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Letter to the Editor

AutoNation Reports Record Q2 EPS of $0.37, Up 16%

Total revenue for the second-quarter ended June 30, 2003 increased to $5.1 billion compared to $5.0 billion a year ago driven by revenue growth of 4% for new vehicles and 6 percent for finance and insurance. Selling, general and administrative expense (SG&A) was $549 million or 71.1 percent as a percentage of total gross profit, a 110 basis point improvement compared to a year ago.

Commenting on the second-quarter performance, AutoNation Chairman and Chief Executive Officer Mike Jackson said, "AutoNation delivered another record quarter of earnings per share coupled with increases in revenue and net income, demonstrating the strength of our operation and the commitment of our team. We benefited from the continued success of our cost containment initiatives and operational improvements, particularly in the area of new and used vehicles and finance and insurance, allowing us to expand our operating margin."

Other highlights in the second quarter include:

• The repurchase of 10.4 million of the company's outstanding shares at a cost of $149 million.
• Record finance and insurance gross profit per vehicle retailed of $804.
• The successful launch of two market brands, Power in Southern California and Champion in Houston, Austin and Corpus Christi; bringing the company's number of branded markets to 13.
• The appointment of two new board members: Alan S. Dawes, vice chairman and chief financial officer of Delphi Corporation, a leading automotive electronics and components supplier; and Frederick J. Schwab, former president and chief executive officer of Porsche Cars North America, Inc., the North American operating unit of Porsche AG.

For the six-month period ended June 30, 2003, AutoNation earned net income from continuing operations of $318 million or $1.10 per share. Excluding the benefit of the first quarter 2003 IRS tax settlement, earnings per share from continuing operations was $0.66, a 10 percent increase versus the prior year. The company's revenue for the six-month period totaled $9.5 billion, down 2 percent versus the prior year.

AutoNation also announced that it will now report new vehicle days supply utilizing the industry standard of selling days inclusive of fleet. Prior to this change, the company reported new vehicle days supply using calendar days excluding fleet, which at the end of the second quarter stood at 72 days. Using the industry metric, the Company's new vehicle inventory at the end of the second quarter was 65 days, compared to the industry at 63 days.

Looking ahead, Mr. Jackson said, "While we are hopeful that efforts to stimulate the economy will take hold, we believe that the auto retail environment will remain challenging for the remainder of the year. Based on our performance this quarter, we are raising our full-year 2003 outlook for earnings per share from continuing operations by $0.07 to the range of $1.28 to $1.33, excluding the benefit of the first quarter tax settlement, and offer third-quarter earnings per share guidance of $0.34 to $0.36."

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