SOURCE: Lithia Motors

Lithia Motors

April 24, 2014 07:30 ET

Lithia Motors Reports Adjusted EPS of $1.03 for the First Quarter of 2014, an Increase of 23% Over the Prior Year

Lithia Increases Quarterly Dividend 23% to $0.16 per Share

MEDFORD, OR--(Marketwired - Apr 24, 2014) - Lithia Motors, Inc. (NYSE: LAD) reported the highest first quarter adjusted net income in Company history and increased adjusted net income from continuing operations 24% for the first quarter 2014 over the prior year period.

2014 first quarter adjusted net income from continuing operations was $27.1 million, or $1.03 per diluted share. This compares to 2013 first quarter net income from continuing operations of $21.9 million, or $0.84 per diluted share.

Unadjusted net income from continuing operations for the first quarter of 2014 was $24.7 million, or $0.94 per diluted share, compared to $21.9 million or $0.84 per diluted share for the first quarter of 2013. As shown in the attached non-GAAP reconciliation tables, the 2014 first quarter adjusted income from continuing operations excluded non-core charges of $0.09 per share related to an adjustment to a reserve associated with a lawsuit filed in 2006 and settled in 2013, a loss reserve for a hailstorm in Texas and a reserve for a contract assumed in an acquistion.

First quarter 2014 revenue from continuing operations increased $175 million, or 19%, to $1.1 billion from $903 million for the first quarter of 2013.

First Quarter-over-Quarter Operating Highlights:

  • Total same store sales increased 12%
  • New vehicle same store sales increased 10%
  • Used vehicle retail same store sales increased 19%
  • Service, body and parts same store sales increased 9%
  • Same store F&I per unit increased $84 to $1,200
  • Adjusted SG&A expense as a percentage of gross profit decreased 60 basis points to 68.5%

"We grew same store sales in all four business lines in the first quarter," said Bryan DeBoer, President and CEO. "Notably, we saw a 9% increase in service, body and parts sales driven by an 8% improvement in customer pay work and a 17% increase in warranty activity. March was a solid month for national new car sales with a SAAR of 16.3 million, the highest level since November 2007. March was also the best month in our Company's history in both revenue and pre-tax profit. Our store leaders increased same store used unit volume 12% in the quarter as we continue our objective to sell 75 used units per store per month. We believe opportunities remain for continued improvement and are optimistic for 2014."

Chris Holzshu, SVP and CFO, said, "Our same store F&I per unit was $1,200. While this is an improvement over 2013, we believe opportunity remains, as we continue to emphasize training and adjust pricing on certain products. Our adjusted SG&A as a percentage of gross profit improved by 60 basis points to 68.5% for the first quarter of 2014. Our incremental throughput, or the percentage of incremental gross profit remaining after deducting incremental SG&A expense, was 40.8% on a same store basis in the first quarter of 2014. We continue to target incremental throughput of 50% on a same store basis and believe this remains achievable on a full year basis."

Corporate Development
In January 2014, we acquired Island Honda in Kahului, Hawaii and, in February 2014, we acquired Stockton Volkswagen in Stockton, California, with estimated total annual revenues of $50 million. In March 2014, we acquired Honolulu GMC Buick Cadillac and Honolulu Volkswagen in Honolulu, Hawaii, with estimated total annual revenues of $75 million.

In April 2014, we acquired Access Ford Lincoln in Corpus Christi, Texas and opened Lithia Chrysler Jeep Dodge Ram of Wasilla in Wasilla, Alaska with $105 million in estimated total annual revenues.

Bryan DeBoer, President and CEO, stated, "We've purchased eight stores and opened one location since October 2013, with total estimated annual revenues of $380 million. This represents an increase of 9% over our full year 2013 total revenues. With our most recent activity we now operate 100 stores in 12 states.'"

Balance Sheet Update
We ended the first quarter with $22 million in cash and $133 million in available credit on our credit facilities. Additionally, approximately $193 million of our operating real estate is currently unfinanced, which could provide an estimated additional $145 million in available liquidity, for total potential liquidity of $300 million.

Dividend Payment
Lithia announced that the Board of Directors has approved a dividend of $0.16 per share related to first quarter 2014 financial results, an increase of $0.03 from the dividend paid related to fourth quarter 2013 results. Lithia will pay the dividend May 23, 2014 to shareholders of record on May 9, 2014.

Outlook for 2014
We project 2014 second quarter earnings of $1.18 to $1.20 per diluted share and full-year 2014 earnings of $4.57 to $4.65 per diluted share. These projections are based on the following annual assumptions about 2014 performance:

  • Total revenues of $4.6 to $4.7 billion
  • New vehicle same store sales increasing 8.0%
  • New vehicle gross margin of 6.5% to 6.7%
  • Used vehicle same store sales increasing 9.5%
  • Used vehicle gross margin of 13.3% to 13.5%
  • Service body and parts same store sales increasing 7.5%
  • Service body and parts gross margin of 48.4% to 48.6%
  • Finance and insurance gross profit of $1,175 per unit
  • Tax rate of 39.5%
  • Average diluted shares outstanding of 26.2 million 
  • Capital expenditures of $92 million

These projections exclude the impact of future acquisitions, dispositions and non-core items. Actual results may be affected by items described under Forward-Looking Statements below.

First Quarter Earnings Conference Call and Updated Presentation
The first quarter conference call may be accessed at 11:00 a.m. ET today by telephone at 877-407-8029. An updated presentation highlighting the first quarter results has been added to www.lithiainvestorrelations.com.

To listen live on our website or for replay, visit www.lithiainvestorrelations.com and click on webcasts.

About Lithia
Lithia Motors, Inc. is the eighth largest automotive retailer in the United States. Lithia sells 28 brands of new vehicles and all brands of used vehicles at 100 stores in 12 states. Lithia also arranges finance, warranty, and credit insurance contracts; and provides vehicle parts, maintenance, and repair services at all of its locations.

Sites
www.lithia.com
www.lithiainvestorrelations.com
www.lithiacareers.com
www.assuredservice.com

Lithia Motors on Facebook
http://www.facebook.com/LithiaMotors

Lithia Motors on Twitter
http://twitter.com/lithiamotors

Forward-Looking Statements
This press release includes "forward-looking statements" within the meaning of the "Safe-Harbor" provisions of the Private Securities Litigation Reform Act of 1995. Forward looking statements include statements regarding our goals, plans, projections and guidance regarding our financial position, results of operations, market position, pending and potential future acquisitions and business strategy, and often contain words such as "project," "outlook," "expect," "anticipate," "intend," "plan," "believe," "estimate," "may," "seek," "would," "should," "likely," "goal," "strategy," "future," "maintain" or "will" and similar references to future periods. Examples of forward-looking statements in this press release include, among others, statements regarding:

  • Expected operating results, such as improved store performance, maintaining incremental throughput above 50%, strategy for customer retention, growth and financial results and all projections set forth under the heading "Outlook for 2014"; and
  • Anticipated availability of liquidity from our unfinanced operating real estate.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events that depend on circumstances that may or may not occur in the future. Forward-looking statements are not guarantees of future performance, and our actual results of operations, financial condition and liquidity and development of the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements in this press release. The risks and uncertainties that could cause actual results to differ materially from estimated or projected results include, without limitation, future economic and financial conditions (both nationally and locally), changes in customer demand, our relationship with, and the financial and operational stability of, vehicle manufacturers and other suppliers, risks associated with our indebtedness (including available borrowing capacity, compliance with financial covenants and ability to refinance or repay indebtedness on favorable terms), government regulations, legislation and others set forth throughout Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations and in Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2013 and from time to time in our other filings with the SEC. We urge you to carefully consider this information and not place undue reliance on forward-looking statements. We undertake no duty to update our forward-looking statements, including our earnings outlook, which are made as of the date of this release.

Non-GAAP Financial Measures
This press release and the attached financial tables contain non-GAAP financial measures such as adjusted net income and diluted earnings per share from continuing operations, adjusted SG&A as a percentage of revenues and gross profit, adjusted operating margin, adjusted operating profit as a percentage of gross profit, and adjusted pre-tax margin. Non-GAAP measures do not have definitions under GAAP and may be defined differently by and not comparable to similarly titled measures used by other companies. As a result, we review any non-GAAP financial measures in connection with a review of the most directly comparable measures calculated in accordance with GAAP. We caution you not to place undue reliance on such non-GAAP measures, but also to consider them with the most directly comparable GAAP measures. We present cash flows from operations in the attached tables, adjusted to include the change in non-trade floor plan debt to improve the visibility of cash flows related to vehicle financing. As required by SEC rules, we have reconciled these measures to the most directly comparable GAAP measures in the attachments to this release. We believe the non-GAAP financial measures we present improve the transparency of our disclosures; provide a meaningful presentation of our results from core business operations, because they exclude items not related to core business operations and other non-cash items; and improve the period-to-period comparability of our results from core business operations. These presentations should not be considered an alternative to GAAP measures.

   
   
Lithia Motors, Inc.  
Consolidated Statements of Operations (Unaudited)  
(In thousands except per share data)  
   
    Three months ended           %  
    March 31,     Increase     Increase  
    2014     2013     (Decrease)     (Decrease)  
Revenues:                              
New vehicle retail   $ 579,522     $ 493,441     $ 86,081     17.4 %
Used vehicle retail     301,893       239,228       62,665     26.2  
Used vehicle wholesale     42,693       39,506       3,187     8.1  
Finance and insurance     39,631       31,663       7,968     25.2  
Service, body and parts     104,617       90,440       14,177     15.7  
Fleet and other     9,750       8,802       948     10.8  
  Total revenues     1,078,106       903,080       175,026     19.4  
Cost of sales:                              
New vehicle retail     540,498       458,794       81,704     17.8  
Used vehicle retail     261,097       204,255       56,842     27.8  
Used vehicle wholesale     41,362       38,532       2,830     7.3  
Service, body and parts     53,785       46,661       7,124     15.3  
Fleet and other     9,303       8,400       903     10.8  
  Total cost of sales     906,045       756,642       149,403     19.7  
Gross profit     172,061       146,438       25,623     17.5  
SG&A expense     121,829       101,131       20,698     20.5  
Depreciation and amortization     5,507       4,721       786     16.6  
Income from operations     44,725       40,586       4,139     10.2  
Floor plan interest expense     (2,984 )     (3,449 )     (465 )   (13.5 )
Other interest expense     (1,974 )     (2,361 )     (387 )   (16.4 )
Other income, net     937       801       136     17.0  
Income from continuing operations before income taxes     40,704       35,577       5,127     14.4  
Income tax expense     (16,010 )     (13,695 )     2,315     16.9  
Income tax rate     39.3 %     38.5 %              
Income from continuing operations   $ 24,694     $ 21,882     $ 2,812     12.9 %
Income from discontinued operations, net of tax     40       173       (133 )   (76.9 )
Net income   $ 24,734     $ 22,055     $ 2,679     12.1 %
                               
Diluted net income per share:                              
Continuing operations   $ 0.94     $ 0.84     $ 0.10     11.9 %
Discontinued operations     -       0.01       (0.01 )   (100.0 )
Net income per share   $ 0.94     $ 0.85     $ 0.09     10.6 %
                               
Diluted shares outstanding     26,320       26,054       266     1.0 %
                               
                               
                               
Lithia Motors, Inc.  
Key Performance Metrics (Unaudited)  
   
    Three months ended           %  
    March 31,     Increase     Increase  
    2014     2013     (Decrease)     (Decrease)  
Gross margin                              
New vehicle retail     6.7 %     7.0 %     (30) bps        
Used vehicle retail     13.5       14.6       (110) bps        
Used vehicle wholesale     3.1       2.5       60 bps        
Finance and insurance     100.0       100.0       - bps        
Service, body and parts     48.6       48.4       20 bps        
Fleet and Other     4.6       4.6       - bps        
Gross profit margin     16.0       16.2       (20) bps        
                               
Unit sales                              
New vehicle retail     17,274       14,720       2,554     17.4 %
Used vehicle retail     16,316       13,661       2,655     19.4  
Total retail units sold     33,590       28,381       5,209     18.4  
Used vehicle wholesale     5,853       5,324       529     9.9  
                               
Average selling price                              
New vehicle retail   $ 33,549     $ 33,522     $ 27     0.1 %
Used vehicle retail     18,503       17,512       991     5.7  
Used vehicle wholesale     7,294       7,420       (126 )   (1.7 )
                               
Average gross profit per unit                              
New vehicle retail   $ 2,259     $ 2,354     $ (95 )   (4.0) %
Used vehicle retail     2,500       2,560       (60 )   (2.3 )
Used vehicle wholesale     227       183       44     24.0  
Finance and insurance     1,180       1,116       64     5.7  
Total vehicle(1)     3,596       3,603       (7 )   (0.2 )
                               
Revenue mix                              
New vehicle retail     53.8 %     54.6 %              
Used vehicle retail     28.0       26.5                
Used vehicle wholesale     4.0       4.4                
Finance and insurance, net     3.7       3.5                
Service, body and parts     9.7       10.0                
Fleet and other     0.8       1.0                
                               
   
Adjusted
   
As reported
 
 
 
 
 
Three months ended
March 31,
    Three months ended
March 31,
 
Other metrics   2014     2013     2014     2013  
SG&A as a % of revenue     10.9 %     11.2 %     11.3 %   11.2 %
SG&A as a % of gross profit     68.5       69.1       70.8     69.1  
Operating profit as a % of revenue     4.5       4.5       4.1     4.5  
Operating profit as a % of gross profit     28.3       27.7       26.0     27.7  
Pretax margin     4.1       3.9       3.8     3.9  
Net profit margin     2.5       2.4       2.3     2.4  
                               
 (1) - includes the sales and gross profit related to new, used retail, used wholesale and finance and insurance and unit sales for new and used retail
 
 
 
Lithia Motors, Inc.  
Same Store Operating Highlights (Unaudited)  
   
    Three months ended           %  
    March 31,     Increase     Increase  
    2014     2013     (Decrease)     (Decrease)  
Revenues                              
New vehicle retail   $ 542,975     $ 493,441     $ 49,534     10.0 %
Used vehicle retail     285,204       239,228       45,976     19.2  
Used vehicle wholesale     41,122       39,481       1,641     4.2  
Finance and insurance     37,430       31,670       5,760     18.2  
Service, body and parts     98,929       90,443       8,486     9.4  
Fleet and other     9,751       8,802       949     10.8  
Total revenues   $ 1,015,411     $ 903,065     $ 112,346     12.4  
                               
Gross profit                              
New vehicle retail   $ 36,693     $ 34,647     $ 2,046     5.9 %
Used vehicle retail     38,809       34,966       3,843     11.0  
Used vehicle wholesale     1,313       1,032       281     27.2  
Finance and insurance     37,430       31,670       5,760     18.2  
Service, body and parts     47,918       43,825       4,093     9.3  
Fleet and other     449       403       46     11.4  
Total gross profit   $ 162,612     $ 146,543     $ 16,069     11.0  
                               
Gross margin                              
New vehicle retail     6.8 %     7.0 %     (20) bps        
Used vehicle retail     13.6       14.6       (100) bps        
Used vehicle wholesale     3.2       2.6       60 bps        
Finance and insurance     100.0       100.0       - bps        
Service, body and parts     48.4       48.5       (10) bps        
Fleet and Other     4.6       4.6       - bps        
Gross profit margin     16.0       16.2       (20) bps        
                               
Unit sales                              
New vehicle retail     15,944       14,720       1,224     8.3 %
Used vehicle retail     15,255       13,661       1,594     11.7  
Total retail units sold     31,199       28,381       2,818     9.9  
Used vehicle wholesale     5,551       5,323       228     4.3  
                               
Average selling price                              
New vehicle retail   $ 34,055     $ 33,522     $ 533     1.6 %
Used vehicle retail     18,696       17,512       1,184     6.8  
Used vehicle wholesale     7,408       7,417       (9 )   (0.1 )
                               
Average gross profit per unit                              
New vehicle retail   $ 2,301     $ 2,354     $ (53 )   (2.3) %
Used vehicle retail     2,544       2,560       (16 )   (0.6 )
Used vehicle wholesale     237       194       43     22.2  
Finance and insurance     1,200       1,116       84     7.5  
Total vehicle(1)     3,662       3,605       57     1.6  
                               
(1) - includes the sales and gross profit related to new, used retail, used wholesale and finance and insurance and unit sales for new and used retail
 
 
 
Lithia Motors, Inc.
Other Highlights (Unaudited)
 
    As of
    March 31,   December 31,   March 31,
    2014   2013   2013
Days Supply(1)            
New vehicle inventory   69   74   71
Used vehicle inventory   46   63   46
             
(1) Days supply calculated based on current inventory levels, excluding in-transit vehicles, and a 30-day historical cost of sales level.
 
 
 
         
Financial covenants        
    Requirement   As of March 31, 2014
Current ratio   Not less than 1.20 to 1   1.37 to 1
Fixed charge coverage ratio   Not less than 1.20 to 1   4.09 to 1
Leverage ratio   Not more than 5.00 to 1   1.39 to 1
Funded debt restriction   Not more than $375 million   $168.8 million
         
         
         
Lithia Motors, Inc.  
Other Highlights (Unaudited)  
   
    Three months ended
March 31,
 
    2014     2013  
New vehicle unit sales brand mix            
Chrysler   29.5 %   31.3 %
General Motors   14.0     15.9  
Toyota   13.7     14.9  
Subaru   9.8     7.7  
Honda, Acura   7.8     6.8  
BMW, MINI   6.0     6.3  
Ford   5.9     5.9  
Nissan   3.8     2.7  
Hyundai   3.0     2.9  
Mercedes   2.3     2.2  
Volkswagen, Audi   2.3     1.8  
Kia   0.9     0.6  
Mazda   0.4     0.5  
Other   0.6     0.5  
             
   
Three months ended
March 31,
 
    2014     2013  
Revenue geographic mix            
Texas   23.9 %   25.7 %
Oregon   22.2     20.8  
California   13.3     10.7  
Montana   8.3     9.0  
Washington   7.3     8.2  
Alaska   6.7     7.1  
Nevada   4.8     4.7  
Idaho   4.7     5.2  
Iowa   4.3     4.5  
North Dakota   2.2     2.4  
New Mexico   1.6     1.7  
Hawaii   0.7     0.0  
             
   
As of April 24, 2014
 
Current store count mix   # of stores     % of total  
Chrysler   24     24.0 %
General Motors   14     14.0  
Honda, Acura   11     11.0  
Toyota   10     10.0  
BMW, MINI   9     9.0  
Ford   6     6.0  
Subaru   5     5.0  
Hyundai   5     5.0  
Volkswagen, Audi   5     5.0  
Nissan   4     4.0  
Mercedes   4     4.0  
Other   3     3.0  
             
             
             
Lithia Motors, Inc.  
Consolidated Balance Sheets (Unaudited)  
(In thousands)  
   
    March 31, 2014     December 31, 2013  
Cash and cash equivalents   $ 22,340     $ 23,686  
Trade receivables, net     182,777       170,519  
Inventories, net     935,850       859,019  
Deferred income taxes     1,316       1,548  
Other current assets     12,564       15,251  
Assets held for sale     12,703       11,526  
Total current assets   $ 1,167,550     $ 1,081,549  
                 
Property and equipment, net     493,171       481,212  
Goodwill     56,787       49,511  
Franchise value     73,502       71,199  
Deferred income taxes     14,374       10,256  
Other non-current assets     38,892       31,394  
Total assets   $ 1,844,276     $ 1,725,121  
                 
Floor plan notes payable   $ 19,978     $ 18,789  
Floor plan notes payable: non trade     744,786       695,066  
Current maturities of long-term debt     7,340       7,083  
Trade payables     54,052       51,159  
Accrued liabilities     107,130       94,143  
Liabilities related to assets held for sale     7,142       6,271  
Total current liabilities   $ 940,428     $ 872,511  
                 
Long-term debt     269,760       245,471  
Deferred revenue     46,238       44,005  
Other long-term liabilities     31,013       28,412  
Total liabilities   $ 1,287,439     $ 1,190,399  
                 
Class A common stock     267,071       268,255  
Class B common stock     319       319  
Additional paid-in capital     24,392       22,598  
Accumulated other comprehensive loss     (1,389 )     (1,538 )
Retained earnings     266,444       245,088  
Total liabilities & stockholders' equity   $ 1,844,276     $ 1,725,121  
                 
                 
                 
Lithia Motors, Inc.  
Summarized Cash Flow from Operations (Unaudited)  
(In thousands)  
   
    Three months ended  
    March 31,  
    2014     2013  
Net income   $ 24,734     $ 22,055  
                 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:                
Depreciation and amortization     5,507       4,721  
Stock-based compensation     1,538       1,140  
Loss (gain) on disposal of assets     20       (19 )
Deferred income taxes     1,866       (206 )
Excess tax benefit from share-based payment arrangements     (5,846 )     (2,937 )
(Increase) decrease:                
  Trade receivables, net     (12,259 )     (960 )
  Inventories     (56,748 )     7,890  
  Other current assets     1,660       5,757  
  Other non-current assets     (3,950 )     (424 )
Increase (decrease):                
  Floor plan notes payable, net     1,675       2,257  
  Trade payables     1,774       (410 )
  Accrued liabilities     12,521       6,188  
  Other long-term liabilities and deferred revenue     5,121       4,705  
Net cash provided by (used in) operating activities   $ (22,387 )   $ 49,757  
                 
                 
                 
Lithia Motors, Inc.
Reconciliation of Non-GAAP Cash Flow from Operations (Unaudited)
(In thousands)
 
    Three months ended
    March 31,
Net cash provided by (used in) operating activities   2014     2013
As reported   $ (22,387 )   $ 49,757
  Floor plan notes payable, non-trade, net     51,783       953
Adjusted   $ 29,396     $ 50,710
               
               
               
Lithia Motors, Inc.  
Reconciliation of Certain Non-GAAP Financial Measures (Unaudited)  
(In thousands, except for per share data)  
   
    Three Months Ended March 31, 2014  
    As reported     Reserve adjustments     Adjusted  
Selling, general and administrative     121,829       (3,931 )     117,898  
                         
Income from operations     44,725       3,931       48,656  
                         
Income from continuing operations before income taxes   $ 40,704     $ 3,931     $ 44,635  
Income tax expense     (16,010 )     (1,546 )     (17,556 )
Net income from continuing operations   $ 24,694     $ 2,385     $ 27,079  
                         
Diluted earnings per share from continuing operations   $ 0.94     $ 0.09     $ 1.03  
Diluted share count     26,320                  
                         
                         

Contact Information

  • Contact:
    John North
    VP Finance and Controller
    (541) 618-5748