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AutoNation Reports Fourth-Quarter Earnings

Feb. 07, 2007

FORT LAUDERDALE, Fla., Feb. 7 /PRNewswire-FirstCall/ -- AutoNation, Inc. (NYSE: AN), America's largest automotive retailer, today reported 2006 fourth- quarter net income from continuing operations of $74 million or $0.35 per share on revenue of $4.5 billion, compared to year-ago net income from continuing operations of $82 million or $0.31 per share on revenue of $4.4 billion. Fourth-quarter EPS from continuing operations increased 13%.

Fourth quarter 2006 results were positively impacted by a 2% increase in total revenue driven by increases of 2% in new vehicle, 5% in parts and service and 8% in finance and insurance. This was offset by lower used vehicle gross profit, higher floor plan and other interest expense and $.01 per share in stock option expense. Additionally, the fourth quarter EPS was positively impacted by continued share repurchases. Fourth quarter 2005 earnings were negatively affected by Hurricane Wilma in Florida.

For full-year 2006, the Company reported net income from continuing operations of $331 million or $1.45 per share, compared to $397 million or $1.48 per share in 2005. After adjusting for certain items as disclosed in the attached financial tables, the Company's full-year EPS from continuing operations for 2006 increased 8% to $1.54 from $1.43 in 2005. The Company's revenue for the full year totaled $19.0 billion, an increase of 1% versus the prior year.

Full year 2006 results were positively impacted by increased gross profits in parts and service and finance and insurance, offset by lower used vehicle gross profit, higher floor plan and other interest expense and $.04 per share stock option expense impact. 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.

Commenting on the fourth-quarter and year ahead, Mike Jackson, chairman and chief executive officer said, "The retail environment was challenging during the fourth-quarter and we expect this to continue in 2007. We believe that in 2007, U.S. new vehicle sales will decline to the low 16 million unit level."

The fourth quarter conference call may be accessed at 11:00 am Eastern Time by phone at 888-639-6205 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 February 7, 2007 through February 14, 2007 by calling 800-475-6701 (access code # 859958).

About AutoNation, Inc.

AutoNation, Inc., headquartered in Fort Lauderdale, Fla., is America's largest automotive retailer. A component of the Standard and Poor's 500 Index, AutoNation has approximately 26,000 full-time employees and owns and operates 331 new vehicle franchises in 16 states. For additional information, please visit http://corp.AutoNation.com or www.AutoNation.com, where more than 90,000 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 December 31, 2005, and the years ended December 31, 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  Twelve Months Ended
                                        December 31,         December 31,
                                       2006      2005      2006       2005

        Revenue:
          New vehicle                $2,652.8  $2,605.1  $11,163.0  $11,224.0
          Used vehicle                1,023.2   1,016.5    4,518.1    4,315.0
          Parts and service             631.8     600.1    2,600.4    2,508.5
          Finance and insurance, net    148.8     138.3      634.3      601.0
          Other                          16.5      18.4       72.8       81.0
        Total revenue                 4,473.1   4,378.4   18,988.6   18,729.5

        Cost of sales:
          New vehicle                 2,461.4   2,413.8   10,345.8   10,407.3
          Used vehicle                  936.1     919.9    4,109.0    3,896.2
          Parts and service             358.5     329.9    1,459.0    1,408.5
          Other                           6.4       4.9       30.4       33.4
        Total cost of sales           3,762.4   3,668.5   15,944.2   15,745.4

        Gross profit                    710.7     709.9    3,044.4    2,984.1

        Selling, general and
         administrative expenses        512.1     511.4    2,165.0    2,100.9
        Depreciation and
         amortization                    21.2      19.9       82.9       78.4
        Other expenses (income)           -        (0.1)      (0.1)       0.8

        Operating income                177.4     178.7      796.6      804.0

        Floorplan interest expense      (36.5)    (30.3)    (142.0)    (105.5)
        Other interest expense          (26.5)    (14.4)     (90.9)     (63.3)
        Other interest expense -
         senior note repurchases          -        (2.3)     (34.5)     (17.4)
        Interest income                   0.8       3.1        8.3        7.5
        Other income (loss)               3.3       0.2        4.6       (0.1)

        Income from continuing
         operations before income
         taxes                          118.5     135.0      542.1      625.2

        Provision for income taxes       44.4      53.2      210.7      228.3

        Net income from continuing
         operations                      74.1      81.8      331.4      396.9

        Income (loss) from
         discontinued operations,
         net of income taxes              1.1      (6.5)     (14.5)      99.6


        Net income                      $75.2     $75.3     $316.9     $496.5


        Diluted earnings per share:
          Continuing operations         $0.35     $0.31      $1.45      $1.48
          Discontinued operations       $0.01    $(0.02)    $(0.06)     $0.37

          Net income                    $0.36     $0.28      $1.38      $1.85

        Weighted average common and
         common equivalent shares
         outstanding                    211.5     266.8      229.3      268.0

        Common shares outstanding       206.8     262.2      206.8      262.2



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

    Operating Highlights
                                          Three Months Ended December 31,
                                      2006      2005   $ Variance  % Variance
    Revenue:
      New vehicle                   $2,652.8  $2,605.1     $47.7      1.8
        Retail used vehicle            810.7     820.5      (9.8)    (1.2)
        Wholesale                      212.5     196.0      16.5      8.4
      Used vehicle                   1,023.2   1,016.5       6.7      0.7
      Parts and service                631.8     600.1      31.7      5.3
      Finance and insurance, net       148.8     138.3      10.5      7.6
      Other                             16.5      18.4      (1.9)
    Total revenue                   $4,473.1  $4,378.4     $94.7      2.2


    Gross profit:
      New vehicle                     $191.4    $191.3      $0.1      0.1
        Retail used vehicle             88.3      96.0      (7.7)    (8.0)
        Wholesale                       (1.2)      0.6      (1.8)
      Used vehicle                      87.1      96.6      (9.5)    (9.8)
      Parts and service                273.3     270.2       3.1      1.1
      Finance and insurance            148.8     138.3      10.5      7.6
      Other                             10.1      13.5      (3.4)
    Total gross profit                 710.7     709.9       0.8      0.1

    Selling, general and
     administrative expenses           512.1     511.4      (0.7)    (0.1)

    Depreciation and amortization       21.2      19.9      (1.3)
    Other expenses (income)                -      (0.1)     (0.1)
      Operating income                 177.4     178.7      (1.3)    (0.7)

    Floorplan interest expense         (36.5)    (30.3)     (6.2)
    Other interest expense             (26.5)    (14.4)    (12.1)
    Other interest expense - senior
     note repurchases                      -      (2.3)      2.3
    Interest income                      0.8       3.1      (2.3)
    Other income (loss)                  3.3       0.2       3.1
      Income from continuing
       operations before
       income taxes                   $118.5    $135.0    $(16.5)   (12.2)

    Retail vehicle unit sales:
      New                             84,048    84,833      (785)    (0.9)
      Used                            49,790    51,887    (2,097)    (4.0)
                                     133,838   136,720    (2,882)    (2.1)

    Revenue per vehicle retailed:
      New                            $31,563   $30,709      $854      2.8
      Used                           $16,282   $15,813      $469      3.0

    Gross profit per vehicle retailed:
      New                             $2,277    $2,255       $22      1.0
      Used                            $1,773    $1,850      $(77)    (4.2)
      Finance and insurance           $1,112    $1,012      $100      9.9



    Operating Highlights
                                         Twelve Months Ended December 31,
                                      2006       2005    $ Variance % Variance
    Revenue:
      New vehicle                  $11,163.0  $11,224.0     $(61.0)    (0.5)
        Retail used vehicle          3,621.2    3,487.9      133.3      3.8
        Wholesale                      896.9      827.1       69.8      8.4
      Used vehicle                   4,518.1    4,315.0      203.1      4.7
      Parts and service              2,600.4    2,508.5       91.9      3.7
      Finance and insurance, net       634.3      601.0       33.3      5.5
      Other                             72.8       81.0       (8.2)
    Total revenue                  $18,988.6  $18,729.5     $259.1      1.4


    Gross profit:
      New vehicle                     $817.2     $816.7       $0.5      0.1
        Retail used vehicle            409.8      415.9       (6.1)    (1.5)
        Wholesale                       (0.7)       2.9       (3.6)
      Used vehicle                     409.1      418.8       (9.7)    (2.3)
      Parts and service              1,141.4    1,100.0       41.4      3.8
      Finance and insurance            634.3      601.0       33.3      5.5
      Other                             42.4       47.6       (5.2)
    Total gross profit               3,044.4    2,984.1       60.3      2.0

    Selling, general and
     administrative expenses         2,165.0    2,100.9      (64.1)    (3.1)

    Depreciation and amortization       82.9       78.4       (4.5)
    Other expenses (income)             (0.1)       0.8        0.9
      Operating income                 796.6      804.0       (7.4)    (0.9)

    Floorplan interest expense        (142.0)    (105.5)     (36.5)
    Other interest expense             (90.9)     (63.3)     (27.6)
    Other interest expense -
     senior note repurchases           (34.5)     (17.4)     (17.1)
    Interest income                      8.3        7.5        0.8
    Other income (loss)                  4.6       (0.1)       4.7
      Income from continuing
       operations before income
       taxes                          $542.1     $625.2     $(83.1)   (13.3)

    Retail vehicle unit sales:
      New                            369,567    381,082    (11,515)    (3.0)
      Used                           225,609    228,528     (2,919)    (1.3)
                                     595,176    609,610    (14,434)    (2.4)

    Revenue per vehicle retailed:
      New                            $30,206    $29,453       $753      2.6
      Used                           $16,051    $15,262       $789      5.2

    Gross profit per vehicle retailed:
      New                             $2,211     $2,143        $68      3.2
      Used                            $1,816     $1,820        $(4)    (0.2)
      Finance and insurance           $1,066       $986        $80      8.1



    Operating Percentages
                                 Three Months Ended  Twelve Months Ended
                                     December 31,       December 31,
                                  % 2006    % 2005    % 2006   % 2005

    Revenue mix percentages:
      New vehicle                   59.3      59.5      58.8     59.9
      Used vehicle                  22.9      23.2      23.8     23.0
      Parts and service             14.1      13.7      13.7     13.4
      Finance and insurance          3.3       3.2       3.3      3.2
      Other                          0.4       0.4       0.4      0.5
                                   100.0     100.0     100.0    100.0

    Gross profit mix percentages:
      New vehicle                   26.9      26.9      26.8     27.4
      Used vehicle                  12.3      13.6      13.4     14.0
      Parts and service             38.5      38.1      37.5     36.9
      Finance and insurance         20.9      19.5      20.8     20.1
      Other                          1.4       1.9       1.5      1.6
                                   100.0     100.0     100.0    100.0

    Operating items as a
     percentage of revenue:
      Gross profit:
        New vehicle                  7.2       7.3       7.3      7.3
        Used vehicle - retail       10.9      11.7      11.3     11.9
        Parts and service           43.3      45.0      43.9     43.9
        Total                       15.9      16.2      16.0     15.9
      Selling, general and
       administrative expenses      11.4      11.7      11.4     11.2
      Operating income               4.0       4.1       4.2      4.3

    Operating items as a
     percentage of total
     gross profit:
      Selling, general and
       administrative expenses      72.1      72.0      71.1     70.4
      Operating income              25.0      25.2      26.2     26.9



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

    Cash Flow Information
                                               Three             Twelve
                                            Months Ended      Months Ended
                                            December 31,      December 31,
                                            2006    2005      2006    2005
    Capital expenditures, excluding
     property operating lease buy-outs     $39.2   $39.4     $176.1   $130.9
    Property operating lease buy-outs         $-      $-         $-    $10.3
    Acquisitions                           $77.9    $2.5     $166.4    $15.9
    Proceeds from exercises of
     stock options                         $13.6   $36.1      $75.7   $112.8
    Senior note repurchases                   $-   $23.6     $334.2   $136.0
    Stock repurchases:
      Aggregate purchase price             $43.3   $49.9   $1,380.6   $237.1
      Shares repurchased (in millions)       2.1     2.4       61.2     11.8



    Floorplan Assistance and Expense

                                Three Months Ended       Twelve Months Ended
                                   December 31,             December 31,
                               2006   2005  Variance    2006    2005  Variance
    Floorplan assistance
     earned (included in
     cost of sales)           $25.4  $24.8    $0.6    $111.6  $109.8    $1.8
    Floorplan interest
     expense                  (36.5) (30.3)   (6.2)   (142.0) (105.5)  (36.5)
      Net floorplan
       benefit (cost)        $(11.1) $(5.5)  $(5.6)   $(30.4)   $4.3  $(34.7)



    Balance Sheet and Other Highlights

                                    December 31, 2006   December 31, 2005

    Cash and cash equivalents                   $52.2             $245.7
    Inventory                                $2,361.4           $2,584.6
    Total floorplan notes payable            $2,265.0           $2,445.7
    Non-vehicle debt                         $1,571.5             $525.0
    Equity                                   $3,712.7           $4,669.5
    New days supply (industry
     standard of selling days,
     including fleet)                         52 days            55 days
    Used days supply (trailing 30 days)       42 days            42 days



    Brand Mix - New Vehicle Revenue %

                                      Three Months Ended  Twelve Months Ended
                                          December 31,         December 31,
                                       % 2006    % 2005    % 2006    % 2005

    Detroit 3:
      Ford, Lincoln-Mercury              13.7      16.1      16.3      18.0
      Chevrolet, Pontiac,
       Buick, Cadillac, GMC              14.1      12.6      14.3      15.0
      Chrysler, Jeep, Dodge               7.3       8.1       7.6       9.0
        Detroit 3 total                  35.1      36.8      38.2      42.0

    Import Premium Luxury:
      Mercedes                           14.1      11.4      11.8       9.6
      BMW                                 5.9       5.8       5.0       5.0
      Lexus                               4.0       4.0       3.4       3.4
      Other premium luxury (Land
       Rover, Porsche)                    3.3       3.3       2.7       2.3
        Premium Luxury total             27.3      24.5      22.9      20.3

    Volume Imports:
      Honda                               8.1       8.5       8.4       8.2
      Toyota                             14.2      12.6      14.2      12.6
      Nissan                              8.7      10.0       9.8      10.1
      Other imports                       6.6       7.6       6.5       6.8
        Import total                     37.6      38.7      38.9      37.7
                                        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 December 31,

                                                              Diluted Earnings
                                            Net Income           Per Share
                                          2006      2005       2006      2005

    As reported                          $75.2     $75.3      $0.36     $0.28

      Discontinued operations -
       store divestitures, net
       of income taxes                    (1.1)      6.5     $(0.01)    $0.02
      Discontinued operations -
       tax adjustments                       -         -         $-        $-

    From continuing operations,
     as reported                          74.1      81.8      $0.35     $0.31
      Income tax adjustments                 -         -         $-        $-
      Senior note repurchases                -       1.5                $0.01
      Proforma stock option
       compensation expense
       (per 2005 disclosures)                -      (2.1)        $-    $(0.01)

    Adjusted                             $74.1     $81.2      $0.35     $0.30



                                           Twelve Months Ended December 31,

                                                              Diluted Earnings
                                            Net Income           Per Share
                                          2006      2005       2006      2005

    As reported                         $316.9    $496.5      $1.38     $1.85

      Discontinued operations -
       store divestitures, net of
       income taxes                       14.5      10.8      $0.06     $0.04
      Discontinued operations -
       tax adjustments                       -    (110.4)        $-    $(0.41)

    From continuing operations,
     as reported                         331.4     396.9      $1.45     $1.48

      Senior note repurchases             21.1      10.6      $0.09     $0.04
      Income tax adjustments                 -     (16.2)        $-    $(0.06)
      Proforma stock option
       compensation expense
       (per 2005 disclosures)                -      (9.3)        $-    $(0.03)

    Adjusted                            $352.5    $382.0      $1.54     $1.43


    * 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 unit sales         intensely competitive, low
                                                 16 million units

    SGA % reduction (over 2007, 2008 and 2009)   approximately 100 bp
      (SGA % of gross profit less
       floorplan interest expense)

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

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



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

    Operating Highlights
                                            Three Months Ended December 31,
                                        2006      2005   $ Variance % Variance
    Revenue:
      New vehicle                   $2,606.3  $2,605.1        $1.2         -
        Retail used vehicle            800.4     820.5       (20.1)     (2.4)
        Wholesale                      205.8     195.4        10.4       5.3
      Used vehicle                   1,006.2   1,015.9        (9.7)     (1.0)
      Parts and service                622.4     600.1        22.3       3.7
      Finance and insurance, net       147.9     138.3         9.6       6.9
      Other                              6.0       7.1        (1.1)    (15.5)
    Total revenue                   $4,388.8  $4,366.5       $22.3       0.5

    Gross profit:
      New vehicle                     $187.1    $191.3       $(4.2)     (2.2)
        Retail used vehicle             87.5      96.1        (8.6)     (8.9)
        Wholesale                       (1.7)      -          (1.7)
      Used vehicle                      85.8      96.1       (10.3)    (10.7)
      Parts and service                269.3     270.2        (0.9)     (0.3)
      Finance and insurance            147.9     138.3         9.6       6.9
      Other                              6.3       8.1        (1.8)    (22.2)
    Total gross profit                $696.4    $704.0       $(7.6)     (1.1)

    Retail vehicle unit sales:
      New                             83,230    84,833      (1,603)     (1.9)
      Used                            49,525    51,887      (2,362)     (4.6)
                                     132,755   136,720      (3,965)     (2.9)

    Revenue per vehicle retailed:
      New                            $31,314   $30,709        $605       2.0
      Used                           $16,162   $15,813        $349       2.2

    Gross profit per vehicle
     retailed:
      New                             $2,248    $2,255         $(7)     (0.3)
      Used                            $1,767    $1,852        $(85)     (4.6)
      Finance and insurance           $1,114    $1,012        $102      10.1



    Operating Highlights
                                           Twelve Months Ended December 31,
                                        2006      2005   $ Variance % Variance

    Revenue:
      New vehicle                  $11,050.5  $11,224.0    $(173.5)     (1.5)
        Retail used vehicle          3,595.4    3,487.8      107.6       3.1
        Wholesale                      876.7      824.5       52.2       6.3
      Used vehicle                   4,472.1    4,312.3      159.8       3.7
      Parts and service              2,572.7    2,508.5       64.2       2.6
      Finance and insurance, net       632.3      600.5       31.8       5.3
      Other                             27.6       28.2       (0.6)     (2.1)
    Total revenue                  $18,755.2  $18,673.5      $81.7       0.4


    Gross profit:
      New vehicle                     $806.6     $816.7     $(10.1)     (1.2)
        Retail used vehicle            407.3      415.9       (8.6)     (2.1)
        Wholesale                       (2.7)       0.3       (3.0)
      Used vehicle                     404.6      416.2      (11.6)     (2.8)
      Parts and service              1,126.8    1,099.9       26.9       2.4
      Finance and insurance            632.3      600.5       31.8       5.3
      Other                             25.5       27.1       (1.6)     (5.9)
    Total gross profit              $2,995.8   $2,960.4      $35.4       1.2


    Retail vehicle unit sales:
      New                            367,665    381,082    (13,417)     (3.5)
      Used                           224,980    228,528     (3,548)     (1.6)
                                     592,645    609,610    (16,965)     (2.8)

    Revenue per vehicle retailed:
      New                            $30,056    $29,453       $603       2.0
      Used                           $15,981    $15,262       $719       4.7

    Gross profit per vehicle
     retailed:
      New                             $2,194     $2,143        $51       2.4
      Used                            $1,810     $1,820       $(10)     (0.5)
      Finance and insurance           $1,067       $985        $82       8.3



    Operating Percentages

                                       Three Months Ended  Twelve Months Ended
                                          December 31,         December 31,
                                        % 2006    % 2005    % 2006     % 2005

    Revenue mix percentages:
      New vehicle                         59.4     59.7     58.9     60.1
      Used vehicle                        22.9     23.3     23.8     23.1
      Parts and service                   14.2     13.7     13.7     13.4
      Finance and insurance                3.4      3.2      3.4      3.2
      Other                                0.1      0.1      0.2      0.2
                                         100.0    100.0    100.0    100.0

    Gross profit mix percentages:
      New vehicle                         26.9     27.2     26.9     27.6
      Used vehicle                        12.3     13.7     13.5     14.1
      Parts and service                   38.7     38.4     37.6     37.2
      Finance and insurance               21.2     19.6     21.1     20.3
      Other                                0.9      1.1      0.9      0.8
                                         100.0    100.0    100.0    100.0

    Operating items as a
     percentage of revenue:
      Gross Profit:
      New vehicle                          7.2      7.3      7.3      7.3
      Used vehicle - retail               10.9     11.7     11.3     11.9
      Parts and service                   43.3     45.0     43.8     43.8
      Total                               15.9     16.1     16.0     15.9

SOURCE AutoNation, Inc.

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

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