AutoNation, Inc. AN: Company-Specific Headwinds Continue to Weigh on Results, but Cost Controls are Improving

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1 Consumer: Automotive Retail AutoNation, Inc. AN: Company-Specific Headwinds Continue to Weigh on Results, but Cost Controls are Improving Maintaining SW: 1) auto retail industry growth outlook remains positive driven by intact or improving new vehicle sales, low- to mid-single-digit growth in used vehicle sales, and mid- to high-single-digit P&S revenue growth; 2) internal recall initiative will likely continue to weigh on earnings mid to longer term, but associated cost controls are seemingly improving; and 3) shares are trading at 11.4x the Street s 2017 EPS estimate, ~23% premium to the peer group s average of 9.3x, and we remain on the sidelines at this time. Key Investment Points Following AN s 2Q16 earnings release, we remain cautious and maintain our SW rating based on our belief that: 1) Auto retail industry growth outlook remains positive driven by intact or improving new vehicle sales, low- to mid-single-digit growth in used vehicle sales, and mid- to high-single-digit P&S revenue growth. U.S. light vehicle SAAR outlook at the mid-17m unit level implies intact or slightly increasing record volumes. Used vehicle demand remains intact though temporarily pressured by the impact of stop sale orders, which is expected to improve by 4Q16. P&S industry revenue growth outlook remains in the mid- to high-single digits driven by increasing vehicles in operation in the zero- to six-year-old segment. 2) Internal recall initiative will likely continue to weigh on earnings mid to longer term, but associated cost controls are seemingly improving. New and used vehicle GPU (gross profit per unit) continued to decline YOY despite some evidence of stabilization/improvement among peers, likely pressured by the internal recall initiative and the associated headwinds. However, gross profit throughput rate has improved sequentially to 27% from 7% last quarter, though remains below industry s targeted range of 35-50%. 3) Shares are trading at 11.4x the Street s 2017 EPS estimate, ~23% premium to the peer group s average of 9.3x, and we remain on the sidelines at this time., CFA / (216) bhoselton@key.com Irina Hodakovsky / (216) ihodakovsky@key.com Anthony Deem / (216) adeem@key.com NYSE: AN Rating: Price Target: Sector Weight NA Price: $ Sep-15 Vol (mil) Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sources: Company reports, FactSet, KeyBanc Capital Markets Inc. Company Data 52-week range $40 - $66 Market Cap. (M) $6,322.0 Shares Out. (M) Enterprise Value (M) $8,614.9 Avg. Daily Volume (30D) 1,242,380.0 SI as % of Float 9.6% Book Value/Share $17.06 Cash (M) $69.0 Sources: Company reports, FactSet, KeyBanc Capital Markets Inc. AN We are maintaining our earnings estimates at $4.18 (FactSet consensus $4.25) for 2016 and at $4.56 (FactSet consensus $4.68) for Estimates FY ends 12/31 F2015A 1Q16A 2Q16A 3Q16E 4Q16E F2016E F2017E EPS (Net) $3.98 $0.96 $1.08 $1.10 $1.04 $4.18 $4.56 Cons. EPS $4.05 $0.90 $1.08 $1.15 $1.13 $4.25 $4.68 Previous $ $ Valuation P/E 13.4x x 11.7x Sources: Company reports, FactSet, KeyBanc Capital Markets Inc. For analyst certification and important disclosures, please refer to the Disclosure Appendix. KeyBanc Capital Markets Inc. Member NYSE/FINRA/SIPC

2 Valuation Investment Risks On a P/E basis, AN is currently trading at 11.7x our 2017 earnings estimate of $4.56. Historically, AN has traded at an average P/E of 14.0x (FY2). The Company is currently trading at an EV/Sales ratio of 0.38x. From , the Company traded at an EV/Sales ratio of 0.29x. We believe the most significant risk to achieving our estimates is a significant decline in North American light vehicle sales. Pg.2

3 Table 1. AN EPS Sensitivity Analysis - (216) ($ in millions, except per share data; SAAR in millions) 2017 Assumptions Comment Acquisitions - Revenue 2016E-2017E $1,931 Opportunistically Acquisitive Acquisitions - Gross Margin Estimate 16% Used Units as % of New Units 68% Depreciation & Amortization $153 Interest Other $113 Other $0 Tax Rate 38% Shares SAAR Range 2015 ASP Estimates SAAR (U.S. Light Vehicle in millions) New Units 304, , , , , ,080 $35,675 Used Units 206, , , , , ,290 $19,801 Parts & Service Growth 3.0% 4.0% 5.0% 6.0% 7.0% 9% Floorplan Interest (Millions) $53 $58 $63 $68 $82 $58 Gross Profit Walk Gross Profit 2017E GP/Unit New $588 $643 $700 $759 $819 $673 $1,928 Used $310 $339 $369 $400 $431 $358 $1,502 F&I $814 $890 $969 $1,050 $1,133 $869 $1,592 Parts & Service $1,378 $1,392 $1,405 $1,418 $1,432 $1,338 NA Other $0 $0 $0 $0 $0 $23 NA Acquisitions $306 $306 $306 $306 $306 NA NA Gross Profit 2017E 3,395 3,569 3,748 3,932 4,120 $3,262 SGA as % of Gross Profit 2017E Operating Income at Various SAAR Levels 71.7% $807 $857 $907 $959 $1, % $841 $892 $945 $999 $1, % $875 $928 $982 $1,038 $1, % $909 $964 $1,020 $1,077 $1, % $943 $999 $1,057 $1,117 $1,177 SGA as % of Gross Profit 2017E EPS at Various SAAR Levels 71.7% $3.87 $4.13 $4.41 $4.69 $ % $4.07 $4.35 $4.63 $4.93 $ % $4.28 $4.56 $4.86 $5.16 $ % $4.48 $4.78 $5.09 $5.40 $ % $4.69 $4.99 $5.31 $5.64 $5.92 SGA as % of Gross Profit Stock Price at P/E of % $44 $48 $51 $54 $ % $47 $50 $53 $57 $ % $49 $52 $56 $59 $ % $52 $55 $58 $62 $ % $54 $57 $61 $65 $68 Source: Company data; KeyBanc Capital Markets estimates. Pg.3

4 AN Earnings (216) (Dollars in millions, except per share data) 1Q15 2Q15 3Q15 4Q Q16 2Q16 3Q16E 4Q16E 2016E 2017E Revenue Assumptions US SAAR Total Light Vehicle Year/Year % Chg. 6% 3% 6% 6% 6% 3% 0% 1% 1% 1% 1% New/Acquired Dealerships $143 $193 $188 $230 $753 $400 $350 $425 $275 $1,450 $481 Dispositions $0 $0 Net New/Acquired Revenue $143 $193 $188 $230 $753 $400 $350 $425 $275 $1,450 $481 Year/Year Revenue Walk Prior Year Revenue $4,364 $4,789 $4,909 $5,048 $19,109 $4,944 $5,224 $5,354 $5,340 $20,862 $21,931 Chg - New $341 $231 $290 $161 $1,023 $31 $104 $157 $64 $355 $410 Chg - Used $148 $120 $57 $56 $381 $26 $14 $85 $58 $181 $237 Chg - F&I $35 $32 $31 $20 $118 $16 $8 $19 $13 $55 $31 Chg - Wholesale ($5) $14 $0 ($8) $2 $23 $30 $42 $47 $141 $28 Chg - Parts & Service $72 $73 $66 $49 $260 $77 $57 $101 $80 $315 $278 Chg - Other ($11) ($34) $1 $14 ($31) $4 $5 $17 ($6) $21 $0 Total Revenue $4,944 $5,224 $5,354 $5,340 $20,862 $5,120 $5,441 $5,775 $5,594 $21,931 $22,916 COGS $4,144 $4,405 $4,523 $4,528 $17,601 $4,294 $4,600 $4,871 $4,728 $18,492 $19,289 Gross Profit $800 $819 $830 $812 $3,262 $826 $842 $905 $866 $3,439 $3,627 SG&A $558 $569 $569 $569 $2,264 $582 $585 $635 $612 $2,414 $2,544 D&A $29 $32 $33 $34 $127 $35 $36 $39 $37 $147 $153 Other, net ($1) ($4) ($7) ($6) ($18) ($5) ($6) ($6) ($6) ($22) ($22) Operating Income $215 $222 $236 $216 $889 $214 $227 $236 $224 $900 $951 Interest - Floorplan $13 $14 $15 $16 $58 $19 $19 $21 $20 $79 $82 Interest - Other $21 $22 $21 $27 $91 $28 $28 $28 $28 $113 $113 Other ($1) ($1) $4 ($1) $1 $3 ($4) $0 $0 ($1) $0 PTX Income $182 $187 $195 $175 $738 $164 $183 $187 $175 $709 $757 Tax $70 $72 $76 $67 $285 $61 $71 $73 $68 $273 $291 ATX Income - Recurring $112 $115 $119 $107 $453 $103 $112 $114 $107 $436 $465 Nonrecurring Items ($0) ($0) ($1) ($10) ($11) $0 ($0) $0 $0 $0 $0 ATX Income - Reported $112 $115 $119 $97 $443 $103 $112 $114 $107 $436 $465 Shares - Diluted EPS - Recurring $0.97 $1.00 $1.05 $0.96 $3.98 $0.96 $1.08 $1.10 $1.04 $4.18 $4.56 EPS - Reported $0.97 $1.00 $1.04 $0.87 $3.88 $0.96 $1.08 $1.10 $1.04 $4.18 $4.56 EBITDA $245 $255 $264 $251 $1,015 $246 $267 $275 $261 $1,048 $1,105 EBITDA/Share $2.13 $2.21 $2.33 $2.24 $8.90 $2.29 $2.57 $2.66 $2.53 $10.05 $10.83 Year/Year % Change Total Revenue 13% 9% 9% 6% 9% 4% 4% 8% 5% 5% 4% Gross Profit 13% 10% 10% 4% 9% 3% 3% 9% 7% 5% 5% Operating Income 17% 12% 14% -5% 9% 0% 2% 0% 4% 1% 6% ATX Income - Recurring 23% 14% 12% -8% 9% -8% -3% -4% 0% -4% 7% EPS - Recurring 30% 20% 16% -6% 14% -1% 8% 5% 8% 5% 9% % of Sales & Tax Rate Gross Profit 16.2% 15.7% 15.5% 15.2% 15.6% 16.1% 15.5% 15.7% 15.5% 15.7% 15.8% SG&A 11.3% 10.9% 10.6% 10.6% 10.8% 11.4% 10.8% 11.0% 10.9% 11.0% 11.1% SG&A as % of Gross Profit 69.7% 69.4% 68.5% 70.0% 69.4% 70.5% 69.5% 70.2% 70.6% 70.2% 70.1% Operating Income 4.3% 4.3% 4.4% 4.0% 4.3% 4.2% 4.2% 4.1% 4.0% 4.1% 4.2% ATX Income - Recurring 2.3% 2.2% 2.2% 2.0% 2.2% 2.0% 2.1% 2.0% 1.9% 2.0% 2.0% EBITDA 4.9% 4.9% 4.9% 4.7% 4.9% 4.8% 4.9% 4.8% 4.7% 4.8% 4.8% Tax Rate 38.5% 38.3% 39.1% 38.5% 38.6% 37.1% 38.8% 39.0% 39.0% 38.5% 38.5% Source: Company data; KeyBanc Capital Markets Inc. estimates. Pg.4

5 AN Earnings (216) (Dollars in millions, except per share data) E 2017E Revenue Assumptions US SAAR Total Light Vehicle Year/Year % Chg. -3% -18% -21% 11% 10% 13% 7% 6% 6% 1% 1% New/Acquired Dealerships $7 $45 $0 $238 $102 $34 $646 $342 $753 $1,450 $481 Dispositions ($1,050) ($350) ($41) $0 $0 $0 $0 $0 $0 Net New/Acquired Revenue $7 ($1,005) ($350) $198 $102 $34 $646 $342 $753 $1,450 $481 Year/Year Revenue Walk Prior Year Revenue $19,119 $17,770 $14,189 $10,683 $12,476 $13,832 $15,669 $17,518 $19,109 $20,862 $21,931 Chg - New ($998) ($2,455) ($2,095) $993 $823 $1,408 $1,043 $1,023 $1,023 $355 $410 Chg - Used ($238) ($553) ($671) $581 $279 $183 $468 $291 $381 $181 $237 Chg - F&I ($42) ($112) ($135) $70 $55 $97 $103 $77 $118 $55 $31 Chg - Wholesale ($47) ($328) ($226) $50 $113 $19 ($55) ($33) $2 $141 $28 Chg - Parts & Service ($20) ($129) ($362) $99 $80 $106 $198 $225 $260 $315 $278 Chg - Other ($4) ($5) ($16) $1 $5 $24 $92 $8 ($31) $21 $0 Total Revenue $17,770 $14,189 $10,683 $12,476 $13,832 $15,669 $17,518 $19,109 $20,862 $21,931 $22,916 COGS $14,913 $11,800 $8,771 $10,346 $11,528 $13,182 $14,758 $16,120 $17,601 $18,492 $19,289 Gross Profit $2,857 $2,389 $1,913 $2,130 $2,304 $2,486 $2,760 $2,989 $3,262 $3,439 $3,627 SG&A $2,057 $1,824 $1,459 $1,555 $1,649 $1,750 $1,935 $2,080 $2,264 $2,414 $2,544 D&A $92 $91 $77 $77 $84 $87 $95 $107 $127 $147 $153 Other, net $2 $160 ($23) $2 ($1) $2 ($6) ($14) ($18) ($22) ($22) Operating Income $706 $315 $400 $496 $572 $648 $736 $816 $889 $900 $951 Interest - Floorplan $134 $88 $36 $43 $43 $46 $53 $53 $58 $79 $82 Interest - Other $111 $87 $42 $55 $65 $87 $88 $87 $91 $113 $113 Other $2 ($39) ($19) $18 $1 ($4) ($6) ($1) $1 ($1) $0 PTX Income $460 $178 $341 $381 $464 $519 $600 $677 $738 $709 $757 Tax $172 ($44) $117 $146 $177 $200 $232 $263 $285 $273 $291 ATX Income - Recurring $288 $222 $224 $235 $286 $320 $368 $415 $453 $436 $465 Nonrecurring Items ($10) ($1,457) ($36) ($8) ($2) ($1) $7 $4 ($11) $0 $0 ATX Income - Reported $279 ($1,235) $188 $227 $284 $319 $375 $419 $443 $436 $465 Shares - Diluted EPS - Recurring $1.44 $1.25 $1.25 $1.48 $1.94 $2.54 $2.98 $3.49 $3.98 $4.18 $4.56 EPS - Reported $1.39 ($6.93) $1.06 $1.43 $1.93 $2.54 $3.04 $3.52 $3.88 $4.18 $4.56 EBITDA $795 $439 $495 $555 $655 $739 $837 $924 $1,015 $1,048 $1,105 EBITDA/Share $3.97 $2.46 $2.79 $3.50 $4.45 $5.87 $6.79 $7.77 $8.90 $10.05 $10.83 Year/Year % Change Total Revenue -7% -20% -25% 17% 11% 13% 12% 9% 9% 5% 4% Gross Profit -7% -16% -20% 11% 8% 8% 11% 8% 9% 5% 5% Operating Income -11% -55% 27% 24% 15% 13% 14% 11% 9% 1% 6% ATX Income - Recurring -13% -23% 1% 5% 22% 12% 15% 13% 9% -4% 7% EPS - Recurring 0% -14% 1% 18% 31% 31% 17% 17% 14% 5% 9% % of Sales & Tax Rate Gross Profit 16.1% 16.8% 17.9% 17.1% 16.7% 15.9% 15.8% 15.6% 15.6% 15.7% 15.8% SG&A 11.6% 12.9% 13.7% 12.5% 11.9% 11.2% 11.0% 10.9% 10.8% 11.0% 11.1% SG&A as % of Gross Profit 72.0% 76.3% 76.3% 73.0% 71.6% 70.4% 70.1% 69.6% 69.4% 70.2% 70.1% Operating Income 4.0% 2.2% 3.7% 4.0% 4.1% 4.1% 4.2% 4.3% 4.3% 4.1% 4.2% ATX Income - Recurring 1.6% 1.6% 2.1% 1.9% 2.1% 2.0% 2.1% 2.2% 2.2% 2.0% 2.0% EBITDA 4.5% 3.1% 4.6% 4.4% 4.7% 4.7% 4.8% 4.8% 4.9% 4.8% 4.8% Tax Rate 37.3% -24.5% 34.2% 38.3% 38.2% 38.4% 38.7% 38.8% 38.6% 38.5% 38.5% Source: Company data; KeyBanc Capital Markets Inc. estimates. Pg.5

6 AN Department Detail (216) (Dollars in millions, except per share data) E 2017E Department Units, ASPs & Revenue New - Units 330, , , , , , , , , , ,687 New - ASP $30,981 $30,315 $31,115 $32,312 $33,472 $33,258 $33,967 $34,503 $35,375 $35,675 $35,675 New - Total $10,233 $7,779 $5,683 $6,676 $7,499 $8,907 $9,950 $10,972 $11,995 $12,350 $12,761 Used - Units 207, , , , , , , , , , ,862 Used - ASP $16,423 $15,664 $16,274 $17,270 $17,812 $17,850 $18,076 $18,561 $19,228 $19,605 $19,801 Used - Total $3,412 $2,859 $2,188 $2,769 $3,048 $3,230 $3,698 $3,989 $4,370 $4,552 $4,789 F&I - Units 538, , , , , , , , , , ,550 F&I - ASP $1,108 $1,103 $1,101 $1,143 $1,201 $1,273 $1,355 $1,409 $1,534 $1,597 $1,592 F&I - Total $596 $484 $349 $419 $475 $571 $674 $751 $869 $924 $955 Wholesale - Total $855 $528 $302 $352 $465 $484 $430 $397 $398 $540 $568 Parts & Service $2,605 $2,476 $2,114 $2,213 $2,293 $2,399 $2,597 $2,823 $3,083 $3,397 $3,676 Other $69 $64 $47 $48 $53 $77 $169 $178 $147 $168 $168 Total Revenue $17,770 $14,189 $10,683 $12,476 $13,832 $15,669 $17,518 $19,109 $20,862 $21,931 $22,916 Year/Year % Change Units, ASPs & Revenue New - Units -11% -22% -29% 13% 8% 20% 9% 9% 7% 2% 3% New - ASP 3% -2% 3% 4% 4% -1% 2% 2% 3% 1% 0% New - Total -9% -24% -27% 17% 12% 19% 12% 10% 9% 3% 3% Used - Units -9% -12% -26% 19% 7% 6% 13% 5% 6% 2% 4% Used - ASP 2% -5% 4% 6% 3% 0% 1% 3% 4% 2% 1% Used - Total -7% -16% -23% 27% 10% 6% 14% 8% 10% 4% 5% F&I - Units -10% -18% -28% 16% 8% 14% 11% 7% 6% 2% 4% F&I - ASP 4% 0% 0% 4% 5% 6% 6% 4% 9% 4% 0% F&I - Total -7% -19% -28% 20% 13% 20% 18% 11% 16% 6% 3% Wholesale - Total -5% -38% -43% 17% 32% 4% -11% -8% 0% 36% 5% Parts & Service -1% -5% -15% 5% 4% 5% 8% 9% 9% 10% 8% Total Revenue -7% -20% -25% 17% 11% 13% 12% 9% 9% 5% 4% Segment Revenue as a % of Total Revenue New 58% 55% 53% 54% 54% 57% 57% 57% 57% 56% 56% Used 19% 20% 20% 22% 22% 21% 21% 21% 21% 21% 21% Used Units as a % of New Units 63% 71% 74% 78% 76% 68% 70% 68% 67% 67% 68% F&I 3% 3% 3% 3% 3% 4% 4% 4% 4% 4% 4% Wholesale 5% 4% 3% 3% 3% 3% 2% 2% 2% 2% 2% Parts & Service 15% 17% 20% 18% 17% 15% 15% 15% 15% 15% 16% Total Revenue 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Gross Profit New $722 $512 $384 $452 $548 $580 $616 $650 $673 $667 $689 Used $361 $289 $224 $258 $281 $294 $325 $363 $358 $354 $363 F&I $596 $484 $349 $419 $475 $571 $674 $751 $869 $924 $955 Wholesale $0 ($9) $5 $9 $4 $6 $5 ($3) ($5) ($5) $0 Parts & Service $1,138 $1,077 $924 $965 $970 $1,008 $1,106 $1,197 $1,338 $1,470 $1,590 Other $40 $36 $26 $28 $27 $29 $34 $31 $28 $29 $29 Total Gross Profit $2,857 $2,389 $1,913 $2,130 $2,304 $2,486 $2,760 $2,989 $3,262 $3,439 $3,627 Gross Profit / Unit Total Front-End $3,122 $2,927 $3,019 $3,078 $3,297 $3,219 $3,247 $3,310 $3,355 $3,363 $3,348 New $2,187 $1,997 $2,103 $2,186 $2,445 $2,164 $2,104 $2,044 $1,985 $1,928 $1,928 Used $1,738 $1,581 $1,666 $1,612 $1,640 $1,623 $1,590 $1,678 $1,556 $1,502 $1,502 F&I $1,108 $1,103 $1,101 $1,143 $1,201 $1,273 $1,355 $1,409 $1,534 $1,597 $1,592 Year/Year % Change in Gross Profit New -12% -29% -25% 18% 21% 6% 6% 5% 4% -1% 3% Used -12% -20% -22% 15% 9% 5% 11% 12% -1% -1% 3% F&I -7% -19% -28% 20% 13% 20% 18% 11% 16% 6% 3% Parts & Service -1% -5% -14% 4% 1% 4% 10% 8% 12% 10% 8% Total Gross Profit -7% -16% -20% 11% 8% 8% 11% 8% 9% 5% 5% Gross Profit as a % of Revenue New 7.1% 6.6% 6.8% 6.8% 7.3% 6.5% 6.2% 5.9% 5.6% 5.4% 5.4% Used 10.6% 10.1% 10.2% 9.3% 9.2% 9.1% 8.8% 9.1% 8.2% 7.8% 7.6% Parts & Service 43.7% 43.5% 43.7% 43.6% 42.3% 42.0% 42.6% 42.4% 43.4% 43.3% 43.3% Total Gross Profit 16.1% 16.8% 17.9% 17.1% 16.7% 15.9% 15.8% 15.6% 15.6% 15.7% 15.8% Source: Company data; KeyBanc Capital Markets Inc. estimates. Pg.6

7 AN Company Balance Sheet (216) (Dollars in millions, except per share data) E 2017E Cash & Equivalents $33 $110 $174 $95 $87 $70 $69 $75 $74 ($203) ($71) Accounts Receivable $714 $370 $406 $462 $587 $698 $741 $818 $908 $955 $998 Inventories $2,326 $1,758 $1,393 $1,867 $1,809 $2,397 $2,827 $2,899 $3,612 $3,797 $3,968 Other Current Assets $166 $485 $296 $205 $193 $196 $193 $207 $117 $117 $117 Total Current Assets $3,238 $2,724 $2,268 $2,629 $2,676 $3,361 $3,830 $3,999 $4,711 $4,666 $5,011 Property, Plant & Equip.-Net $1,987 $1,799 $1,714 $1,838 $1,951 $2,095 $2,235 $2,422 $2,667 $2,765 $2,857 Goodwill - Net $2,757 $1,126 $1,123 $1,142 $1,172 $1,529 $1,595 $1,669 $1,834 $1,834 $1,834 Other Assets $497 $366 $303 $365 $400 $218 $254 $309 $345 $728 $873 Total Assets $8,480 $6,014 $5,407 $5,974 $6,199 $7,203 $7,914 $8,400 $9,558 $9,994 $10,575 Floorplan Notes Payable-Trade $1,722 $1,360 $1,021 $1,380 $1,362 $1,766 $2,130 $2,091 $2,566 $2,697 $2,818 Floorplan Notes Payable-Non-Trad $460 $453 $354 $487 $537 $774 $899 $1,007 $1,161 $1,221 $1,276 Short-term Debt $24 $33 $8 $8 $13 $30 $30 $25 $613 $613 $613 Accounts Payable $212 $135 $152 $164 $202 $236 $263 $265 $300 $315 $329 Other Current Liabilities $485 $474 $330 $361 $349 $396 $430 $495 $529 $529 $529 Total Current Liabilities $2,902 $2,456 $1,863 $2,399 $2,463 $3,202 $3,752 $3,882 $5,169 $5,375 $5,565 Long-term Debt $1,752 $1,226 $1,105 $1,341 $1,634 $2,066 $1,810 $2,103 $1,754 $2,004 $2,004 Other Long-term Liabilities $352 $135 $136 $155 $207 $247 $291 $342 $286 $286 $286 Shareholders' Equity $3,474 $2,198 $2,303 $2,079 $1,895 $1,689 $2,062 $2,072 $2,349 $2,328 $2,719 Total Liab. & Shrhldrs' Eqty. $8,480 $6,014 $5,407 $5,974 $6,199 $7,203 $7,914 $8,400 $9,558 $9,994 $10,575 Activity Ratios Inventory Turnover Receivable Turnover Total Asset Turnover Liquidity Ratios Quick Ratio Current Ratio Debt Ratios EBIT Interest Coverage EBITDA Interest Coverage Funds from Ops./Total Debt 21.3% 24.4% 27.0% 23.1% 22.5% 19.4% 25.2% 24.5% 24.5% 22.3% 23.7% Free Oper. CF/Total Debt 0.7% 41.9% 19.4% 3.4% 9.8% 4.9% 14.0% 12.3% 10.1% 9.7% 11.3% Long Term Debt/Capital 33.5% 35.8% 32.4% 39.2% 46.3% 55.0% 46.7% 50.4% 42.7% 46.3% 42.4% Total Debt/Capital 33.8% 36.4% 32.6% 39.3% 46.5% 55.4% 47.2% 50.7% 50.2% 52.9% 49.0% Return On Investment Ratios Return On Avg. Total Assets 5.2% 6.1% 4.8% 5.2% 5.8% 6.0% 6.0% 6.1% 6.1% 5.7% 5.7% Return On Average Equity 8.0% 7.8% 10.0% 10.7% 14.4% 17.9% 19.6% 20.1% 20.5% 18.6% 18.4% Return On Total Capital 13.4% 8.2% 12.2% 14.0% 16.3% 18.0% 19.3% 20.3% 20.1% 18.7% 18.5% Source: Company Data; KeyBanc Capital Markets estimates. Pg.7

8 AN Cash Flow Statement - (216) bhoselton@keybanc.com (Dollars in millions, except per share data) E 2017E Net Income, Reported $279 ($1,243) $198 $227 $284 $319 $375 $419 $443 $436 $465 D&A $90 $85 $77 $77 $84 $87 $95 $107 $127 $147 $153 Working Capital ($206) $330 ($10) ($105) ($45) ($128) ($3) ($50) ($83) ($85) ($78) Non-Trade Floorplan Financing $238 ($7) ($100) $133 $50 $138 $89 $62 $155 $59 $55 Other $44 $1,512 $105 $53 $54 $41 $17 $10 $20 $0 $0 Operating Cash Flow $445 $678 $269 $385 $426 $457 $573 $548 $662 $558 $596 Capital Expenditures ($160) ($110) ($75) ($162) ($163) ($177) ($203) ($210) ($258) ($245) ($245) Sales of PP&E $4 $3 $11 $5 $14 $16 $3 $8 $22 Acquisitions/Divestitures $48 $17 $66 ($60) ($59) ($135) ($78) ($205) ($278) ($383) ($144) Other $17 $15 $13 $16 $2 ($2) $20 $31 $4 Investing Cash Flow ($91) ($75) $14 ($200) ($206) ($298) ($258) ($376) ($509) ($628) ($389) Net Changes In Stock ($548) ($58) ($111) ($475) ($502) ($576) ($67) ($488) ($207) ($457) ($74) Net Changes In ST Debt ($27) $15 ($1) ($16) $232 $45 ($329) $310 ($665) Net Changes In LT Debt $184 ($463) ($82) $236 ($8) $335 $54 ($9) $749 $250 Dividends Paid $0 $0 $0 $0 $0 $0 $0 Other $16 ($20) ($26) ($8) $49 $22 $26 $22 ($30) Financing Cash Flow ($374) ($526) ($220) ($263) ($229) ($174) ($316) ($165) ($154) ($207) ($74) Exchange Rate Gain/(Loss) Net Incr./Decr. In Cash from contin ($20) $77 $63 ($78) ($9) ($15) ($0) $7 ($1) ($277) $132 Beginning Cash Balance $53 $33 $110 $174 $95 $87 $70 $69 $75 $74 ($203) Ending Cash Balance $33 $110 $174 $95 $87 $72 $69 $77 $74 ($203) ($71) Free Cash Flow Operating Cash Flow $445 $678 $269 $385 $426 $457 $573 $548 $662 $558 $596 Capital Expenditures ($160) ($110) ($75) ($162) ($163) ($177) ($203) ($210) ($258) ($245) ($245) Free Cash Flow $286 $567 $194 $223 $263 $279 $371 $338 $404 $313 $351 Pg.8

9 Disclosure Appendix AutoNation, Inc. - AN We have managed or co-managed a public offering of securities for AutoNation, Inc. within the past 12 months. AutoNation, Inc. is an investment banking client of ours. We have received compensation for investment banking services from AutoNation, Inc. during the past 12 months. We have received compensation for non-investment banking securities related services from AutoNation, Inc. during the past 12 months. We expect to receive or intend to seek compensation for investment banking services from AutoNation, Inc. within the next three months. During the past 12 months, AutoNation, Inc. has been a client of the firm or its affiliates for non-securities related services. As of the date of this report, we make a market in AutoNation, Inc.. For the three-year history represented in this chart, this stock has been rated Sector Weight. Reg A/C Certification The research analyst(s) responsible for the preparation of this research report certifies that:(1) all the views expressed in this research report accurately reflect the research analyst's personal views about any and all of the subject securities or issuers; and (2) no part of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this research report. Three-Year Rating and Price Target History Rating Disclosures Distribution of Ratings/IB Services Firmwide and by Sector KeyBanc Capital Markets IB Serv/Past 12 Mos. Consumer IB Serv/Past 12 Mos. Rating Count Percent Count Percent Overweight [OW] Sector Weight [SW] Underweight [UW] Rating Count Percent Count Percent Overweight [OW] Sector Weight [SW] Underweight [UW] Pg.9

10 Disclosure Appendix (cont'd) Rating System Overweight - We expect the stock to outperform the analyst's coverage sector over the coming 6-12 months. Sector Weight - We expect the stock to perform in line with the analyst's coverage sector over the coming 6-12 months. Underweight - We expect the stock to underperform the analyst's coverage sector over the coming 6-12 months. Note: KeyBanc Capital Markets changed its rating system after market close on February 27, The previous ratings were Buy, Hold and Underweight. Additionally, Pacific Crest Securities changed its rating system to match KeyBanc Capital Markets rating system after market close on April 10, 2015, in conjunction with the merger of the broker dealers. The previous ratings were Outperform, Sector Perform and Underperform. Other Disclosures KeyBanc Capital Markets is a trade name under which corporate and investment banking products and services of KeyCorp and its subsidiaries, KeyBanc Capital Markets Inc., Member NYSE/FINRA/SIPC ( KBCMI ), and KeyBank National Association ( KeyBank N.A. ), are marketed. Pacific Crest Securities is a division of KeyBanc Capital Markets Inc. KeyBanc Capital Markets Inc. ( KBCMI ) does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. This report has been prepared by KBCMI. The material contained herein is based on data from sources considered to be reliable; however, KBCMI does not guarantee or warrant the accuracy or completeness of the information. It is published for informational purposes only and should not be used as the primary basis of investment decisions. Neither the information nor any opinion expressed constitutes an offer, or the solicitation of an offer, to buy or sell any security. The opinions and estimates expressed reflect the current judgment of KBCMI and are subject to change without notice. This report may contain forward-looking statements, which involve risk and uncertainty. Actual results may differ significantly from the forward-looking statements. This report is not intended to provide personal investment advice and it does not take into account the specific investment objectives, financial situation and the specific needs of any person or entity. No portion of an analyst s compensation is based on a specific banking transaction; however, part of his/her compensation may be based upon overall firm revenue and profitability, of which investment banking is a component. Individuals associated with KBCMI (other than the research analyst(s) listed on page 1 of this research report) may have a position (long or short) in the securities covered in this research report and may make purchases and/or sales of those securities in the open market or otherwise without notice. As required by FINRA Rule 2241(C)(4)(A), financial interest, if any, by any research analysts listed on page 1 of this report will be disclosed in Important Disclosures, Company-specific regulatory disclosures located above in the Disclosure Appendix. KBCMI itself may have a position (long or short) in the securities covered in this research report and may make purchases and/or sales of those securities in the open market or otherwise without notice. As required by FINRA Rule 2241(C)(4)(F), if KBCMI, or its affiliates, beneficially own 1% or more of any class of common equity securities in the subject company(ies) in this research report, it will be disclosed in Important Disclosures, Company-specific regulatory disclosures located above in the Disclosures Appendix. This communication is intended solely for use by KBCMI clients. The recipient agrees not to forward or copy the information to any other person without the express written consent of KBCMI. Pg.10