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

Oct. 28, 2004

FORT LAUDERDALE, Fla., Oct. 28 /PRNewswire-FirstCall/ -- AutoNation, Inc. (NYSE: AN), America's largest automotive retailer, today reported net income from continuing operations of $95.0 million, or $0.35 per share, on revenue of $5.1 billion for the third quarter ended September 30, 2004. The results compare with 2003 third-quarter net income from continuing operations of $109.5 million, or $0.38 per share, on revenue of $5.1 billion.

"A number of factors directly impacted our third-quarter earnings," said Mike Jackson, chairman and chief executive officer of AutoNation. "These factors included the four major hurricanes that caused store closings and substantial disruption of our business throughout Florida and the Southeast, and the challenging retail sales environment we continue to experience."

At the end of the third quarter, AutoNation's new vehicle inventory level was 53 days versus 75 days at the end of the second quarter - a decline of 25,000 units or 24%.

For the nine-month period ended September 30, 2004, the Company reported net income from continuing operations of $278.9 million or $1.02 per share. Net income from continuing operations for the nine-month period ended September 30, 2003 was $428.5 million or $1.48 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 nine-month period ended September 30, 2003 was $1.04. The Company's revenue for the nine-month period ended September 30, 2004 totaled $14.8 billion, up 2 percent versus the prior year.

Looking ahead, Mr. Jackson said, "We expect fourth-quarter EPS from continuing operations to be in the range of $0.30 to $0.33 per share. As previously announced, our full-year 2004 guidance for EPS from continuing operations is in the range of $1.32 to $1.35."

Following careful consideration, the Company has made a policy change with regard to providing future earnings guidance. In the future, the Company will no longer provide quarterly or annual earnings per share guidance. The Company will continue providing investors with long-term EPS growth targets along with information and insight into strategic initiatives, growth and value drivers, and trend and industry data critical to understanding the Company's businesses and operating environment.

"We believe that our Company and shareholders are best served with our approach of managing our business for the long-term," Mr. Jackson stated. "Our progress in executing our long-term strategy is best measured as we achieve it, rather than focusing on establishing and attaining short-term public forecasts. With our diversified business model, our goal continues to be EPS growth at a long-term average annual rate of 10%-12%."

Key assumptions and drivers related to our long-term EPS growth rate objective are set forth in the following financial tables and will be discussed on the earnings conference call.

Separately, the Company also announced today that its Board of Directors has authorized an additional $250 million for the repurchase of its common stock. The Board's decision extends the Company's previously authorized share repurchase programs.

AutoNation will discuss these results, the Company's outlook and supporting assumptions during a conference call and audio webcast this morning at 9:00 a.m., Eastern Time. To listen to the live conference call, dial (800) 762-4717, 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 November 4, 2004, by calling (800) 475-6701, access code number #750554 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 360 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, including the information set forth under "Business Assumptions Impacting Long-term EPS Growth Target" in the following financial tables, 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 nine-month period ended September 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 measure, 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  Nine Months Ended
                                          September 30,       September 30,
                                         2004      2003      2004      2003

        Revenue:
           New vehicle                 $3,176.6  $3,218.6  $9,003.6  $8,826.9
           Used vehicle                 1,098.8   1,117.7   3,312.2   3,295.6
           Parts and service              638.0     630.3   1,898.2   1,837.6
           Finance and insurance          162.3     166.5     470.6     458.9
           Other                           21.7       9.5      68.1      30.9
        Total revenue                   5,097.4   5,142.6  14,752.7  14,449.9

        Cost of sales:
           New vehicle                  2,956.5   2,989.6   8,369.8   8,180.5
           Used vehicle                 1,001.3   1,013.5   3,002.6   2,978.5
           Parts and service              361.3     355.0   1,066.9   1,035.5
           Other                           10.0       1.2      30.6       4.3
        Total cost of sales             4,329.1   4,359.3  12,469.9  12,198.8

        Gross profit                      768.3     783.3   2,282.8   2,251.1

        Selling, general and
         administrative expenses          551.7     558.7   1,649.6   1,617.8
        Depreciation                       20.2      17.3      58.5      50.8
        Amortization                        0.3       0.3       0.9       1.3
        Loan and lease underwriting
         income, net                         --      (0.1)       --      (6.1)
        Other losses (gains)                1.0      (0.1)      1.4       2.3

        Operating income                  195.1     207.2     572.4     585.0

        Floorplan interest expense        (21.4)    (15.2)    (60.1)    (53.7)
        Other interest expense            (18.4)    (18.5)    (57.4)    (54.7)
        Interest income                     0.9       0.8       2.3       2.8
        Other (loss) income                (1.9)     (1.3)     (3.3)      5.0

        Income from continuing
         operations before income
         taxes                            154.3     173.0     453.9     484.4

        Provision for income taxes         59.3      63.5     175.0     183.4
        Income tax benefit from IRS
         settlement                          --        --        --    (127.5)

        Net tax provision - continuing
         operations                        59.3      63.5     175.0      55.9

        Net income from continuing
         operations                        95.0     109.5     278.9     428.5

        Loss from discontinued
         operations, net of income
         taxes                             (2.6)     (0.7)     (7.1)    (13.8)

        Net income before cumulative
         effect of accounting change       92.4     108.8     271.8     414.7

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

        Net income                        $92.4    $108.8    $271.8    $400.1


        Diluted earnings per share:
           Continuing operations          $0.35     $0.38     $1.02     $1.48
           Discontinued operations       $(0.01)    $  --    $(0.03)   $(0.05)
           Cumulative effect of
            accounting change             $  --     $  --     $  --    $(0.05)
           Net income                     $0.34     $0.38     $0.99     $1.39

        Weighted average common and
         common equivalent shares
         outstanding                      270.6     286.6     273.2     288.6

        Common shares outstanding         264.4     274.6     264.4     274.6



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


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


          Revenue:
            New vehicle                   $3,176.6  $3,218.6  $(42.0)    (1.3)
              Retail used vehicle            881.7     907.8   (26.1)    (2.9)
              Wholesale                      217.1     209.9     7.2      3.4
            Used vehicle                   1,098.8   1,117.7   (18.9)    (1.7)
            Parts and service                638.0     630.3     7.7      1.2
            Finance and insurance            162.3     166.5    (4.2)    (2.5)
            Other                             21.7       9.5    12.2
                                          $5,097.4  $5,142.6  $(45.2)    (0.9)


          Gross profit:
            New vehicle                     $220.1    $229.0   $(8.9)    (3.9)
              Retail used vehicle             98.5     104.2    (5.7)    (5.5)
              Wholesale                       (1.0)       --    (1.0)
            Used vehicle                      97.5     104.2    (6.7)    (6.4)
            Parts and service                276.7     275.3     1.4      0.5
            Finance and insurance            162.3     166.5    (4.2)    (2.5)
            Other                             11.7       8.3     3.4
                                             768.3     783.3   (15.0)    (1.9)

          Selling, general and
           administrative expenses           551.7     558.7     7.0      1.3

          Depreciation                        20.2      17.3    (2.9)
          Amortization                         0.3       0.3      --
          Loan and lease underwriting
           income, net                          --      (0.1)   (0.1)
          Other losses (gains)                 1.0      (0.1)   (1.1)
           Operating income                  195.1     207.2   (12.1)    (5.8)

          Floorplan interest expense         (21.4)    (15.2)   (6.2)   (40.8)
          Other interest expense             (18.4)    (18.5)    0.1      0.5
          Interest income                      0.9       0.8     0.1     12.5
          Other income                        (1.9)     (1.3)   (0.6)
            Income from continuing
             operations before income
             taxes                          $154.3    $173.0  $(18.7)   (10.8)

          Retail vehicle unit sales:
               New                         110,634   115,434  (4,800)    (4.2)
               Used                         60,731    64,175  (3,444)    (5.4)
                                           171,365   179,609  (8,244)    (4.6)

          Revenue per vehicle retailed:
               New                         $28,713   $27,883    $830      3.0
               Used                        $14,518   $14,146    $372      2.6

          Gross profit per vehicle
           retailed:
               New                          $1,989    $1,984      $5      0.3
               Used                         $1,622    $1,624     $(2)    (0.1)
               Finance and insurance          $947      $927     $20      2.2


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


           Operating Highlights           Nine Months Ended September 30,
                                       2004     2003  $Variance  %Variance
         Revenue:
          New vehicle              $9,003.6   $8,826.9  $176.7      2.0
            Retail used vehicle     2,698.4    2,693.7     4.7      0.2
            Wholesale                 613.8      601.9    11.9      2.0
          Used vehicle              3,312.2    3,295.6    16.6      0.5
          Parts and service         1,898.2    1,837.6    60.6      3.3
          Finance and insurance       470.6      458.9    11.7      2.5
          Other                        68.1       30.9    37.2
                                  $14,752.7  $14,449.9  $302.8      2.1


         Gross profit:
          New vehicle                $633.8     $646.4  $(12.6)    (1.9)
            Retail used vehicle       308.4      315.4    (7.0)    (2.2)
            Wholesale                   1.2        1.7    (0.5)
          Used vehicle                309.6      317.1    (7.5)    (2.4)
          Parts and service           831.3      802.1    29.2      3.6
          Finance and insurance       470.6      458.9    11.7      2.5
          Other                        37.5       26.6    10.9
                                    2,282.8    2,251.1    31.7      1.4

         Selling, general and
          administrative expenses   1,649.6    1,617.8   (31.8)    (2.0)

         Depreciation                  58.5       50.8    (7.7)
         Amortization                   0.9        1.3     0.4
         Loan and lease
          underwriting income,
          net                            --       (6.1)   (6.1)
         Other losses (gains)           1.4        2.3     0.9
          Operating income            572.4      585.0   (12.6)    (2.2)

         Floorplan interest
          expense                     (60.1)     (53.7)   (6.4)   (11.9)
         Other interest expense       (57.4)     (54.7)   (2.7)    (4.9)
         Interest income                2.3        2.8    (0.5)   (17.9)
         Other income                  (3.3)       5.0    (8.3)
           Income from continuing
            operations before
            income taxes             $453.9     $484.4  $(30.5)    (6.3)

         Retail vehicle unit
          sales:
             New                    314,869    316,920  (2,051)    (0.6)
             Used                   186,411    188,585  (2,174)    (1.2)
                                    501,280    505,505  (4,225)    (0.8)

         Revenue per vehicle
          retailed:
             New                    $28,595    $27,852    $743      2.7
             Used                   $14,476    $14,284    $192      1.3

         Gross profit per vehicle
          retailed:
             New                     $2,013     $2,040    $(27)    (1.3)
             Used                    $1,654     $1,672    $(18)    (1.1)
             Finance and
              insurance                $939       $908     $31      3.4


               Operating Percentages      Three Months Ended Nine Months Ended
                                            September 30,      September 30,
                                          %  2004   %  2003  %  2004  %  2003

          Revenue mix percentages:
            New vehicle                       62.3      62.6    61.0     61.1
            Used vehicle                      21.6      21.7    22.5     22.8
            Parts and service                 12.5      12.3    12.9     12.7
            Finance and insurance              3.2       3.2     3.2      3.2
            Other                              0.4       0.2     0.4      0.2
                                             100.0     100.0   100.0    100.0

          Gross profit mix percentages:
            New vehicle                       28.6      29.2    27.8     28.7
            Used vehicle                      12.7      13.3    13.6     14.1
            Parts and service                 36.0      35.1    36.4     35.6
            Finance and insurance             21.1      21.3    20.6     20.4
            Other                              1.6       1.1     1.6      1.2
                                             100.0     100.0   100.0    100.0

          Operating items as a percentage
           of revenue:
            Gross profit:
               New vehicle                     6.9       7.1     7.0      7.3
               Used vehicle - retail          11.2      11.5    11.4     11.7
               Parts and service              43.4      43.7    43.8     43.6
               Total                          15.1      15.2    15.5     15.6
            Selling, general and
             administrative expenses          10.8      10.9    11.2     11.2
            Operating income                   3.8       4.0     3.9      4.0

          Operating items as a percentage
           of total gross profit:
            Selling, general and
             administrative expenses          71.8      71.3    72.3     71.9
            Operating income                  25.4      26.5    25.1     26.0



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



               Cash Flow Information     Three Months Ended  Nine Months Ended
                                            September 30,      September 30,
                                            2004    2003      2004     2003

           Capital expenditures, excluding
            property operating lease
            buy-outs                        $26.9    $30.1    $81.6    $75.3
           Property operating lease buy-
            outs                            $  --    $  --    $77.7     $9.8
           Stock repurchases                $82.9   $111.8   $190.8   $465.2
           Acquisitions                     $(0.1)    $3.0   $154.3    $47.8
           Proceeds from exercises of
            stock options                   $18.2    $63.2    $68.1   $101.9



           Floorplan Assistance      Three Months Ended    Nine Months Ended
                  and Expense            September 30,        September 30,
                                     2004  2003  Variance  2004 2003 Variance


         Floorplan assistance
          (included in cost of
          operations)                $32.8  $29.3   $3.5  $90.6  $87.5   $3.1
         Floorplan interest expense  (21.4) (15.2)  (6.2) (60.1) (53.7)  (6.4)

           Net floorplan benefit     $11.4  $14.1  $(2.7) $30.5  $33.8  $(3.3)



      Balance Sheet and Other Highlights


                                   September 30,  December 31,  September 30,
                                      2004            2003           2003


          Cash and cash equivalents    $90.8            $172.1          $35.6
          Inventory                 $2,647.1          $2,889.4       $2,339.4
          Vehicle floorplan
           payable                  $2,457.4          $2,780.7       $2,202.6
          Non-vehicle debt            $817.4            $824.4         $738.5
          Equity                    $4,113.0          $3,949.7       $3,958.7
          New days supply
            (industry standard of
             selling days,
             including fleet)        53 days           71 days        53 days

          Used days supply
            (trailing 30 days)       41 days           41 days        38 days



           Comparable Basis                                  Diluted Earnings
           Reconciliations                  Net Income           Per Share
                                         Nine Months Ended   Nine Months Ended
                                           September 30,        September 30,

                                            2004     2003     2004    2003

           Net income, as reported          $271.8   $400.1   $0.99    $1.39

             Discontinued operations           7.1     13.8   $0.03    $0.05
             Cumulative effect of
              accounting change                 --     14.6      --    $0.05
           Net income from continuing
            operations, as reported          278.9    428.5   $1.02    $1.48
             Income tax benefit from IRS
              settlement                       --    (127.5)     --   $(0.44)
           Net income, excluding income
            tax benefit from IRS
            Settlement                     $278.9   $301.0   $1.02    $1.04

    Business Assumptions Impacting Long-term EPS Growth Target:

    U.S. light vehicle annual unit sales-stable in the high 16 million range
    SGA % reduction (next 3 years) (SGA % of gross profit less floorplan
     interest expense)-approximately 200 bp (including the previously
     announced 100 basis point reduction resulting from the organizational
     realignment.)
    Continued opportunistic redeployment of cash flow-share repurchase, debt
     reduction, after-tax capital expenditures and acquisitions
    Targeted return on incremental invested capital-approximately 15%


    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 total 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 $21 million and $65 million for the three and nine months ended September 30, 2004, respectively, and for used vehicles by $49 million and $151 million for the same periods, respectively. For 2003, the adjustment reduced both revenue and cost of sales for new vehicles by $21 million and $61 million for the three and nine months ended September 30, 2003, respectively, and used vehicles by $50 million and $143 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 September 30,
                                           2004     2003   $Variance %Variance

           Revenue:
               New vehicle                 $3,091.3  $3,207.0  $(115.7)  (3.6)
                 Retail used vehicle          858.5     903.3    (44.8)  (5.0)
                 Wholesale                    206.1     208.7     (2.6)  (1.2)
               Used vehicle                 1,064.6   1,112.0    (47.4)  (4.3)
               Parts and service              624.3     626.7     (2.4)  (0.4)
               Finance and insurance          159.8     166.1     (6.3)  (3.8)
               Other                            9.0       6.7      2.3
                                           $4,949.0  $5,118.5  $(169.5)  (3.3)


           Gross profit:
               New vehicle                   $213.2    $228.2   $(15.0)  (6.6)
                 Retail used vehicle           96.7     103.9     (7.2)  (6.9)
                 Wholesale                     (1.9)       --     (1.9)
               Used vehicle                    94.8     103.9     (9.1)  (8.8)
               Parts and service              270.1     273.8     (3.7)  (1.4)
               Finance and insurance          159.8     166.1     (6.3)  (3.8)
               Other                            7.1       5.5      1.6
                                             $745.0    $777.5   $(32.5)  (4.2)


           Retail vehicle unit sales:
                  New                       108,371   115,043   (6,672)  (5.8)
                  Used                       59,716    63,837   (4,121)  (6.5)
                                            168,087   178,880  (10,793)  (6.0)

           Revenue per vehicle retailed:
                  New                       $28,525   $27,877     $648    2.3
                  Used                      $14,376   $14,150     $226    1.6

           Gross profit per vehicle
            retailed:
                  New                        $1,967    $1,984     $(17)  (0.9)
                  Used                       $1,619    $1,628      $(9)  (0.6)
                  Finance and insurance        $951      $929      $22    2.4



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




              Operating Highlights       Nine Months Ended September 30,
                                        2004      2003    $Variance  %Variance

          Revenue:
              New vehicle             $8,786.0   $8,783.5    $2.5        --
                Retail used vehicle    2,642.1    2,677.3   (35.2)     (1.3)
                Wholesale                586.9      597.5   (10.6)     (1.8)
              Used vehicle             3,229.0    3,274.8   (45.8)     (1.4)
              Parts and service        1,863.0    1,824.5    38.5       2.1
              Finance and insurance      464.1      457.1     7.0       1.5
              Other                       26.6       22.5     4.1
                                     $14,368.7  $14,362.4    $6.3        --


          Gross profit:
              New vehicle               $616.8     $644.2  $(27.4)     (4.3)
                Retail used vehicle      303.6      313.6   (10.0)     (3.2)
                Wholesale                 (0.8)       2.0    (2.8)
              Used vehicle               302.8      315.6   (12.8)     (4.1)
              Parts and service          814.1      796.5    17.6       2.2
              Finance and insurance      464.1      457.1     7.0       1.5
              Other                       21.6       18.9     2.7
                                      $2,219.4   $2,232.3  $(12.9)     (0.6)


          Retail vehicle unit sales:
                 New                   308,925    315,365  (6,440)     (2.0)
                 Used                  183,787    187,289  (3,502)     (1.9)
                                       492,712    502,654  (9,942)     (2.0)

          Revenue per vehicle
           retailed:
                 New                   $28,441    $27,852    $589       2.1
                 Used                  $14,376    $14,295     $81       0.6

          Gross profit per vehicle
           retailed:
                 New                    $1,997     $2,043    $(46)     (2.3)
                 Used                   $1,652     $1,674    $(22)     (1.3)
                 Finance and
                  insurance               $942       $909     $33       3.6





                 Operating Percentages  Three Months Ended   Nine Months Ended
                                           September 30,        September 30,
                                           %  2004   %  2003   %  2004 %  2003

           Revenue mix percentages:
               New vehicle                     62.5      62.7     61.1   61.2
               Used vehicle                    21.5      21.7     22.5   22.8
               Parts and service               12.6      12.2     13.0   12.7
               Finance and insurance            3.2       3.2      3.2    3.2
               Other                            0.2       0.2      0.2    0.1
                                              100.0     100.0    100.0  100.0


           Gross profit mix percentages:
               New vehicle                     28.6      29.4     27.8   28.9
               Used vehicle                    12.7      13.4     13.6   14.1
               Parts and service               36.3      35.2     36.7   35.7
               Finance and insurance           21.4      21.4     20.9   20.5
               Other                            1.0       0.6      1.0    0.8
                                              100.0     100.0    100.0  100.0



           Operating items as a percentage
            of revenue:
               Gross Profit:
                  New vehicle                   6.9       7.1      7.0    7.3
                  Used vehicle - retail        11.3      11.5     11.5   11.7
                  Parts and service            43.3      43.7     43.7   43.7
                  Total                        15.1      15.2     15.4   15.5


SOURCE  AutoNation, Inc.
    -0-                             10/28/2004
    /CONTACT:  Marc Cannon of AutoNation, +1-954-769-3146, or
cannonm@autonation.com /
    /Photo:  http://www.newscom.com/cgi-bin/prnh/20001017/AUTONATIONLOGO
              AP Archive:  http://photoarchive.ap.org
              PRN Photo Desk, photodesk@prnewswire.com/
    /Company News On-Call:  http://www.prnewswire.com/comp/750525.html /
    /Web site:  http://corp.autonation.com
                http://www.autonation.com /
    /Audio:  http://www.autonation.com /
    (AN)

CO:  AutoNation, Inc.
ST:  Florida, Texas
IN:  AUT
SU:  ERN ERP CCA MAV

SP-KW 
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2443 10/28/2004 06:42 EDT http://www.prnewswire.com
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