Austin Ligon Store Quotations

Selling, general, and administrative expenses as a percent of net sales and operating revenues increased slightly to 11.4% in this year's third quarter from 11.3% in last year's quarter. As expected, the moderate rate of increase in unit comps was not sufficient to provide SG&A leverage. Having a larger percentage of our store base comprised of stores not yet at basic maturity and last year's lower-than-normal corporate bonuses were also contributing factors. At the end of this year's third quarter, 49% of our stores were less than four years old, compared with 40% at the end of last year's third quarter.

We have revolutionized the way consumers buy cars. This will be the first time northeastern area residents will have an opportunity to experience a no- hassle, no-haggle, fun and easy car shopping experience. As we continue to grow our store base by 15 to 20 percent each year, we are looking forward to introducing ourselves to more and more consumers in the Northeast.

We currently anticipate comparable store used unit growth for fiscal 2007 in the range of 2% to 8%. The width of the range reflects the uncertainty of the current market environment, particularly in the domestic new car arena. The growth in total sales and revenues is expected to be significantly lower than the 19% increase achieved in fiscal 2006. This decrease reflects the difference in store opening patterns. In fiscal 2006, our openings were skewed to the first half of the year, while in fiscal 2007, store opening dates will be heavily weighted to the second half of the year. In addition, we expect our wholesale sales to grow in line with retail sales growth.

With an estimated television viewing audience of approximately 185,000, Charlottesville, Va., represents our first entry into a small market. We will be adjusting our store footprint, inventory, and our staffing model in this store, as a result of the smaller overall sales opportunities provided by this market. This store's performance over the next few years will help us better understand our longer-term opportunities in small markets.

In fiscal 2007, we anticipate gross capital expenditures of approximately $300 million. Planned expenditures primarily relate to new store construction and land purchases associated with future year store openings. Compared with the roughly $200 million of spending in fiscal 2006, the fiscal 2007 capital spending estimate primarily reflects a higher level of real estate purchases for store development in future years, as well as the timing of construction activities.