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AutoNation Reports Second-Quarter Earnings

Jul. 27, 2006
     * Earnings from continuing operations of $0.33 per share; excluding
       $.09 per share one-time impact of the Company's recent
       recapitalization, second-quarter adjusted EPS from continuing
       operations was $0.42, up 5% from prior year

     * Recapitalization delivered $1.15 billion of cash to stockholders

     * Record second-quarter operating income of $213 million

     * Premium luxury new vehicle revenue up 18%; premium luxury and volume
       imports accounted for 61% of new vehicle revenue versus 55% a year ago

FORT LAUDERDALE, Fla., July 27 /PRNewswire-FirstCall/ -- AutoNation, Inc. (NYSE: AN), America's largest automotive retailer, today reported 2006 second- quarter net income from continuing operations of $74 million or $0.33 per share, compared to year-ago net income from continuing operations of $107 million or $0.40 per share. During the quarter, the Company repurchased $309 million in face value of its 9% senior notes for $334.2 million, incurring one-time repurchase costs of approximately $21 million after tax, or $.09 per share. Excluding this impact, the Company's second quarter adjusted net income from continuing operations was $95 million or $0.42 per share, up 5% versus the prior year. Second quarter results also include approximately $0.01 per share of non-cash compensation expense related to employee stock options, which is a component of selling, general and administrative (SG&A) expenses, that was not in the prior year results.

Second-quarter 2006 revenue totaled $5.0 billion, an increase of 1% compared to the year-ago period, with revenue growth in retail used vehicles of 7%, parts and service of 4%, and finance and insurance of 8%, more than offsetting a decline in new vehicle revenue. Premium luxury new vehicle revenue increased 18% over the prior year. Premium luxury and volume imports accounted for 61% of new vehicle revenue versus 55% a year ago. Total gross profit for the quarter increased 4%. Operating income was a second-quarter record of $213 million, up 1% versus the prior year.

During the quarter, the Company successfully completed a tender offer for 50 million shares of its stock and other related debt financing transactions, including the senior notes repurchase mentioned above. These transactions allowed the Company to deliver $1.15 billion of cash to stockholders while retaining financial flexibility.

Chairman and Chief Executive Officer Mike Jackson commented, "While the second quarter was a challenging economic environment for new vehicle sales, we were pleased with strong growth in our premium luxury new vehicle business, our high-margin parts and service business, used vehicles and finance & insurance."

Discontinued operations in the second quarter were nominal compared to net income of $.33 per share last year. Last year's net income included a benefit of $0.36 per share from the resolution of various tax matters.

AutoNation also announces that Executive Vice President and Chief Financial Officer Craig Monaghan will be leaving AutoNation effective August 31, 2006 to take the position of Chief Financial Officer for Sears Holdings. "Craig has been a highly valued member of our executive team since joining the organization in 2000, and has been instrumental in the successful development and execution of a number of our Company's most effective initiatives. All of us at AutoNation wish him well in his new duties," said Jackson. Beginning September 1, 2006, Alex McAllister, the Company's Vice President and Corporate Controller, will also serve as Interim CFO until December 31, 2006 when he will retire from the Company. Mr. McAllister had independently approached the Company about retiring for personal reasons unrelated to the Company. AutoNation will commence a national search for the CFO position immediately.

For the six-month period ended June 30, 2006, the Company reported net income from continuing operations of $172 million or $0.70 per share. Excluding senior note repurchase costs, earnings per share from continuing operations for the six-month period ended June 30, 2006 were $193 million or $0.78 per share, compared to $0.76 per share in the prior year. The Company's revenue for the six-month period ended June 30, 2006 totaled $9.7 billion, up 3% compared to $9.4 billion in the prior year.

The second quarter conference call may be accessed at 11:00 a.m. Eastern Time, by phone at 888-781-3339 or via the Internet (audio web cast) at http://www.AutoNation.com by clicking on the "About Us" link then clicking on "Investors" and then "Web casts." A playback of the conference call will be available after 2:30 p.m. Eastern Time July 27, 2006 through August 3, 2006 by calling 800-475-6701 (access code #836187).

About AutoNation, Inc.

AutoNation, Inc., headquartered in Fort Lauderdale, Fla., is America's largest automotive retailer and a component of the Standard and Poor's 500 Index. AutoNation has approximately 27,000 full-time employees and owns and operates 338 new vehicle franchises in 16 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 long-term growth targets.

NON-GAAP FINANCIAL MEASURES

The attached financial tables contain certain non-GAAP financial measures as defined under SEC rules, such as net income and diluted earnings per share from continuing operations for the three-month and six-month periods ended June 30, 2006 and 2005, adjusted to exclude the effect of repurchases of the Company's 9% senior unsecured notes due 2008. As required by SEC rules, the Company has provided reconciliations of these measures to the most directly comparable GAAP measures, which are set forth in the attachments to this release. The Company believes that each of the foregoing non-GAAP financial measures 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.

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

                                       Three Months Ended   Six Months Ended
                                            June 30,            June 30,
                                         2006      2005      2006      2005
        Revenue:
           New vehicle                 $2,944.9  $2,993.8  $5,629.2  $5,624.8
           Used vehicle                 1,203.9   1,124.4   2,345.3   2,186.7
           Parts and service              670.0     645.2   1,334.4   1,278.0
           Finance and insurance          171.1     158.1     322.9     302.2
           Other                           20.9      22.5      39.8      42.0

        Total revenue                   5,010.8   4,944.0   9,671.6   9,433.7

        Cost of sales:
           New vehicle                  2,730.5   2,779.5   5,214.9   5,216.4
           Used vehicle                 1,097.8   1,018.2   2,124.7   1,967.9
           Parts and service              372.8     363.3     745.3     722.0
           Other                            9.0      10.7      16.7      18.8

        Total cost of sales             4,210.1   4,171.7   8,101.6   7,925.1

        Gross profit                      800.7     772.3   1,570.0   1,508.6

        Selling, general and
         administrative expenses          566.2     542.4   1,112.5   1,059.7
        Depreciation and amortization      21.2      20.0      41.0      39.8
        Other expenses (income)             0.1      (0.6)      0.1      (0.5)

        Operating income                  213.2     210.5     416.4     409.6

        Floorplan interest expense        (37.7)    (28.1)    (69.9)    (52.6)
        Other interest expense            (25.2)    (15.4)    (37.2)    (33.0)
        Other interest expense -
         senior note repurchases          (34.5)     (0.7)    (34.5)    (15.1)
        Interest income                     3.2       1.4       6.7       2.9
        Other income                        0.7       0.9       0.7        --

        Income from continuing
         operations before income
         taxes                            119.7     168.6     282.2     311.8

        Provision for income taxes         46.0      61.7     110.5     115.8

        Net income from continuing
         operations                        73.7     106.9     171.7     196.0

        Income (loss) from
         discontinued operations, net
         of income taxes                   (1.0)     87.9     (11.8)     95.8

        Net income                        $72.7    $194.8    $159.9    $291.8

        Diluted earnings per share:
           Continuing operations          $0.33     $0.40     $0.70     $0.73
           Discontinued operations       $(0.00)    $0.33    $(0.05)    $0.36

           Net income                     $0.32     $0.73     $0.65     $1.08

        Weighted average common and
         common equivalent shares
          outstanding                     225.2     267.8     246.5     269.0

        Common shares outstanding         213.0     261.2     213.0     261.2



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

             Operating Highlights            Three Months Ended June 30,
                                                                $         %
                                         2006      2005     Variance  Variance
        Revenue:
          New vehicle                  $2,944.9  $2,993.8    $(48.9)    (1.6)
            Retail used vehicle           965.5     903.2      62.3      6.9
            Wholesale                     238.4     221.2      17.2      7.8
          Used vehicle                  1,203.9   1,124.4      79.5      7.1
          Parts and service               670.0     645.2      24.8      3.8
          Finance and insurance           171.1     158.1      13.0      8.2
          Other                            20.9      22.5      (1.6)
        Total revenue                  $5,010.8  $4,944.0     $66.8      1.4

        Gross profit:
          New vehicle                    $214.4    $214.3      $0.1      0.0
            Retail used vehicle           106.2     105.7       0.5      0.5
            Wholesale                      (0.1)      0.5      (0.6)
          Used vehicle                    106.1     106.2      (0.1)    (0.1)
          Parts and service               297.2     281.9      15.3      5.4
          Finance and insurance           171.1     158.1      13.0      8.2
          Other                            11.9      11.8       0.1
        Total gross profit                800.7     772.3      28.4      3.7

        Selling, general and
         administrative expenses          566.2     542.4     (23.8)    (4.4)
        Depreciation and
         amortization                      21.2      20.0      (1.2)
        Other expenses (income)             0.1      (0.6)     (0.7)

          Operating income                213.2     210.5       2.7      1.3

        Floorplan interest expense        (37.7)    (28.1)     (9.6)
        Other interest expense            (25.2)    (15.4)     (9.8)
        Other interest expense -
         senior note repurchases          (34.5)     (0.7)    (33.8)
        Interest income                     3.2       1.4       1.8
        Other income                        0.7       0.9      (0.2)
          Income from continuing
           operations before income
           taxes                         $119.7    $168.6    $(48.9)   (29.0)

        Retail vehicle unit sales:
             New                         99,027   102,007    (2,980)    (2.9)
             Used                        59,635    59,388       247      0.4
                                        158,662   161,395    (2,733)    (1.7)

        Revenue per vehicle retailed:
             New                        $29,738   $29,349      $389      1.3
             Used                       $16,190   $15,208      $982      6.5

        Gross profit per vehicle
         retailed:
             New                         $2,165    $2,101       $64      3.0
             Used                        $1,781    $1,780        $1      0.1
             Finance and insurance       $1,078      $980       $98     10.0


             Operating Highlights              Six Months Ended June 30,
                                                                $        %
                                         2006      2005     Variance Variance
        Revenue:
          New vehicle                  $5,629.2  $5,624.8      $4.4      0.1
            Retail used vehicle         1,889.1   1,779.1     110.0      6.2
            Wholesale                     456.2     407.6      48.6     11.9
          Used vehicle                  2,345.3   2,186.7     158.6      7.3
          Parts and service             1,334.4   1,278.0      56.4      4.4
          Finance and insurance           322.9     302.2      20.7      6.8
          Other                            39.8      42.0      (2.2)
        Total revenue                  $9,671.6  $9,433.7    $237.9      2.5

        Gross profit:
          New vehicle                    $414.3    $408.4      $5.9      1.4
            Retail used vehicle           218.2     215.1       3.1      1.4
            Wholesale                       2.4       3.7      (1.3)
          Used vehicle                    220.6     218.8       1.8      0.8
          Parts and service               589.1     556.0      33.1      6.0
          Finance and insurance           322.9     302.2      20.7      6.8
          Other                            23.1      23.2      (0.1)
        Total gross profit              1,570.0   1,508.6      61.4      4.1

        Selling, general and
         administrative expenses        1,112.5   1,059.7     (52.8)    (5.0)
        Depreciation and
         amortization                      41.0      39.8      (1.2)
        Other expenses (income)             0.1      (0.5)     (0.6)

          Operating income                416.4     409.6       6.8      1.7

       Floorplan interest expense          (69.9)    (52.6)   (17.3)
       Other interest expense              (37.2)    (33.0)    (4.2)
       Other interest expense -
        senior note repurchases            (34.5)    (15.1)   (19.4)
       Interest income                       6.7       2.9      3.8
       Other income                          0.7        --      0.7
         Income from continuing
          operations before income
          taxes                           $282.2    $311.8   $(29.6)    (9.5)

       Retail vehicle unit sales:
            New                          188,001   191,568   (3,567)    (1.9)
            Used                         117,570   117,806     (236)    (0.2)
                                         305,571   309,374   (3,803)    (1.2)
       Revenue per vehicle retailed:
            New                          $29,942   $29,362     $580      2.0
            Used                         $16,068   $15,102     $966      6.4

       Gross profit per vehicle
        retailed:
            New                           $2,204    $2,132      $72      3.4
            Used                          $1,856    $1,826      $30      1.6
            Finance and insurance         $1,057      $977      $80      8.2


                                           Three Months      Six Months
                                              Ended             Ended
                Operating Percentages        June 30,          June 30,
                                          % 2006   % 2005   % 2006   % 2005
        Revenue mix percentages:
           New vehicle                      58.8     60.6     58.2     59.6
           Used vehicle                     24.0     22.7     24.2     23.2
           Parts and service                13.4     13.1     13.8     13.5
           Finance and insurance             3.4      3.2      3.3      3.2
           Other                             0.4      0.4      0.5      0.5
                                           100.0    100.0    100.0    100.0

         Gross profit mix
          percentages:
           New vehicle                      26.8     27.7     26.4     27.1
           Used vehicle                     13.3     13.8     14.1     14.5
           Parts and service                37.1     36.5     37.5     36.9
           Finance and insurance            21.4     20.5     20.6     20.0
           Other                             1.4      1.5      1.4      1.5
                                           100.0    100.0    100.0    100.0

         Operating items as a
          percentage of revenue:
            Gross profit:
              New vehicle                    7.3      7.2      7.4      7.3
              Used vehicle - retail         11.0     11.7     11.6     12.1
              Parts and service             44.4     43.7     44.1     43.5
              Total                         16.0     15.6     16.2     16.0
            Selling, general and
             administrative expenses        11.3     11.0     11.5     11.2
            Operating income                 4.3      4.3      4.3      4.3

         Operating items as a
          percentage of total gross
          profit:
            Selling, general and
             administrative expenses        70.7     70.2     70.9     70.2
            Operating income                26.6     27.3     26.5     27.2



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

                                             Three Months        Six Months
            Cash Flow Information            Ended June 30,     Ended June 30,
                                              2006    2005       2006    2005
    Capital expenditures, excluding
     property operating lease buy-outs       $29.2   $36.7      $49.1   $57.1

    Property operating lease buy-outs          $--   $10.3        $--   $10.3

    Stock repurchases                     $1,218.6   $77.7   $1,218.6  $148.6

    Acquisitions                               $--    $5.9      $67.4    $8.0

    Proceeds from exercises of stock
     options                                  $19.3  $29.7       $51.6  $52.7

    Senior note repurchases                  $334.2   $6.4      $334.2 $112.4


       Floorplan Assistance        Three Months               Six Months
           and Expense                Ended                      Ended
                                     June 30,                   June 30,
                             2006    2005  Variance     2006    2005  Variance
    Floorplan assistance
     earned (included in
     cost of sales)         $30.4   $30.7   $(0.3)     $57.4   $57.0    $0.4
    Floorplan interest
     expense                (37.7)  (28.1)   (9.6)     (69.9)  (52.6)  (17.3)

      Net floorplan benefit
       (cost)               $(7.3)   $2.6   $(9.9)    $(12.5)   $4.4  $(16.9)


       Balance Sheet and Other Highlights

                                    June 30,      December 31,      June 30,
                                      2006            2005            2005

    Cash and cash equivalents          $35.6          $245.2           $49.4
    Inventory                       $2,795.7        $2,626.6        $2,554.1
    Total floorplan notes payable   $2,511.7        $2,486.9        $2,317.1
    Non-vehicle debt                $1,493.5          $525.0          $677.3
    Equity                          $3,683.1        $4,669.5        $4,476.5

    New days supply (industry
     standard of selling days,
     including fleet)                61 days         55 days         50 days

    Used days supply (trailing
     30 days)                        43 days         42 days         42 days


     Brand Mix - New Vehicle Revenue %

                                 Three Months Ended         Six Months Ended
                                      June 30,                  June 30,
                                % 2006       % 2005       % 2006       % 2005

      Detroit 3:
        Ford, Lincoln-Mercury     16.7         17.8         17.1         18.2
        Chevrolet, Pontiac,
         Buick, Cadillac, GMC     14.6         18.2         14.5         17.1
        Chrysler, Jeep, Dodge      7.5          8.7          7.9          8.8
          Detroit 3 total         38.8         44.7         39.5         44.1

      Premium Luxury:
        Mercedes                  11.8          9.0         11.1          9.0
        BMW                        4.8          4.7          4.9          4.7
        Lexus                      3.2          3.1          3.3          3.1
        Other premium luxury
         (Land Rover, Porsche,
         Rolls Royce)              2.2          1.7          2.4          1.9
          Premium Luxury total    22.0         18.5         21.7         18.7

      Imports:
        Honda                      8.7          8.0          8.4          7.8
        Toyota                    14.4         12.6         13.8         12.7
        Nissan                     9.7          9.7         10.2         10.0
        Other imports              6.4          6.5          6.4          6.7
          Import total            39.2         36.8         38.8         37.2


                                 100.0        100.0        100.0        100.0



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

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

                                             2006     2005     2006     2005

         As reported                        $72.7   $194.8    $0.32    $0.73

           Discontinued operations -
            store divestitures, net of
            income taxes                      1.0      7.8      $--    $0.03
           Discontinued operations - tax
            adjustments                        --    (95.7)     $--   $(0.36)

         From continuing operations, as
          reported                          $73.7   $106.9    $0.33    $0.40

           Senior note repurchases           21.3       --     0.09      $--

         Adjusted                           $95.0   $106.9    $0.42    $0.40



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

                                             2006     2005     2006     2005

         As reported                       $159.9   $291.8    $0.65    $1.08

           Discontinued operations - store
            divestitures, net of income
            taxes                            11.8     11.6    $0.05    $0.04
           Discontinued operations - tax
            adjustments                        --   (107.4)     $--   $(0.40)

           From continuing operations, as
            reported                        171.7    196.0    $0.70    $0.73

          Senior note repurchases            21.0      9.1     0.09    $0.03

         Adjusted                          $192.7   $205.1    $0.78    $0.76


         * Please refer to the "Non-GAAP Financial Measures" section of the
           Press Release.



         Business Assumptions Impacting Long-term Average EPS Growth Target
         of 10% to 12% Per Year:

         U.S. light vehicle annual           intensely competitive, nearly
          unit sales                          17 million units

         SGA % reduction (over 2006,         approximately 100 bp, excluding
          2007 and 2008)                      stock option expense
          (SGA % of gross profit less
           floorplan interest expense)

         Continued opportunistic             share repurchase, capital
          redeployment of cash flow           expenditures and acquisitions

         Targeted return on incremental      approximately 15% after-tax
          invested capital



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

       Operating Highlights            Three Months Ended June 30,
                                2006         2005     $ Variance   % Variance
    Revenue:
        New vehicle           $2,915.8     $2,993.8       $(78.0)        (2.6)
          Retail used
           vehicle               958.2        903.2         55.0          6.1
          Wholesale              232.1        220.5         11.6          5.3
        Used vehicle           1,190.3      1,123.7         66.6          5.9
        Parts and service        661.8        645.2         16.6          2.6
        Finance and insurance    170.5        158.0         12.5          7.9
        Other                      8.1          7.8          0.3          3.8
    Total revenue             $4,946.5     $4,928.5        $18.0          0.4

    Gross profit:
        New vehicle             $211.5       $214.3        $(2.8)        (1.3)
          Retail used
           vehicle               105.2        105.7         (0.5)        (0.5)
          Wholesale               (0.6)        (0.1)        (0.5)
        Used vehicle             104.6        105.6         (1.0)        (0.9)
        Parts and service        292.6        282.0         10.6          3.8
        Finance and insurance    170.5        158.0         12.5          7.9
        Other                      6.7          6.5          0.2          3.1
    Total gross profit          $785.9       $766.4        $19.5          2.5

    Retail vehicle unit
     sales:
        New                     98,567      102,007       (3,440)        (3.4)
        Used                    59,468       59,388           80          0.1
                               158,035      161,395       (3,360)        (2.1)

    Revenue per vehicle
     retailed:
        New                    $29,582      $29,349         $233          0.8
        Used                   $16,113      $15,208         $905          6.0

    Gross profit per
     vehicle retailed:
        New                     $2,146       $2,101          $45          2.1
        Used                    $1,769       $1,780         $(11)        (0.6)
        Finance and insurance   $1,079         $979         $100         10.2



       Operating Highlights              Six Months Ended June 30,
                                2006         2005     $ Variance   % Variance
    Revenue:
        New vehicle           $5,586.8     $5,624.8       $(38.0)        (0.7)
          Retail used
           vehicle             1,878.9      1,779.1         99.8          5.6
          Wholesale              448.0        406.3         41.7         10.3
        Used vehicle           2,326.9      2,185.4        141.5          6.5
        Parts and service      1,322.6      1,278.0         44.6          3.5
        Finance and insurance    322.0        301.7         20.3          6.7
        Other                     15.2         14.7          0.5          3.4
    Total revenue             $9,573.5     $9,404.6       $168.9          1.8

    Gross profit:
        New vehicle             $410.1       $408.4         $1.7          0.4
          Retail used
           vehicle               217.0        215.1          1.9          0.9
          Wholesale                1.3          2.4         (1.1)
        Used vehicle             218.3        217.5          0.8          0.4
        Parts and service        582.2        556.0         26.2          4.7
        Finance and insurance    322.0        301.7         20.3          6.7
        Other                     13.2         12.6          0.6          4.8
    Total gross profit        $1,545.8     $1,496.2        $49.6          3.3

    Retail vehicle unit
     sales:
        New                    187,325      191,568       (4,243)        (2.2)
        Used                   117,337      117,806         (469)        (0.4)
                               304,662      309,374       (4,712)        (1.5)

    Revenue per vehicle
     retailed:
        New                    $29,824      $29,362         $462          1.6
        Used                   $16,013      $15,102         $911          6.0

    Gross profit per
     vehicle retailed:
        New                     $2,189       $2,132          $57          2.7
        Used                    $1,849       $1,826          $23          1.3
        Finance and insurance   $1,057         $975          $82          8.4



       Operating Percentages       Three Months                Six Months
                                       Ended                     Ended
                                      June 30,                  June 30,
                                % 2006       % 2005       % 2006       % 2005
    Revenue mix percentages:
        New vehicle               58.9         60.7         58.4         59.8
        Used vehicle              24.1         22.8         24.3         23.2
        Parts and service         13.4         13.1         13.8         13.6
        Finance and insurance      3.4          3.2          3.4          3.2
        Other                      0.2          0.2          0.1          0.2
                                 100.0        100.0        100.0        100.0

    Gross profit mix
     percentages:
        New vehicle               26.9         28.0         26.5         27.3
        Used vehicle              13.3         13.8         14.1         14.5
        Parts and service         37.2         36.8         37.7         37.2
        Finance and insurance     21.7         20.6         20.8         20.2
        Other                      0.9          0.8          0.9          0.8
                                 100.0        100.0        100.0        100.0

    Operating items as a
     percentage of revenue:
        Gross Profit:
          New vehicle              7.3          7.2          7.3          7.3
          Used vehicle - retail   11.0         11.7         11.5         12.1
          Parts and service       44.2         43.7         44.0         43.5
          Total                   15.9         15.6         16.1         15.9

SOURCE AutoNation, Inc.

CONTACT:
Marc Cannon of AutoNation, Inc.
+1-954-769-3146
or cannonm@autonation.com

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