AutoNation Inc AN
Q1 2012 Earnings Call Transcript

Operator: John Murphy, Bank of America Merrill Lynch.

John Murphy - Bank of America Merrill Lynch: Just a first question. I mean there has been a lot of conjecture over whether being a real support in inducing the SAAR in the first quarter upwards. Just curious what you guys really think about that or if you think it was really a nonfactor and the key driver here is that we are seeing some release of pent-up demand?

Mike Jackson - Chairman and CEO: This is Mike Jackson. I think the underlying strength of the recovery is clearly there. We went into the year with a forecast of 14 million for the full year on the high range of May, the forecast out there and we had a caution or a yellow around the issue of fuel prices where we clearly thought we would see $4 a gallon and we viewed that as a risk to sales. It just turned out that without increased incentives $4 a gallon if anything is assisting sales not hurting sales and we really see a dramatic change from five years ago in ‘08. We see overall a 20% improvement in fuel efficiency compared to the end of ‘07 going into ‘08 and the consumer were not asking them to make a trade-off between size and performance. They can have what they currently have and get a significant increase in fuel efficiency and that’s been done with the traditional drivetrain with relatively reasonable incremental cost, with turbocharging, direct injection and 7, 8 and 9 speed automatic transmissions. But looking at the quarter in and of itself retail was up a solid 7%, there was an emphasis on replacement fleet plus 19. Though that will not continue for the full year, but we see it at mid-14 and think the genuine replacement need, exciting new products, and great financing will underpin that mid-14.

John Murphy - Bank of America Merrill Lynch: Second question you alluded to I think some rebates from stair-step programs from our previous luxury program we've also heard that Chrysler is reasonably active in the market with, it sounds like their stair-step programs. I am just curious if one if those programs had any impact in the quarter and two if you're seeing any other automakers out there sort of mimicking these programs with new stair-step or buying rebate programs to the dealers directly.

Michael E. Maroone - President and COO: There continues to be a number of stair-step programs out there that targets very greatly, some are quite reasonable, some are quite extraordinary. It certainly has an impact on every quarter I don't know that this quarter was much different. But they are impacted and this across a number of different manufacturers.

Michael J. Short - EVP and CFO: The reason we called out the premium luxury incentives in the prior period was because they were kind of catch a payment which we qualified for in that quarter and that’s why we recognized them, sort of an aberration and as opposed to ongoing incentives.

John Murphy - Bank of America Merrill Lynch: Just a follow-up for Mike Maroone. Those programs are not necessarily an acceleration or incremental to what we saw late last year are they more of a continuation or they step up I am just trying to understand.

Michael E. Maroone - President and COO: I think there is more manufacturers involved there, but they very greatly from quarter-to-quarter, we saw strong stair-step programs in Q1 of 2011. Saw them again in 2012, we also saw a lot at year-end. So each of the quarter, I'd say that our margins going forward, I think, will be similar to our Q1 margins. Although, I think they'll vary some by quarter.