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AutoNation Reports Third-Quarter Earnings

Oct. 26, 2006

- Announces 4 acquisitions with annual revenue of approximately $200 million

FORT LAUDERDALE, Fla., Oct. 26 /PRNewswire-FirstCall/ -- AutoNation, Inc. (NYSE: AN), America's largest automotive retailer, today reported 2006 third- quarter net income from continuing operations of $85 million or $0.40 per share on revenue of $5.0 billion, compared to year-ago net income from continuing operations of $121 million or $0.45 per share on revenue of $5.1 billion. Adjusting the prior-year earnings for certain items as disclosed in the attached tables, the Company's third-quarter EPS from continuing operations was $0.40 versus $0.41 in the prior year, a decline of 2%.

In the third quarter, industry new vehicle retail unit sales declined 11% in the U.S. and were down 16% in California according to CNW. AutoNation new vehicle retail unit sales were down 8% in total and 12% in California, which represents approximately 20% of the Company's new vehicle business. Chairman and Chief Executive Officer Mike Jackson commented, "The third quarter was a challenging economic environment for new vehicle sales. California's economic situation has been declining during 2006 due to the rise in interest rates and a soft housing market." Mr. Jackson also noted, "The employee discount programs offered by domestic manufacturers last year make year-over-year comparisons difficult."

In addition to the decline in new vehicle sales, results for the third quarter were impacted by increased floor plan interest expense due to higher interest rates and higher inventories, and higher other interest expense due to increased debt levels related to the Company's recapitalization earlier in 2006. The effect on EPS of higher other interest expense was more than offset by the 19% reduction in shares outstanding due to the 50 million share buyback in the second quarter.

For the nine-month period ended September 30, 2006, the Company reported net income from continuing operations of $257 million or $1.09 per share compared to $1.18 per share in the prior year. After adjusting for certain items as disclosed in the attached tables, EPS from continuing operations for the nine-month period on a comparable basis increased 5% to $1.18 from $1.12 in the prior year. The Company's revenue for the nine-month period ended September 30, 2006 totaled $14.6 billion, up 1% compared to $14.4 billion in the prior year.

Separately, the Company today announced that it has signed an agreement to acquire Harloff BMW in northern San Diego County, California. The acquisition, which is subject to certain conditions and approvals, is expected to close in the fourth quarter of 2006. During the quarter, AutoNation acquired Land Rover Fort Lauderdale and Fairbanks Dodge in the South Florida market and Fremont Jeep in Fremont, California. AutoNation estimates that the annual revenue from these acquisitions will be approximately $200 million.

The third quarter conference call may be accessed at 11:00 a.m. Eastern Time, today by phone at 888-781-3339 or via the Internet (audio webcast) at http://www.AutoNation.com by clicking on the "About Us" link then clicking on "Investors" and then "Webcasts." A playback of the conference call will be available after 2:30 p.m. Eastern Time October 26, 2006 through November 2, 2006 by calling 800-475-6701 (access code # 844682).

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 335 new vehicle franchises in 16 states. For additional information, please visit http://corp.AutoNation.com or 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 period ended September 30, 2005, and the nine-month periods ended September 30, 2006 and 2005, adjusted in each case to exclude certain items disclosed in the attached financial tables. 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  Nine Months Ended
                                          September 30,       September 30,
                                         2006      2005      2006      2005

        Revenue:
           New vehicle                 $2,942.5  $3,087.8  $8,540.8  $8,677.5
           Used vehicle                 1,180.7   1,144.8   3,507.2   3,314.4
           Parts and service              656.2     653.5   1,976.1   1,916.9
           Finance and insurance, net     165.5     164.1     487.1     465.0
           Other                           16.6      20.8      56.4      62.8
        Total revenue                   4,961.5   5,071.0  14,567.6  14,436.6

        Cost of sales:
           New vehicle                  2,727.1   2,864.9   7,913.1   8,048.5
           Used vehicle                 1,077.3   1,038.3   3,184.8   2,990.9
           Parts and service              367.3     369.3   1,104.4   1,083.1
           Other                            7.3       9.5      24.0      28.5
        Total cost of sales             4,179.0   4,282.0  12,226.3  12,151.0

        Gross profit                      782.5     789.0   2,341.3   2,285.6

        Selling, general and
         administrative expenses          557.6     549.3   1,660.3   1,598.2
        Depreciation and amortization      21.3      19.2      61.9      58.7
        Other expenses (income)            (0.4)      1.2      (0.3)      0.7

        Operating income                  204.0     219.3     619.4     628.0

        Floorplan interest expense        (37.2)    (24.1)   (106.2)    (75.9)
        Other interest expense            (27.2)    (15.9)    (64.4)    (48.9)
        Other interest expense -
         senior note repurchases            -         -       (34.5)    (15.1)
        Interest income                     0.9       1.5       7.6       4.4
        Other income                        0.5       0.1       1.2      (0.1)

        Income from continuing
         operations before income
         taxes                            141.0     180.9     423.1     492.4

        Provision for income taxes         55.6      60.3     166.1     175.9

        Net income from continuing
         operations                        85.4     120.6     257.0     316.5

        Income (loss) from
         discontinued operations, net
         of income taxes                   (3.6)      8.7     (15.3)    104.7


        Net income                        $81.8    $129.3    $241.7    $421.2


        Diluted earnings per share:
           Continuing operations          $0.40     $0.45     $1.09     $1.18
           Discontinued operations       $(0.02)    $0.03    $(0.07)    $0.39

           Net income                     $0.38     $0.48     $1.03     $1.57

        Weighted average common and
         common equivalent shares
         outstanding                      215.0     267.2     235.0     269.1

        Common shares outstanding         207.7     261.4     207.7     261.4



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


              Operating Highlights          Three Months Ended September 30,
                                                                $         %
                                           2006      2005   Variance  Variance

         Revenue:
           New vehicle                   $2,942.5  $3,087.8  $(145.3)    (4.7)
             Retail used vehicle            947.8     913.6     34.2      3.7
             Wholesale                      232.9     231.2      1.7      0.7
           Used vehicle                   1,180.7   1,144.8     35.9      3.1
           Parts and service                656.2     653.5      2.7      0.4
           Finance and insurance, net       165.5     164.1      1.4      0.9
           Other                             16.6      20.8     (4.2)
         Total revenue                   $4,961.5  $5,071.0  $(109.5)    (2.2)

         Gross profit:
           New vehicle                     $215.4    $222.9    $(7.5)    (3.4)
             Retail used vehicle            105.5     107.9     (2.4)    (2.2)
             Wholesale                       (2.1)     (1.4)    (0.7)
           Used vehicle                     103.4     106.5     (3.1)    (2.9)
           Parts and service                288.9     284.2      4.7      1.7
           Finance and insurance            165.5     164.1      1.4      0.9
           Other                              9.3      11.3     (2.0)
         Total gross profit                 782.5     789.0     (6.5)    (0.8)

         Selling, general and
          administrative expenses           557.6     549.3     (8.3)    (1.5)

         Depreciation and amortization       21.3      19.2     (2.1)
         Other expenses (income)             (0.4)      1.2      1.6
          Operating income                  204.0     219.3    (15.3)    (7.0)

         Floorplan interest expense         (37.2)    (24.1)   (13.1)
         Other interest expense             (27.2)    (15.9)   (11.3)
         Other interest expense - senior
          note repurchases                    -         -        -
         Interest income                      0.9       1.5     (0.6)
         Other income                         0.5       0.1      0.4
           Income from continuing
            operations before income
            taxes                          $141.0    $180.9   $(39.9)   (22.1)

         Retail vehicle unit sales:
              New                          99,390   107,578   (8,188)    (7.6)
              Used                         59,822    60,574     (752)    (1.2)
                                          159,212   168,152   (8,940)    (5.3)

         Revenue per vehicle retailed:
              New                         $29,606   $28,703     $903      3.1
              Used                        $15,844   $15,082     $762      5.1

         Gross profit per vehicle
          retailed:
              New                          $2,167    $2,072      $95      4.6
              Used                         $1,764    $1,781     $(17)    (1.0)
              Finance and insurance        $1,039      $976      $63      6.5



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


             Operating Highlights           Nine Months Ended September 30,
                                                                $         %
                                         2006       2005    Variance  Variance

         Revenue:
           New vehicle                  $8,540.8   $8,677.5  $(136.7)    (1.6)
             Retail used vehicle         2,821.3    2,678.9    142.4      5.3
             Wholesale                     685.9      635.5     50.4      7.9
           Used vehicle                  3,507.2    3,314.4    192.8      5.8
           Parts and service             1,976.1    1,916.9     59.2      3.1
           Finance and insurance, net      487.1      465.0     22.1      4.8
           Other                            56.4       62.8     (6.4)
         Total revenue                 $14,567.6  $14,436.6   $131.0      0.9


         Gross profit:
           New vehicle                    $627.7     $629.0    $(1.3)    (0.2)
             Retail used vehicle           322.0      321.2      0.8      0.2
             Wholesale                       0.4        2.3     (1.9)
           Used vehicle                    322.4      323.5     (1.1)    (0.3)
           Parts and service               871.7      833.8     37.9      4.5
           Finance and insurance           487.1      465.0     22.1      4.8
           Other                            32.4       34.3     (1.9)
         Total gross profit              2,341.3    2,285.6     55.7      2.4

         Selling, general and
          administrative expenses        1,660.3    1,598.2    (62.1)    (3.9)

         Depreciation and amortization      61.9       58.7     (3.2)
         Other expenses (income)            (0.3)       0.7      1.0
          Operating income                 619.4      628.0     (8.6)    (1.4)

         Floorplan interest expense       (106.2)     (75.9)   (30.3)
         Other interest expense            (64.4)     (48.9)   (15.5)
         Other interest expense -
          senior note repurchases          (34.5)     (15.1)   (19.4)
         Interest income                     7.6        4.4      3.2
         Other income                        1.2       (0.1)     1.3
           Income from continuing
            operations before income
            taxes                         $423.1     $492.4   $(69.3)   (14.1)

         Retail vehicle unit sales:
              New                        286,396    298,022  (11,626)    (3.9)
              Used                       176,388    177,371     (983)    (0.6)
                                         462,784    475,393  (12,609)    (2.7)

         Revenue per vehicle retailed:
              New                        $29,822    $29,117     $705      2.4
              Used                       $15,995    $15,103     $892      5.9

         Gross profit per vehicle
          retailed:
              New                         $2,192     $2,111      $81      3.8
              Used                        $1,826     $1,811      $15      0.8
              Finance and insurance       $1,053       $978      $75      7.7



                                         Three Months Ended Nine Months Ended
               Operating Percentages         September 30,     September 30,
                                           % 2006   % 2005   % 2006   % 2005

          Revenue mix percentages:
            New vehicle                      59.3     60.9     58.6     60.1
            Used vehicle                     23.8     22.6     24.1     23.0
            Parts and service                13.2     12.9     13.6     13.3
            Finance and insurance             3.3      3.2      3.3      3.2
            Other                             0.4      0.4      0.4      0.4
                                            100.0    100.0    100.0    100.0

          Gross profit mix percentages:
            New vehicle                      27.5     28.3     26.8     27.5
            Used vehicle                     13.2     13.5     13.8     14.2
            Parts and service                36.9     36.0     37.2     36.5
            Finance and insurance            21.2     20.8     20.8     20.3
            Other                             1.2      1.4      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      7.3      7.2
               Used vehicle - retail         11.1     11.8     11.4     12.0
               Parts and service             44.0     43.5     44.1     43.5
               Total                         15.8     15.6     16.1     15.8
            Selling, general and
             administrative expenses         11.2     10.8     11.4     11.1
            Operating income                  4.1      4.3      4.3      4.4

          Operating items as a percentage
           of total gross profit:
            Selling, general and
             administrative expenses         71.3     69.6     70.9     69.9
            Operating income                 26.1     27.8     26.5     27.5



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


                                         Three Months Ended  Nine Months Ended
              Cash Flow Information         September 30,      September 30,
                                            2006     2005     2006      2005
          Capital expenditures, excluding
           property operating lease
           buy-outs                         $87.8   $34.4     $136.9    $91.5
          Property operating lease buy-
           outs                              $-      $-         $-      $10.3
          Stock repurchases                $118.7   $38.7   $1,337.3   $187.2
          Acquisitions                      $21.1    $5.4      $88.5    $13.4
          Proceeds from exercises of
           stock options                    $10.5   $24.0      $62.1    $76.7
          Senior note repurchases            $-      $-       $334.2   $112.4



        Floorplan Assistance and   Three Months Ended     Nine Months Ended
                 Expense              September 30,          September 30,
                                  2006   2005  Variance  2006   2005  Variance


        Floorplan assistance
         earned (included in cost
         of sales)                $28.4  $29.5   $(1.1)  $85.4  $86.1   $(0.7)
        Floorplan interest
         expense                  (37.2) (24.1)  (13.1) (106.2) (75.9)  (30.3)

         Net floorplan benefit
          (cost)                  $(8.8)  $5.4  $(14.2) $(20.8) $10.2  $(31.0)



      Balance Sheet and Other Highlights

                                     September 30,  December 31, September 30,
                                         2006           2005          2005

         Cash and cash equivalents         $29.7        $245.4        $280.0
         Inventory                      $2,363.8      $2,601.8      $2,132.8
         Total floorplan notes payable  $2,121.0      $2,463.9      $1,885.5
         Non-vehicle debt               $1,501.9        $525.0        $675.1
         Equity                         $3,660.4      $4,669.5      $4,599.3
         New days supply (industry
          standard of selling
          days, including fleet)         51 days       55 days       43 days

         Used days supply (trailing 30
          days)                          38 days       42 days       41 days



      Brand Mix - New Vehicle Revenue %
                                         Three Months Ended Nine Months Ended
                                             September 30,     September 30,
                                           % 2006   % 2005   % 2006   % 2005

    Detroit 3:
       Ford, Lincoln-Mercury                 17.4     19.5     17.0     18.5
       Chevrolet, Pontiac, Buick,
        Cadillac, GMC                        15.2     15.1     14.7     16.3
       Chrysler, Jeep, Dodge                  7.3      9.5      7.7      9.1
         Detroit 3 total                     39.9     44.1     39.4     43.9

    Premium Luxury:
       Mercedes                              10.9      8.8     11.1      9.0
       BMW                                    4.4      4.6      4.7      4.7
       Lexus                                  3.1      3.1      3.2      3.1
       Other premium luxury (Land Rover,
        Porsche, Rolls Royce)                 2.1      2.2      2.3      1.9
         Premium Luxury total                20.5     18.7     21.3     18.7

    Imports:
       Honda                                  8.5      8.2      8.5      8.0
       Toyota                                14.8     12.0     14.2     12.5
       Nissan                                 9.7     10.0     10.0     10.1
       Other imports                          6.6      7.0      6.6      6.8
         Import total                        39.6     37.2     39.3     37.4
                                            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 September 30,
                                                           Diluted Earnings
                                             Net Income        Per Share
                                            2006    2005     2006    2005

         As reported                       $81.8   $129.3   $0.38    $0.48

          Discontinued operations - store
           divestitures, net of income
           taxes                             3.6     (5.7)  $0.02   $(0.02)
          Discontinued operations - tax
           adjustments                       -       (3.0)   $-     $(0.01)

         From continuing operations, as
          reported                          85.4    120.6   $0.40    $0.45
           Income tax adjustments            -       (9.4)   $-     $(0.04)
           Proforma stock option
            compensation expense (per 2005
            disclosures)                     -       (2.1)   $-     $(0.01)

         Adjusted                          $85.4   $109.1   $0.40    $0.41



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

                                            2006     2005     2006    2005

         As reported                       $241.7   $421.2   $1.03    $1.57

          Discontinued operations - store
           divestitures, net of income
           taxes                             15.3      5.7   $0.07    $0.02
          Discontinued operations - tax
           adjustments                        -     (110.4)   $-     $(0.41)

         From continuing operations, as
          reported                          257.0    316.5   $1.09    $1.18



           Senior note repurchases           20.9      9.1   $0.09    $0.03
           Income tax adjustments             -      (16.2)   $-     $(0.06)
           Proforma stock option
            compensation expense (per 2005
            disclosures)                      -       (7.2)   $-     $(0.03)

         Adjusted                          $277.9   $302.2   $1.18    $1.12

         * 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 September 30,
                                                                 $        %
                                           2006      2005    Variance Variance

           Revenue:
               New vehicle                 $2,918.8  $3,087.7  $(168.9) (5.5)
                 Retail used vehicle          942.5     913.7     28.8   3.2
                 Wholesale                    227.6     230.5     (2.9) (1.3)
               Used vehicle                 1,170.1   1,144.2     25.9   2.3
               Parts and service              649.6     653.6     (4.0) (0.6)
               Finance and insurance, net     165.4     164.2      1.2   0.7
               Other                            6.5       6.4      0.1   1.6
           Total revenue                   $4,910.4  $5,056.1  $(145.7) (2.9)


           Gross profit:
               New vehicle                   $213.2    $222.9    $(9.7) (4.4)
                 Retail used vehicle          104.9     107.9     (3.0) (2.8)
                 Wholesale                     (2.6)     (2.2)    (0.4)
               Used vehicle                   102.3     105.7     (3.4) (3.2)
               Parts and service              285.2     284.2      1.0   0.4
               Finance and insurance          165.4     164.2      1.2   0.7
               Other                            6.1       6.5     (0.4) (6.2)
           Total gross profit                $772.2    $783.5   $(11.3) (1.4)



           Retail vehicle unit sales:
                  New                        98,982   107,578   (8,596) (8.0)
                  Used                       59,691    60,574     (883) (1.5)
                                            158,673   168,152   (9,479) (5.6)

           Revenue per vehicle retailed:
                  New                       $29,488   $28,702     $786   2.7
                  Used                      $15,790   $15,084     $706   4.7

           Gross profit per vehicle
            retailed:
                  New                        $2,154    $2,072      $82   4.0
                  Used                       $1,757    $1,781     $(24) (1.3)
                  Finance and insurance      $1,042      $976      $66   6.8



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


                 Operating Highlights        Nine Months Ended September 30,
                                                                 $        %
                                           2006      2005    Variance Variance

           Revenue:
               New vehicle                 $8,474.7   $8,677.5  $(202.8) (2.3)
                 Retail used vehicle        2,805.8    2,678.9    126.9   4.7
                 Wholesale                    672.5      633.5     39.0   6.2
               Used vehicle                 3,478.3    3,312.4    165.9   5.0
               Parts and service            1,957.8    1,916.9     40.9   2.1
               Finance and insurance, net     486.1      464.6     21.5   4.6
               Other                           21.6       21.1      0.5   2.4
           Total revenue                  $14,418.5  $14,392.5    $26.0   0.2



           Gross profit:
               New vehicle                   $621.4     $629.0    $(7.6) (1.2)
                 Retail used vehicle          320.3      321.1     (0.8) (0.2)
                 Wholesale                     (1.1)       0.3     (1.4)
               Used vehicle                   319.2      321.4     (2.2) (0.7)
               Parts and service              861.1      833.9     27.2   3.3
               Finance and insurance          486.1      464.6     21.5   4.6
               Other                           19.2       19.1      0.1   0.5
           Total gross profit              $2,307.0   $2,268.0    $39.0   1.7


           Retail vehicle unit sales:
                  New                       285,312    298,022  (12,710) (4.3)
                  Used                      176,024    177,371   (1,347) (0.8)
                                            461,336    475,393  (14,057) (3.0)

           Revenue per vehicle retailed:
                  New                       $29,703    $29,117     $586   2.0
                  Used                      $15,940    $15,103     $837   5.5

           Gross profit per vehicle
            retailed:
                  New                        $2,178     $2,111      $67   3.2
                  Used                       $1,820     $1,810      $10   0.6
                  Finance and insurance      $1,054       $977      $77   7.9



                                         Three Months Ended Nine Months Ended
                 Operating Percentages      September 30,     September 30,
                                           % 2006   % 2005   % 2006   % 2005

            Revenue mix percentages:
                New vehicle                  59.4     61.1     58.8     60.3
                Used vehicle                 23.8     22.6     24.1     23.0
                Parts and service            13.2     12.9     13.6     13.3
                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                  27.6     28.4     26.9     27.7
                Used vehicle                 13.2     13.5     13.8     14.2
                Parts and service            36.9     36.3     37.3     36.8
                Finance and insurance        21.4     21.0     21.1     20.5
                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      7.2
                   Used vehicle - retail     11.1     11.8     11.4     12.0
                   Parts and service         43.9     43.5     44.0     43.5
                   Total                     15.7     15.5     16.0     15.8

SOURCE AutoNation, Inc.

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

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