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AutoNation Reports Second-Quarter Net Income From Continuing Operations of $0.35 Per Share

Jul. 20, 2004

FORT LAUDERDALE, Fla., Jul 20, 2004 /PRNewswire-FirstCall via Comtex/ -- AutoNation, Inc. (NYSE: AN), America's largest automotive retailer, today reported net income from continuing operations of $96 million, or $0.35 per share, on revenue of $5.0 billion for the second quarter ended June 30, 2004. The results compare with 2003 second-quarter net income from continuing operations of $107 million, or $0.37 per share, on revenue of $5.0 billion. Including the impact of $4 million net of tax or $0.01 per share of loss from discontinued operations, primarily due to store divestitures, net income for the second quarter 2004 was $92 million, or $0.34 per share.

"As previously announced, a number of factors directly impacted the company's second-quarter earnings," said Mike Jackson, chairman and chief executive officer of AutoNation. "Our cost structure was targeted for vehicle sales volume levels that did not materialize, particularly in June, with significant declines in sales of Ford and General Motors products. Low volume when combined with high inventories also caused a gross margin decline in our new vehicle business." The decline in new and used vehicle gross profit was partially offset by improved gross profit performances in parts and service and finance and insurance.

"The economic environment for American retailers in the month of June was particularly challenging, led by a 1.1% decline in retail sales, the largest drop in 16 months," said Jackson. "The automotive retail component of that decline was significant; the industry reported a 4.3% decrease, a notable falloff when compared to May's 3.2% gain."

For the six-month period ended June 30, 2004, the Company earned net income from continuing operations of $184 million or $0.67 per share. Net income from continuing operations for the six-month period ended June 30, 2003 was $1.10 per share. Excluding the $0.44 per share benefit of the first- quarter 2003 IRS tax settlement, earnings per share from continuing operations for the six-month period ended June 30, 2003 was $0.66. The Company's revenue for the six-month period ended June 30, 2004 totaled $9.7 billion, up 4 percent versus the prior year.

Looking ahead, Mr. Jackson said, "Although the second-quarter earnings were disappointing, our cash flow is strong and our strategy sound. We expect to report third-quarter EPS from continuing operations in the range of $0.36 to $0.38 per share. As previously announced, in light of the second-quarter results and the difficult new vehicle environment that we are operating in, our full-year 2004 guidance for EPS from continuing operations is in the range of $1.35 to $1.40."

AutoNation will discuss these results, the Company's outlook and supporting assumptions during a conference call and audio webcast this morning at 10:00 a.m. Eastern Time. To listen to the live conference call, dial 800-288-8961, or listen to the audio webcast via the Internet at http://www.autonation.com, by clicking on the "about us" link, then clicking on "investors," then "webcast." A playback of the conference call will be available after 12:30 p.m. Eastern Time through July 27, 2004, by calling 800-475-6701, access code number 738524 or via the Internet as outlined above.

About AutoNation, Inc.

AutoNation, Inc., headquartered in Fort Lauderdale, Fla., is America's largest automotive retailer. Ranked No. 97 on the 2004 Fortune 500 and a component of the Standard and Poor's 500 Index, AutoNation employs approximately 28,000 people and owns and operates 365 new vehicle franchises in 18 states. For additional information, please visit http://corp.AutoNation.com or http://www.AutoNation.com, where more than 100,000 vehicles are available for sale.

FORWARD-LOOKING STATEMENTS

Certain statements and information included in this release constitute "forward-looking statements" within the meaning of the Federal Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied in such forward-looking statements. Additional discussion of factors that could cause actual results to differ materially from management's projections, estimates and expectations is contained in the Company's SEC filings. The Company undertakes no duty to update its forward- looking statements, including its earnings outlook. This release contains certain non-GAAP financial measures as defined under SEC rules, including earnings per share from continuing operations for the six-month period ended June 30, 2003 excluding the benefit of the first-quarter 2003 IRS tax settlement. The Company believes such non-GAAP financial measure improves the transparency of the Company's disclosure, provides a meaningful presentation of the Company's results from its core business operations excluding the impact of items not related to the Company's ongoing core business operations, and improves the period-to-period comparability of the Company's results from its core business operations. As required by SEC rules, the Company has provided a reconciliation of this measure to the most directly comparable GAAP measures, which is set forth in the attachments to this release.


                                AUTONATION, INC.
                     UNAUDITED CONSOLIDATED INCOME STATEMENTS
                      ($ in millions, except per share data)



                                       Three Months Ended   Six Months Ended
                                            June 30,            June 30,
                                         2004      2003      2004      2003

        Revenue:
           New vehicle                 $3,055.1  $3,057.3  $5,849.3  $5,636.6
           Used vehicle                 1,119.8   1,132.8   2,219.0   2,186.0
           Parts and service              632.9     617.5   1,265.4   1,213.1
           Finance and insurance          158.4     157.8     309.3     293.7
           Other                           22.7      10.0      46.3      21.3
        Total revenue                   4,988.9   4,975.4   9,689.3   9,350.7

        Cost of sales:
           New vehicle                  2,840.5   2,834.6   5,434.1   5,217.5
           Used vehicle                 1,014.7   1,023.3   2,006.5   1,972.6
           Parts and service              352.9     347.4     708.7     684.0
           Other                           10.7       1.4      20.5       3.0
        Total cost of sales             4,218.8   4,206.7   8,169.8   7,877.1

        Gross profit                      770.1     768.7   1,519.5   1,473.6

        Selling, general and
         administrative expenses          556.4     545.3   1,103.2   1,064.9
        Depreciation                       19.7      16.9      38.5      33.7
        Amortization                        0.3       0.4       0.6       1.0
        Loan and lease underwriting
         income, net                         --      (3.1)       --      (6.0)
        Other losses (gains)               (1.4)      2.1       0.5       2.4

        Operating income                  195.1     207.1     376.7     377.6

        Floorplan interest expense        (21.4)    (19.4)    (38.9)    (38.8)
        Other interest expense            (19.7)    (20.6)    (39.0)    (36.2)
        Interest income                     0.7       0.9       1.4       2.0
        Other (loss) income                (1.0)      5.3      (1.3)      6.3

        Income from continuing
         operations before income
         taxes                            153.7     173.3     298.9     310.9

        Provision for income taxes         58.1      66.7     115.4     119.6
        Income tax benefit from IRS
         settlement                          --        --        --    (127.5)

        Net tax provision - continuing
         operations                        58.1      66.7     115.4      (7.9)

        Net income from continuing
         operations                        95.6     106.6     183.5     318.8

        Loss from discontinued
         operations, net of income
         taxes                             (3.5)     (0.3)     (4.1)    (12.9)

        Net income before cumulative
         effect of accounting change       92.1     106.3     179.4     305.9

        Cumulative effect of
         accounting change, net of
         income taxes                        --        --        --     (14.6)

        Net income                        $92.1    $106.3    $179.4    $291.3


        Diluted earnings per share:
           Continuing operations          $0.35     $0.37     $0.67     $1.10
           Discontinued operations       $(0.01)       --    $(0.01)   $(0.04)
           Cumulative effect of
            accounting change                --        --        --    $(0.05)
           Net income                     $0.34     $0.37     $0.65     $1.01

        Weighted average common and
         common equivalent shares
         outstanding                      273.2     285.2     274.5     289.6

        Common shares outstanding         267.7     274.6     267.7     274.6


                            See accompanying note.



                                AUTONATION, INC.
                          UNAUDITED SUPPLEMENTARY DATA
                    ($ in millions, except per vehicle data)




               Operating Highlights           Three Months Ended June 30,
                                                                $        %
                                            2004      2003   Variance Variance


          Revenue:
            New vehicle                   $3,055.1  $3,057.3   $(2.2)    (0.1)
              Retail used vehicle            913.0     934.2   (21.2)    (2.3)
              Wholesale                      206.8     198.6     8.2      4.1
            Used vehicle                   1,119.8   1,132.8   (13.0)    (1.1)
            Parts and service                632.9     617.5    15.4      2.5
            Finance and insurance            158.4     157.8     0.6      0.4
            Other                             22.7      10.0    12.7
                                          $4,988.9  $4,975.4   $13.5      0.3


          Gross profit:
            New vehicle                     $214.6    $222.7   $(8.1)    (3.6)
              Retail used vehicle            103.6     108.5    (4.9)    (4.5)
              Wholesale                        1.5       1.0     0.5
            Used vehicle                     105.1     109.5    (4.4)    (4.0)
            Parts and service                280.0     270.1     9.9      3.7
            Finance and insurance            158.4     157.8     0.6      0.4
            Other                             12.0       8.6     3.4
                                             770.1     768.7     1.4      0.2

          Selling, general and
           administrative expenses           556.4     545.3   (11.1)    (2.0)

          Depreciation                        19.7      16.9    (2.8)
          Amortization                         0.3       0.4     0.1
          Loan and lease underwriting
           income, net                          --      (3.1)   (3.1)
          Other losses (gains)                (1.4)      2.1     3.5
            Operating income                 195.1     207.1   (12.0)    (5.8)

          Floorplan interest expense         (21.4)    (19.4)   (2.0)   (10.3)
          Other interest expense             (19.7)    (20.6)    0.9      4.4
          Interest income                      0.7       0.9    (0.2)   (22.2)
          Other income                        (1.0)      5.3    (6.3)
            Income from continuing
             operations before income
             taxes                          $153.7    $173.3  $(19.6)   (11.3)

          Retail vehicle unit sales:
               New                         107,535   109,186  (1,651)    (1.5)
               Used                         62,884    65,498  (2,614)    (4.0)
                                           170,419   174,684  (4,265)    (2.4)

          Revenue per vehicle retailed:
               New                         $28,410   $28,001    $409      1.5
               Used                        $14,519   $14,263    $256      1.8

          Gross profit per vehicle
           retailed:
               New                          $1,996    $2,040    $(44)    (2.2)
               Used                         $1,647    $1,657    $(10)    (0.6)
               Finance and insurance          $929      $903     $26      2.9





               Operating Highlights            Six Months Ended June 30,
                                                                $        %
                                            2004      2003   Variance Variance


          Revenue:
            New vehicle                   $5,849.3  $5,636.6  $212.7      3.8
              Retail used vehicle          1,820.5   1,792.2    28.3      1.6
              Wholesale                      398.5     393.8     4.7      1.2
            Used vehicle                   2,219.0   2,186.0    33.0      1.5
            Parts and service              1,265.4   1,213.1    52.3      4.3
            Finance and insurance            309.3     293.7    15.6      5.3
            Other                             46.3      21.3    25.0
                                          $9,689.3  $9,350.7  $338.6      3.6


          Gross profit:
            New vehicle                     $415.2    $419.1   $(3.9)    (0.9)
              Retail used vehicle            210.3     211.6    (1.3)    (0.6)
              Wholesale                        2.2       1.8     0.4
            Used vehicle                     212.5     213.4    (0.9)    (0.4)
            Parts and service                556.7     529.1    27.6      5.2
            Finance and insurance            309.3     293.7    15.6      5.3
            Other                             25.8      18.3     7.5
                                           1,519.5   1,473.6    45.9      3.1

          Selling, general and
           administrative expenses         1,103.2   1,064.9   (38.3)    (3.6)

          Depreciation                        38.5      33.7    (4.8)
          Amortization                         0.6       1.0     0.4
          Loan and lease underwriting
           income, net                          --      (6.0)   (6.0)
          Other losses (gains)                 0.5       2.4     1.9
            Operating income                 376.7     377.6    (0.9)    (0.2)

          Floorplan interest expense         (38.9)    (38.8)   (0.1)    (0.3)
          Other interest expense             (39.0)    (36.2)   (2.8)    (7.7)
          Interest income                      1.4       2.0    (0.6)   (30.0)
          Other income                        (1.3)      6.3    (7.6)
            Income from continuing
             operations before income
             taxes                          $298.9    $310.9  $(12.0)    (3.9)

          Retail vehicle unit sales:
               New                         205,081   202,522   2,559      1.3
               Used                        126,027   124,891   1,136      0.9
                                           331,108   327,413   3,695      1.1

          Revenue per vehicle retailed:
               New                         $28,522   $27,832    $690      2.5
               Used                        $14,445   $14,350     $95      0.7

          Gross profit per vehicle
           retailed:
               New                          $2,025    $2,069    $(44)    (2.1)
               Used                         $1,669    $1,694    $(25)    (1.5)
               Finance and insurance          $934      $897     $37      4.1






               Operating Percentages      Three Months Ended  Six Months Ended
                                               June 30,           June 30,
                                          %  2004   %  2003   %  2004  %  2003

          Revenue mix percentages:
            New vehicle                       61.2      61.4    60.4     60.3
            Used vehicle                      22.4      22.8    22.9     23.4
            Parts and service                 12.7      12.4    13.1     13.0
            Finance and insurance              3.2       3.2     3.2      3.1
            Other                              0.5       0.2     0.4      0.2
                                             100.0     100.0   100.0    100.0

          Gross profit mix percentages:
            New vehicle                       27.9      29.0    27.3     28.4
            Used vehicle                      13.6      14.2    14.0     14.5
            Parts and service                 36.4      35.1    36.6     35.9
            Finance and insurance             20.6      20.5    20.4     19.9
            Other                              1.5       1.2     1.7      1.3
                                             100.0     100.0   100.0    100.0

          Operating items as a percentage
           of revenue:
            Gross profit:
               New vehicle                     7.0       7.3     7.1      7.4
               Used vehicle - retail          11.3      11.6    11.6     11.8
               Parts and service              44.2      43.7    44.0     43.6
               Total                          15.4      15.5    15.7     15.8
            Selling, general and
             administrative expenses          11.2      11.0    11.4     11.4
            Operating income                   3.9       4.2     3.9      4.0

          Operating items as a percentage
           of total gross profit:
            Selling, general and
             administrative expenses          72.3      70.9    72.6     72.3
            Operating income                  25.3      26.9    24.8     25.6


                            See accompanying note.



                                 AUTONATION, INC.
                     UNAUDITED SUPPLEMENTARY DATA, Continued
                      ($ in millions, except per share data)




           Cash Flow   Three Months Ended June 30,  Six Months Ended June 30,
          Information      2004         2003           2004      2003

        Capital
         expenditures,
         excluding
         property
         operating
         lease buy-outs    $33.1        $25.4          $54.7     $49.3
        Property
         operating
         lease buy-outs      $--         $1.0          $77.7      $9.8
        Stock
         repurchases       $49.8       $148.8         $107.9    $353.4
        Acquisitions       $66.5          $--         $154.4     $45.1
        Proceeds from
         exercises of
         stock options     $37.2        $25.8          $49.9     $38.7


         Floorplan
          Assistance   Three Months Ended June 30,   Six Months Ended June 30,
          and Expense    2004     2003  Variance     2004     2003   Variance




        Floorplan
         assistance
         (included in
         cost of
         operations)    $31.0    $30.3    $0.7      $58.2    $58.5    $(0.3)
        Floorplan
         interest
         expense        (21.4)   (19.4)   (2.0)     (38.9)   (38.8)    (0.1)

          Net inventory
           carrying
           benefit       $9.6    $10.9   $(1.3)     $19.3    $19.7    $(0.4)


         Balance Sheet
           and Other
           Highlights

                                   June      December      June
                                 30, 2004    31, 2003    30, 2003
        Cash and cash
         equivalents                $56.8      $171.8      $236.8
        Inventory                $3,357.6    $2,904.8    $2,791.5
        Floorplan notes
         payable                 $3,175.7    $2,796.0    $2,587.9
        Non-vehicle debt           $819.9      $824.4      $740.9
        Equity                   $4,083.0    $3,949.7    $3,885.5
        New days supply
         (industry standard of
         selling days,
         including fleet)         75 days     71 days     65 days

        Used days
         supply (trailing
         30 days)                 41 days     41 days     34 days




        Comparable
         Basis
         Reconciliations
                                 Net Income       Diluted Earnings Per Share
                              Six Months Ended        Six Months Ended
                                  June 30,               June 30,

                             2004          2003      2004     2003

        Net income, as
         reported          $179.4        $291.3     $0.65    $1.01

          Discontinued
           operations         4.1          12.9     $0.01    $0.04
          Cumulative
           effect of
           accounting
           change              --          14.6        --    $0.05
        Net income from
         continuing
         operations, as
         reported           183.5         318.8     $0.67    $1.10
          Income tax
           benefit
           from IRS
           settlement          --        (127.5)       --   $(0.44)
        Net income,
         excluding income
         tax benefit from
          IRS Settlement   $183.5        $191.3     $0.67    $0.66


        Note
        The Company's parts and service departments provide reconditioning
        repair work for used vehicles acquired by the used vehicle
        department and minor preparatory work for new vehicles.  The parts
        and service departments charge the new and used departments as if
        they were third parties in order to account for total activity
        performed by that department.  The Company has determined that the
        revenue and related cost of sales of both new and used vehicles had
        not been reduced by the intracompany charge for such work.
        Commencing with the second quarter of 2004, the Company is making
        the adjustment and has revised amounts previously reported by
        reducing new and used vehicle revenue and cost of sales by the
        amount of the intracompany charge.  The adjustments have no impact
        on gross profit, operating income, income from continuing
        operations, net income, earnings per share, cash flows, or
        financial position for any period or their respective trends.

        The effect of the adjustments was to reduce both revenue and cost
        of sales for new vehicles by $22 million and $44 million for the
        three and six months ended June 30, 2004, respectively, and for
        used vehicles by $52 million and $102 million for the same
        periods, respectively.  For 2003, the adjustment reduced both
        revenue and cost of sales for new vehicles by $21 million and
        $40 million for the three and six months ended June 30, 2003,
        respectively, and used vehicles by $49 million and $94 million for
        the same periods, respectively.  Accordingly, the Company's
        revenue-based performance metrics, such as revenue per vehicle,
        gross profit as a percent of revenue, and SG&A as a percent of
        revenue, also have been revised.  These revisions do not have a
        material impact on the amounts for any period or respective
        trends.



                                   AUTONATION, INC.
                              UNAUDITED SAME STORE DATA
                       ($ in millions, except per vehicle data)




                 Operating Highlights          Three Months Ended June 30,
                                                                 $        %
                                            2004      2003   Variance Variance


           Revenue:
               New vehicle                 $2,973.1  $3,042.6  $(69.5)  (2.3)
                 Retail used vehicle          892.9     928.6   (35.7)  (3.8)
                 Wholesale                    196.0     197.2    (1.2)  (0.6)
               Used vehicle                 1,088.9   1,125.8   (36.9)  (3.3)
               Parts and service              620.4     613.1     7.3    1.2
               Finance and insurance          155.9     157.0    (1.1)  (0.7)
               Other                            9.0       7.5     1.5
                                           $4,847.3  $4,946.0  $(98.7)  (2.0)


           Gross profit:
               New vehicle                   $208.2    $222.2  $(14.0)  (6.3)
                 Retail used vehicle          102.0     107.8    (5.8)  (5.4)
                 Wholesale                      0.4       1.1    (0.7)
               Used vehicle                   102.4     108.9    (6.5)  (6.0)
               Parts and service              273.8     268.1     5.7    2.1
               Finance and insurance          155.9     157.0    (1.1)  (0.7)
               Other                            7.4       6.4     1.0
                                             $747.7    $762.6  $(14.9)  (2.0)




           Retail vehicle unit sales:
                  New                       105,366   108,675  (3,309)  (3.0)
                  Used                       62,031    65,072  (3,041)  (4.7)
                                            167,397   173,747  (6,350)  (3.7)

           Revenue per vehicle retailed:
                  New                       $28,217   $27,997    $220    0.8
                  Used                      $14,394   $14,270    $124    0.9

           Gross profit per vehicle
            retailed:
                  New                        $1,976    $2,045    $(69)  (3.4)
                  Used                       $1,644    $1,657    $(13)  (0.8)
                  Finance and insurance        $931      $904     $27    3.0






                 Operating Highlights          Six Months Ended June 30,
                                                                 $        %
                                            2004      2003   Variance Variance


           Revenue:
               New vehicle                 $5,717.1  $5,604.7  $112.4    2.0
                 Retail used vehicle        1,787.5   1,780.3     7.2    0.4
                 Wholesale                    382.5     390.5    (8.0)  (2.0)
               Used vehicle                 2,170.0   2,170.8    (0.8)  (0.0)
               Parts and service            1,243.9   1,203.6    40.3    3.3
               Finance and insurance          305.3     292.3    13.0    4.4
               Other                           17.6      15.8     1.8
                                           $9,453.9  $9,287.2  $166.7    1.8


           Gross profit:
               New vehicle                   $405.2    $417.6  $(12.4)  (3.0)
                 Retail used vehicle          207.4     210.2    (2.8)  (1.3)
                 Wholesale                      1.1       1.8    (0.7)
               Used vehicle                   208.5     212.0    (3.5)  (1.7)
               Parts and service              546.1     525.0    21.1    4.0
               Finance and insurance          305.3     292.3    13.0    4.4
               Other                           14.4      13.5     0.9
                                           $1,479.5  $1,460.4   $19.1    1.3




           Retail vehicle unit sales:
                  New                       201,400   201,358      42    0.0
                  Used                      124,418   123,933     485    0.4
                                            325,818   325,291     527    0.2

           Revenue per vehicle retailed:
                  New                       $28,387   $27,835    $552    2.0
                  Used                      $14,367   $14,365      $2    0.0

           Gross profit per vehicle
            retailed:
                  New                        $2,012    $2,074    $(62)  (3.0)
                  Used                       $1,667    $1,696    $(29)  (1.7)
                  Finance and insurance        $937      $899     $38    4.2




                Operating Percentages     Three Months Ended  Six Months Ended
                                                June 30,          June 30,
                                           %  2004   %  2003  %  2004 %  2003

           Revenue mix percentages:
               New vehicle                     61.3      61.5    60.5   60.3
               Used vehicle                    22.5      22.8    23.0   23.4
               Parts and service               12.8      12.4    13.2   13.0
               Finance and insurance            3.2       3.2     3.2    3.1
               Other                            0.2       0.1     0.1    0.2
                                              100.0     100.0   100.0  100.0


           Gross profit mix percentages:
               New vehicle                     27.8      29.1    27.4   28.6
               Used vehicle                    13.7      14.3    14.1   14.5
               Parts and service               36.6      35.2    36.9   35.9
               Finance and insurance           20.9      20.6    20.6   20.0
               Other                            1.0       0.8     1.0    1.0
                                              100.0     100.0   100.0  100.0



           Operating items as a percentage
            of revenue:
               Gross Profit:
                  New vehicle                   7.0       7.3     7.1    7.5
                  Used vehicle - retail        11.4      11.6    11.6   11.8
                  Parts and service            44.1      43.7    43.9   43.6
                  Total                        15.4      15.4    15.6   15.7


                            See accompanying note.

SOURCE AutoNation, Inc.

Photo    : http://www.newscom.com/cgi-bin/prnh/20001017/AUTONATIONLOGO
Audio    : http://www.autonation.com /
Marc Cannon, AutoNation, Inc., +1-954-769-3146, or
cannonm@autonation.com
/Company News On-Call:  http://www.prnewswire.com/comp/750525.htm
http://www.prnewswire.com
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