerman
Chairman and CEO: Mike Jackson
EVP and CFO: Mike Short
Director, President and COO: Mike Maroone

Key Investors Issues

- EPS were 28 cents a share compared to 37 cents a share last year.
- Net income fell to $50.7 million compared to $77.6 million in the year-earlier quarter.
- Earnings from continuing operations slipped to 31 cents a share from 39 cents a share.

First Quarter Highlights

EPS from continuing operations were 31 cents per share compared to a year ago of 39 cents per share.

- Prior-year results benefit from a favorable tax adjustment of 2 cents per share. Results for the first quarter of 2008 reflected a decline in vehicle retail sales especially in California, Florida, Nevada, and Arizona where the housing crisis has clearly impacted overall economic activity and consumer demand for vehicle.
- AutoNation new unit sales for those markets were down 11% and for the industry, California, Florida, Nevada, and Arizona, new unit sales were down approximately 15% according to CNW Research. AutoNation new vehicle sales for the other states were down 4%.

U.S. retail auto sales had declined 11% according to CNW Research.

AutoNation new unit sales declined 8%. While today''s economic uncertainty may compel certain potential buyers to put off their purchase decisions until a later date, their needs remain. Once consumers begin to sense that their own economic situation has stabilized, they will begin to be ready to commit to purchase big ticket items like vehicles. Industry analysts like CNW and J.D. Power forecast improved new vehicle sales beginning in 2009 due to fleet age and increase in vehicle scrappage, and a robust line-up of new products. CNW forecast new vehicle sales of 16.3 million in 2009, 16.7 million in 2010, and 16.9 million in 2011.

Operating profit was $147 million, down 21% from $186 million a year ago.

The prior period included the benefit from favorable tax adjustments of 2 cents per share.

- SG&A decreased $13 million versus 2007. Because of the erosion in gross profit SG&A as a percentage of gross profit increased to 74.5% from 71.2% a year ago reflecting deleveraging of cost structure.
- Net inventory carrying cost was $3.3 million lower versus the prior-year period. The favorable variances primarily a result of lower floorplan interest rates partially offset by a decrease in floorplan assistance resulting from lower new vehicle sales. Other interest expense was 40 cents per share million higher in versus last year. The unfavorable variance is a result of increase in debt levels associated with mortgage facility, revolving credit facility, and other indebtedness partially offset by lower interest rates on term loan facility, mortgage facility, and floating rate Senior Notes.

- Effective income tax rate was 40.6% versus the prior year effective rate of 35.8%. The first quarter of 2007 rate benefitted from adjustments from the resolution of various tax matters. The company expects ongoing rate to be about 40%, excluding the impact of any potential tax adjustments in the future.
- The company had losses from discontinued operations of $5 million, net of taxes, or 3 cents per share. These losses related to the divestiture of several stores.

- The company repurchased 1.9 million shares of stock at an average price of $14.84 per share for a total of $28 million. Future share repurchases are subject to limitations contained in debt agreements. As of April 1, 2008, basket capacity for share repurchases was approximately $32 million. Each quarter the company is permitted to add back 50% of net income after tax and any stock option exercise proceeds.
- The company reinvested $23.5 million in the business through capital expenditures. The company expects full-year 2008 capital expenditures to be approximately $110 million net of asset sales. That excludes acquisition-related spending, land purchase for future sites or lease buyouts. At March 31, non-vehicle debt was $1.8 billion and the company had unused revolving credit availability of $436 million. Non-vehicle debt-to-capital ratio was 33%.

Thus far in 2008 economic headwinds have been a significant factor for the auto retail industry sustaining an environment that is both challenging and increasingly competitive.

AutoNation retailed 71,400 new vehicles on a same-store basis, was down 9% compared to the period a year ago. It compares favorably to the industry that was off 11% in the quarter according to CNW Research. Of note is a $231 reduction in profit per new vehicle retailed. The highly competitive and distressed market along with the tightening of credit is factors that impacted both volume and margin.

The same factors impacted used vehicle results where same-store used vehicle retail volume was off by approximately 2300 units, or 4% compared to the period a year ago. And profit per used vehicle retailed was down to $233. Given the linkage between new and used the company was encouraged that used vehicle volume was off less than new and attributes this to the additional dedicated used resources that were put in place early in the quarter.

- Relative to strength or weakness in the markets where it operates, the company has already called out ongoing pressures on markets in Arizona, California, Florida, and Nevada. In the quarter, Texas continued to perform well, especially South Texas. And the markets of Chicago, Knoxville, and Memphis held their ground compared to the rest of the country.
- At March 31 new day supply was 57 days, an increase of 5 days compared to a year ago driven by softer-than-expected March sales. The company closed the quarter with a used day supply of 40 days, an increase of 2 days compared to a year ago. In the quarter, parts and service same-store revenue grew $5 million to $650 million, an increase of 1%, and gross profit held steady at $281 million compared to the quarter a year ago. The company remains focused on growing customer pay, parts and service business and as it transitions from a service culture to a service retailing culture utilizing customer friendly service sales process.
- Same-store F&I gross profit per vehicle retailed was $1183, an increase of $66 year-over-year this despite a revenue decline driven by lower volume. The company attributes continued growth in PVR to increased product penetration, improved returns from service contract portfolios with third parties, strong preferred lender network, and ongoing efforts to improve the performance of third and fourth quartile stores.

Key questions from the first quarter earnings call conducted by AutoNation, Inc. on April 24, 2008.

John Murphy (Merrill Lynch): It sounds like you are getting more competition from some of your weaker local competitors. Is that something you see reversing as the market gets better or is this sort of more structural going forward?