AutoNation 2007 Annual Report Download - page 45

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Table of Contents
• We are subject to interest rate risk in connection with our floorplan notes payable, revolving credit facility, term loan facility, and floating
rate senior unsecured notes that could have a material adverse effect on our profitability.
• Our revolving credit facility, term loan facility, mortgage facility, and the indenture relating to our senior unsecured notes contain certain
restrictions on our ability to conduct our business.
• Our substantial indebtedness could adversely affect our financial condition and operations and prevent us from fulfilling our debt
service obligations. We may still be able to incur more debt, intensifying these risks.
• Our largest stockholder, as a result of its voting ownership, may have the ability to exert substantial influence over actions to be taken or
approved by our stockholders.
 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our primary market risk exposure is increasing LIBOR-based interest rates. Interest rate derivatives may be used to hedge a portion of our
variable rate debt when appropriate based on market conditions. At December 31, 2007, our fixed rate debt, primarily consisting of amounts
outstanding under senior unsecured notes and mortgages, totaled $595.2 million and had a fair value of $578.9 million. At December 31,
2006, our fixed rate debt, primarily consisting of amounts outstanding under senior unsecured notes, totaled $360.5 million and had a fair
value of $363.4 million.

We had $2.2 billion of variable rate vehicle floorplan payables at December 31, 2007 and 2006. Based on these amounts, a 100 basis point
change in interest rates would result in an approximate change of $21.8 million in 2007 and $22.1 million in 2006 to our annual floorplan
interest expense. Our exposure to changes in interest rates with respect to total vehicle floorplan payable is partially mitigated by manufacturers’
floorplan assistance, which in some cases is based on variable interest rates.
We had $1.2 billion of other variable rate debt outstanding at December 31, 2007 and 2006. Based on the amounts outstanding at year-end,
a 100 basis point change in interest rates would result in an approximate change to interest expense of $11.8 million in 2007 and $12.1 million
in 2006.
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