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AutoNation Reports Second-Quarter Earnings

Jul. 26, 2007

FORT LAUDERDALE, Fla., July 26 /PRNewswire-FirstCall/ -- AutoNation, Inc. (NYSE: AN), America's largest automotive retailer, today reported 2007 second- quarter net income from continuing operations of $79 million or $0.38 per share, compared to year-ago net income from continuing operations of $74 million or $0.33 per share. Last year's second quarter results included one- time debt repurchase costs of approximately $21 million after tax, or $.09 per share. Results for the second quarter of 2007 reflected a decline in new vehicle retail sales especially in California and Florida, partially offset by a tax adjustment.

Second-quarter 2007 revenue totaled $4.6 billion, compared to $4.9 billion in the year-ago period, driven primarily by lower new vehicle sales. In the second-quarter, industry new vehicle retail sales for California and Florida were off approximately 14%, based on CNW Research data. AutoNation's decline for new vehicle unit sales for California and Florida was 16%. Together, California and Florida represent approximately 50% of the Company's new vehicle business and 20% of the industry retail new vehicles sold in the U.S.

Commenting on the second-quarter, Mike Jackson, Chairman and Chief Executive Officer, said, "The second quarter was a challenging economic environment for new vehicle sales driven largely by continued weakness in the housing market in our key markets of Florida and California." Mr. Jackson also noted, "A key force behind consumer spending in recent years was the perceived growth in household wealth consumers had from the value of increasing home prices and readily available home equity credit. With the slumping housing market, consumers have been less willing to purchase big-ticket items, including vehicles. We expect to continue to see a challenging new vehicle retail market as long as the housing market difficulties persist. AutoNation continues to have confidence in California and Florida and views them as healthy markets over the long term."

For the six-month period ended June 30, 2007, the Company reported net income from continuing operations of $162 million or $0.77 per share compared to $172 million or $0.70 per share in the prior year. The Company's revenue for the six-month period ended June 30, 2007 totaled $8.9 billion, down 5% compared to $9.4 billion in the prior year.

The Company also announced today that the Board of Directors approved an extension of the employment agreements of Mr. Jackson and Michael E. Maroone, the President and Chief Operating Officer of the Company, until 2010. Mr. Jackson has served as Chairman of the Board since January 2003 and as our Chief Executive Officer since September 1999. Mr. Maroone joined the Company in 1997 and has served as our President and Chief Operating Officer since August 1999.

The second quarter conference call may be accessed at 11:00 a.m. Eastern Time today by phone at 866-269-9612 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 July 26, 2007 through August 2, 2007 by calling 800-475-6701 (access code # 875632).

About AutoNation, Inc.

AutoNation, Inc., headquartered in Fort Lauderdale, Fla., is America's largest automotive retailer and has been named America's Most Admired Automotive Retailer by FORTUNE Magazine in five of the last six years. A component of the Standard and Poor's 500 Index, AutoNation owns and operates 321 new vehicle franchises in 16 states. For additional information, please visit http://corp.AutoNation.com or www.AutoNation.com, where more than 80,000 vehicles are available for sale along with AutoNation's E-Vehicle program.

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- and six-month periods ended June 30, 2007 and 2006, 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     Six Months Ended
                                       June 30,              June 30,
                                    2007      2006        2007      2006

    Revenue:
      New vehicle                 $2,631.5  $2,884.9    $5,094.7  $5,513.8
      Used vehicle                 1,104.5   1,171.3     2,193.1   2,282.8
      Parts and service              653.8     648.2     1,310.4   1,289.9
      Finance and insurance, net     152.3     167.6       300.6     316.4
      Other                           17.2      20.7        34.3      39.5
    Total revenue                  4,559.3   4,892.7     8,933.1   9,442.4

    Cost of sales:
      New vehicle                  2,450.1   2,674.2     4,734.1   5,106.9
      Used vehicle                 1,010.2   1,067.8     1,994.1   2,067.4
      Parts and service              366.8     360.5       736.9     720.0
      Other                            6.5       8.9        13.1      16.7
    Total cost of sales            3,833.6   4,111.4     7,478.2   7,911.0

    Gross profit                     725.7     781.3     1,454.9   1,531.4

    Selling, general and
     administrative expenses         517.7     548.4     1,038.9   1,077.5
    Depreciation and amortization     21.6      20.7        42.8      40.0
    Other expenses, net                1.6       0.2         1.6       0.2

    Operating income                 184.8     212.0       371.6     413.7

    Floorplan interest expense       (33.5)    (36.1)      (66.0)    (67.0)
    Other interest expense           (26.5)    (25.2)      (53.0)    (37.2)
    Other interest expense -
     senior note repurchases             -     (34.5)          -     (34.5)
    Interest income                    0.9       3.1         1.8       6.6
    Other gains, net                   0.8       0.7         1.0       0.7

    Income from continuing
     operations before income
     taxes                           126.5     120.0       255.4     282.3

    Provision for income taxes        47.2      46.1        93.4     110.6

    Net income from continuing
     operations                       79.3      73.9       162.0     171.7

    Loss from discontinued
     operations, net of income
     taxes                            (2.0)     (1.2)       (7.1)    (11.8)

    Net income                       $77.3     $72.7      $154.9    $159.9

    Diluted earnings (loss) per
     share:
      Continuing operations          $0.38     $0.33       $0.77     $0.70
      Discontinued operations       $(0.01)   $(0.01)     $(0.03)   $(0.05)

      Net income                     $0.37     $0.32       $0.74     $0.65

    Weighted average common and
     common equivalent shares
     outstanding                     208.6     225.2       209.7     246.5

    Common shares outstanding, net
     of treasury stock               201.9     213.0       201.9     213.0



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

                Operating Highlights          Three Months Ended June 30,
                                                               $        %
                                          2007      2006   Variance  Variance
    Revenue:
      New vehicle                       $2,631.5  $2,884.9  $(253.4)  (8.8)
        Retail used vehicle                880.1     937.9    (57.8)  (6.2)
        Wholesale                          224.4     233.4     (9.0)  (3.9)
      Used vehicle                       1,104.5   1,171.3    (66.8)  (5.7)
      Parts and service                    653.8     648.2      5.6    0.9
      Finance and insurance, net           152.3     167.6    (15.3)  (9.1)
      Other                                 17.2      20.7     (3.5)
    Total revenue                       $4,559.3  $4,892.7  $(333.4)  (6.8)

    Gross profit:
      New vehicle                         $181.4    $210.7   $(29.3) (13.9)
        Retail used vehicle                 93.6     103.2     (9.6)  (9.3)
        Wholesale                            0.7       0.3      0.4
      Used vehicle                          94.3     103.5     (9.2)  (8.9)
      Parts and service                    287.0     287.7     (0.7)  (0.2)
      Finance and insurance                152.3     167.6    (15.3)  (9.1)
      Other                                 10.7      11.8     (1.1)
    Total gross profit                     725.7     781.3    (55.6)  (7.1)

    Selling, general and
     administrative expenses               517.7     548.4     30.7    5.6

    Depreciation and amortization           21.6      20.7     (0.9)
    Other expenses, net                      1.6       0.2     (1.4)
      Operating income                     184.8     212.0    (27.2) (12.8)

    Floorplan interest expense             (33.5)    (36.1)     2.6
    Other interest expense                 (26.5)    (25.2)    (1.3)
    Other interest expense - senior
     note repurchases                          -     (34.5)    34.5
    Interest income                          0.9       3.1     (2.2)
    Other gains, net                         0.8       0.7      0.1
       Income from continuing
        operations before income
        taxes                             $126.5    $120.0     $6.5    5.4

    Retail vehicle unit sales:
      New                                 85,768    96,932  (11,164) (11.5)
      Used                                53,011    57,781   (4,770)  (8.3)
                                         138,779   154,713  (15,934) (10.3)

    Revenue per vehicle retailed:
      New                                $30,682   $29,762     $920    3.1
      Used                               $16,602   $16,232     $370    2.3

    Gross profit per vehicle
     retailed:
      New                                 $2,115    $2,174     $(59)  (2.7)
      Used                                $1,766    $1,786     $(20)  (1.1)
      Finance and insurance               $1,097    $1,083      $14    1.3



                Operating Highlights           Six Months Ended June 30,
                                                               $        %
                                          2007      2006   Variance  Variance


    Revenue:
      New vehicle                       $5,094.7  $5,513.8  $(419.1)  (7.6)
        Retail used vehicle              1,760.3   1,836.3    (76.0)  (4.1)
        Wholesale                          432.8     446.5    (13.7)  (3.1)
      Used vehicle                       2,193.1   2,282.8    (89.7)  (3.9)
      Parts and service                  1,310.4   1,289.9     20.5    1.6
      Finance and insurance, net           300.6     316.4    (15.8)  (5.0)
      Other                                 34.3      39.5     (5.2)
    Total revenue                       $8,933.1  $9,442.4  $(509.3)  (5.4)


    Gross profit:
      New vehicle                         $360.6    $406.9   $(46.3) (11.4)
        Retail used vehicle                195.5     212.5    (17.0)  (8.0)
        Wholesale                            3.5       2.9      0.6
      Used vehicle                         199.0     215.4    (16.4)  (7.6)
      Parts and service                    573.5     569.9      3.6    0.6
      Finance and insurance                300.6     316.4    (15.8)  (5.0)
      Other                                 21.2      22.8     (1.6)
    Total gross profit                   1,454.9   1,531.4    (76.5)  (5.0)

    Selling, general and
     administrative expenses             1,038.9   1,077.5     38.6    3.6

    Depreciation and amortization           42.8      40.0     (2.8)
    Other expenses, net                      1.6       0.2     (1.4)
      Operating income                     371.6     413.7    (42.1) (10.2)

    Floorplan interest expense             (66.0)    (67.0)     1.0
    Other interest expense                 (53.0)    (37.2)   (15.8)
    Other interest expense - senior
     note repurchases                          -     (34.5)    34.5
    Interest income                          1.8       6.6     (4.8)
    Other gains, net                         1.0       0.7      0.3
      Income from continuing
       operations before income
       taxes                              $255.4    $282.3   $(26.9)  (9.5)

    Retail vehicle unit sales:
      New                                165,279   184,045  (18,766) (10.2)
      Used                               107,111   114,004   (6,893)  (6.0)
                                         272,390   298,049  (25,659)  (8.6)

    Revenue per vehicle retailed:
      New                                $30,825   $29,959     $866    2.9
      Used                               $16,434   $16,107     $327    2.0

    Gross profit per vehicle
     retailed:
      New                                 $2,182    $2,211     $(29)  (1.3)
      Used                                $1,825    $1,864     $(39)  (2.1)
      Finance and insurance               $1,104    $1,062      $42    4.0



                                     Three Months Ended    Six Months Ended
     Operating Percentages               June 30,              June 30,
                                     % 2007    % 2006       % 2007   % 2006

    Revenue mix percentages:
      New vehicle                      57.7     59.0         57.0     58.4
      Used vehicle                     24.2     23.9         24.6     24.2
      Parts and service                14.3     13.2         14.7     13.7
      Finance and insurance, net        3.3      3.4          3.4      3.4
      Other                             0.5      0.5          0.3      0.3
                                      100.0    100.0        100.0    100.0

    Gross profit mix percentages:
      New vehicle                      25.0     27.0         24.8     26.6
      Used vehicle                     13.0     13.2         13.7     14.1
      Parts and service                39.5     36.8         39.4     37.2
      Finance and insurance            21.0     21.5         20.7     20.7
      Other                             1.5      1.5          1.4      1.4
                                      100.0    100.0        100.0    100.0

    Operating items as a percentage
     of revenue:
      Gross profit:
        New vehicle                     6.9      7.3          7.1      7.4
        Used vehicle - retail          10.6     11.0         11.1     11.6
        Parts and service              43.9     44.4         43.8     44.2
        Total                          15.9     16.0         16.3     16.2
      Selling, general and
       administrative expenses         11.4     11.2         11.6     11.4
      Operating income                  4.1      4.3          4.2      4.4

    Operating items as a percentage
     of total gross profit:
      Selling, general and
       administrative expenses         71.3     70.2         71.4     70.4
      Operating income                 25.5     27.1         25.5     27.0



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

                                       Three Months Ended     Six Months Ended
     Cash Flow Information                 June 30,                June 30,
                                        2007     2006           2007     2006

    Capital expenditures               $36.8     $29.1         $79.2     $48.9
    Acquisitions                        $0.8     $   -          $0.8     $67.4
    Proceeds from exercises of stock
     options                           $12.5     $19.3         $88.6     $51.6
    Stock repurchases:
      Aggregate purchase price        $189.6  $1,218.6        $239.9  $1,218.6
      Shares repurchased (in
       millions)                         8.7      53.1          11.0      53.1



     Floorplan Assistance and      Three Months Ended      Six Months Ended
            Expense                    June 30,                June 30,
                                   2007   2006  Variance  2007   2006 Variance
    Floorplan assistance
     earned (included in cost
     of sales)                    $24.8  $29.3  $(4.5)   $49.5   $55.4  $(5.9)
    Floorplan interest expense    (33.5) (36.1)   2.6    (66.0)  (67.0)   1.0

      Net floorplan cost          $(8.7) $(6.8) $(1.9)  $(16.5) $(11.6) $(4.9)



      Balance Sheet and Other Highlights
                                     June 30,     December 31,  June 30,
                                       2007          2006         2006

    Cash and cash equivalents          $31.2          $52.6        $37.3
    Inventory                       $2,346.6       $2,320.3     $2,706.2
    Total floorplan notes
     payable                        $2,099.8       $2,228.3     $2,433.5
    Non-vehicle debt                $1,528.6       $1,571.5     $1,493.5
    Equity                          $3,738.1       $3,712.7     $3,683.0

    New days supply (industry
     standard of selling
     days, including fleet)          56 days        51 days      60 days

    Used days supply (trailing
     30 days)                        44 days         42 days     43 days



    Brand Mix - New Vehicle Revenue %

                              Three Months Ended      Six Months Ended
                                   June 30,               June 30,
                               % 2007   % 2006        % 2007    % 2006

    Detroit 3:
      Ford, Lincoln-Mercury      15.1     16.5         14.9      16.9
      Chevrolet, Pontiac,
       Buick, Cadillac, GMC      12.8     13.8         13.3      13.8
      Chrysler, Jeep, Dodge       7.1      7.4          7.1       7.8
        Detroit 3 total          35.0     37.7         35.3      38.5

    Import Premium Luxury:
      Mercedes                   11.2     12.1         11.6      11.3
      BMW                         6.6      4.9          6.3       5.0
      Lexus                       3.8      3.3          3.9       3.4
      Other premium luxury
       (Land Rover, Porsche)      3.2      2.5          3.0       2.6
        Premium Luxury total     24.8     22.8         24.8      22.3

    Volume Imports:
      Honda                       9.1      8.8          9.0       8.6
      Toyota                     15.7     14.7         15.2      14.1
      Nissan                      9.1      9.7          9.4      10.1
      Other imports               6.3      6.3          6.3       6.4
        Import total             40.2     39.5         39.9      39.2
                                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
                                            2007     2006     2007     2006

    As reported                            $77.3     $72.7   $0.37    $0.32
      Discontinued operations, net of
       income taxes                          2.0       1.2   $0.01    $0.01

    From continuing operations, as
     reported                               79.3      73.9   $0.38    $0.33
      Income tax adjustments                (3.5)        -  $(0.02)   $   -
      Senior note repurchases                  -      21.3  $    -    $0.09

    Adjusted                               $75.8     $95.2   $0.36    $0.42



                                               Six Months Ended June 30,
                                              Net Income    Diluted Earnings
                                                                Per Share
                                            2007     2006     2007     2006

    As reported                           $154.9    $159.9   $0.74    $0.65

      Discontinued operations, net of
       income taxes                          7.1      11.8   $0.03    $0.05
    From continuing operations, as
     reported                              162.0     171.7   $0.77    $0.70

      Income tax adjustments                (8.6)        -  $(0.04)   $   -
      Senior note repurchases                  -      21.0  $    -    $0.09

    Adjusted                              $153.4    $192.7   $0.73    $0.78

    * 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, low 16
     unit sales                          million units

    SGA % reduction (over 2007,         approximately 100 bp, excluding
     2008 and 2009)                      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
     invested capital                 approximately 15% after-tax



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

      Operating Highlights               Three Months Ended June 30,
                                   2007      2006     $ Variance   % Variance

    Revenue:
      New vehicle                $2,610.1  $2,884.9    $(274.8)       (9.5)
        Retail used vehicle         875.3     937.9      (62.6)       (6.7)
        Wholesale                   221.4     232.7      (11.3)       (4.9)
      Used vehicle                1,096.7   1,170.6      (73.9)       (6.3)
      Parts and service             647.3     648.2       (0.9)       (0.1)
      Finance and insurance, net    152.7     167.9      (15.2)       (9.1)
      Other                           6.6       8.4       (1.8)
    Total revenue                $4,513.4  $4,880.0    $(366.6)       (7.5)

    Gross profit:
      New vehicle                  $179.5    $210.7     $(31.2)      (14.8)
        Retail used vehicle          93.3     103.3      (10.0)       (9.7)
        Wholesale                     0.1      (0.4)       0.5
      Used vehicle                   93.4     102.9       (9.5)       (9.2)
      Parts and service             283.4     287.1       (3.7)       (1.3)
      Finance and insurance         152.7     167.9      (15.2)       (9.1)
      Other                           6.9       6.7        0.2
    Total gross profit             $715.9    $775.3     $(59.4)       (7.7)

    Retail vehicle unit sales:
      New                          85,372    96,932    (11,560)      (11.9)
      Used                         52,875    57,781     (4,906)       (8.5)
                                  138,247   154,713    (16,466)      (10.6)

    Revenue per vehicle retailed:
      New                         $30,573   $29,762       $811         2.7
      Used                        $16,554   $16,232       $322         2.0

    Gross profit per vehicle
     retailed:
      New                          $2,103    $2,174       $(71)       (3.3)
      Used                         $1,765    $1,788       $(23)       (1.3)
      Finance and insurance        $1,105    $1,085        $20         1.8



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

      Operating Highlights                Six Months Ended June 30,
                                   2007      2006     $ Variance   % Variance
    Revenue:
      New vehicle                $5,038.4  $5,513.8    $(475.4)       (8.6)
        Retail used vehicle       1,746.2   1,836.4      (90.2)       (4.9)
        Wholesale                   423.1     445.2      (22.1)       (5.0)
      Used vehicle                2,169.3   2,281.6     (112.3)       (4.9)
      Parts and service           1,293.7   1,289.9        3.8         0.3
      Finance and insurance,
       net                          301.2     316.7      (15.5)       (4.9)
      Other                          13.5      15.5       (2.0)
    Total revenue                $8,816.1  $9,417.5    $(601.4)       (6.4)

    Gross profit:
      New vehicle                  $355.5    $406.9     $(51.4)      (12.6)
        Retail used vehicle         194.3     212.6      (18.3)       (8.6)
        Wholesale                     2.3       1.6        0.7
      Used vehicle                  196.6     214.2      (17.6)       (8.2)
      Parts and service             564.5     568.7       (4.2)       (0.7)
      Finance and insurance         301.2     316.7      (15.5)       (4.9)
      Other                          13.6      13.3        0.3
    Total gross profit           $1,431.4  $1,519.8     $(88.4)       (5.8)

     Retail vehicle unit sales:
      New                         164,282   184,045    (19,763)      (10.7)
      Used                        106,736   114,004     (7,268)       (6.4)
                                  271,018   298,049    (27,031)       (9.1)

    Revenue per vehicle
     retailed:
      New                         $30,669   $29,959       $710         2.4
      Used                        $16,360   $16,108       $252         1.6

    Gross profit per vehicle
     retailed:
      New                          $2,164    $2,211       $(47)       (2.1)
      Used                         $1,820    $1,865       $(45)       (2.4)
      Finance and
       insurance                   $1,111    $1,063        $48         4.5



                                    Three Months Ended     Six Months Ended
      Operating Percentages            June 30,                June 30,
                                   % 2007     % 2006      % 2007    % 2006

    Revenue mix percentages:
      New vehicle                   57.8       59.1        57.1      58.5
      Used vehicle                  24.3       24.0        24.6      24.2
      Parts and service             14.3       13.3        14.7      13.7
      Finance and insurance,
       net                           3.4        3.4         3.4       3.4
      Other                          0.2        0.2         0.2       0.2
                                   100.0      100.0       100.0     100.0

    Gross profit mix percentages:
      New vehicle                   25.1       27.2        24.8      26.8
      Used vehicle                  13.0       13.3        13.7      14.1
      Parts and service             39.6       37.0        39.4      37.4
      Finance and insurance         21.3       21.7        21.0      20.8
      Other                          1.0        0.8         1.1       0.9
                                   100.0      100.0       100.0     100.0

    Operating items as a
     percentage of revenue:
      Gross Profit:
        New vehicle                  6.9        7.3         7.1       7.4
        Used vehicle - retail       10.7       11.0        11.1      11.6
        Parts and service           43.8       44.3        43.6      44.1
        Total                       15.9       15.9        16.2      16.1

SOURCE AutoNation, Inc.

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

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