SOURCE: Lithia Motors

Lithia Motors

October 30, 2014 07:28 ET

Lithia Motors Reports Adjusted EPS of $1.32 for the Third Quarter of 2014, an Increase of 17% Over the Prior Year

Lithia Motors Declares $0.16 per Share Dividend for Third Quarter

MEDFORD, OR--(Marketwired - Oct 30, 2014) - Lithia Motors, Inc. (NYSE: LAD) reported the highest third quarter adjusted net income in Company history and an increase in adjusted net income from continuing operations of 18% for the third quarter 2014 over the prior year period.

2014 third quarter adjusted net income from continuing operations was $34.9 million, or $1.32 per diluted share. This compares to 2013 third quarter adjusted net income from continuing operations of $29.6 million, or $1.13 per diluted share.

Unadjusted net income from continuing operations for the third quarter of 2014 was $34.5 million, or $1.31 per diluted share, compared to $30.9 million or $1.18 per diluted share, for the third quarter of 2013. As shown in the attached non-GAAP reconciliation tables, the 2014 third quarter adjusted results from continuing operations exclude a $0.01 per share expense related to non-core acquisition expenses for the purchase of DCH Auto Group offset by a non-core benefit resulting from a tax attribute. The 2013 third quarter adjusted results from continuing operations exclude a $0.05 per share benefit related to non-core tax attribute.

Third quarter 2014 revenue from continuing operations increased $228 million, or 21%, to $1.3 billion from $1.1 billion for the third quarter of 2013.

Third Quarter-over-Quarter Operating Highlights:

  • Total same store sales increased 12%
  • New vehicle same store sales increased 11%
  • Used vehicle retail same store sales increased 13%
  • Service, body and parts same store sales increased 13%
  • Same store F&I per unit increased $97 to $1,202
  • Adjusted SG&A expense as a percentage of gross profit was 66.1%

"As we previously announced, we had solid results in new vehicle sales, service and parts and F&I per unit in the quarter," said Bryan DeBoer, President and CEO. "Used vehicle revenue showed strong growth but margin compression was a headwind in the quarter. The outlook remains bright for automotive retailing, with exciting product from our manufacturer partners, ample credit availability and opportunities for us to increase earnings through improving store operations and finding synergies with the DCH Auto group. "

For the first nine months of 2014, adjusted net income per diluted share from continuing operations increased 22% to $3.69 from $3.02 for the first nine months of 2013. Unadjusted net income from continuing operations was $3.58 per diluted share for the first nine months of 2014, compared to $2.98 per diluted share for the first nine months of 2013.

Chris Holzshu, SVP and CFO, said, "For the second quarter in a row, our same store F&I per unit was above $1,200, and was $97 per unit above the third quarter of last year. Our adjusted SG&A as a percentage of gross profit was 66.1% for the third quarter of 2014, slightly higher than last year's result and among the best in the industry. Our incremental throughput, or the percentage of incremental gross profit remaining after deducting incremental SG&A expense, was 38% on a same store basis in the third quarter of 2014, and was impacted by the lower gross profit dollars generated in our used vehicle business. We seek to improve operational leverage through targeting incremental throughput of 50%."

Corporate Development
On October 1, 2014, we completed the purchase of DCH Auto Group (USA) Inc., one of the 10 largest dealer groups in the country. The DCH stores are estimated to generate approximately $2.3 billion in annualized revenue. The transaction was funded by approximately $364 million in cash, the issuance of 268,770 shares of Lithia Class A common stock, incurring $230 million of vehicle floorplan debt financing, and the assumption of non-floor plan debt of $53 million.

Additionally, in October 2014, we acquired Harris Nissan in Clovis, California with $25 million in estimated total annual revenues.

Bryan DeBoer, President and CEO, stated, "We continue to see robust acquisition activity in the marketplace, and are pleased to add Lithia Nissan of Clovis in our exclusive market strategy. Additionally, the integration of DCH will provide geographic and franchise diversification, shifting 20% of our revenues to the east coast and over 50% of our vehicle sales volume to import brands, while more than doubling our potential acquisition targets as we pursue a metro market strategy."

Balance Sheet Update
We ended the third quarter with $22 million in cash and $167 million in available credit on our credit facilities. Additionally, approximately $133 million of our operating real estate is currently unfinanced, which could provide an estimated additional $100 million in available liquidity, for total potential liquidity of $289 million.

On October 1, 2014, we amended our credit facility to increase the total financing commitment to $1.7 billion.

Dividend Payment and Share Repurchase
We announced that our Board of Directors has approved a dividend of $0.16 per share related to third quarter 2014 financial results. We will pay the dividend December 5, 2014 to shareholders of record on November 21, 2014.

Since the second quarter, we have repurchased approximately 161,000 shares at a weighted average price of $69 per share. Under our existing share repurchase authorization, approximately 1.5 million shares remain available for repurchase.

Outlook for 2014
We project 2014 fourth quarter earnings guidance within a range of $1.17 to $1.19 per diluted share, including earnings related to the DCH Auto Group. Full-year 2014 earnings are projected to be $4.86 to $4.88 per diluted share. Both projections are based on the following full year assumptions. Additionally, the fourth quarter projection excludes $0.04 to $0.06 per share and the full year projection excludes $0.06 to $0.08 per share in acquisition expenses and is based on the following assumptions:

Continuing Operations Projections

  • Total revenues of $5.2 to $5.4 billion
  • New vehicle sales increasing 35.0%
  • New vehicle gross margin of 6.2% to 6.4%
  • Used vehicle sales increasing 31.5%
  • Used vehicle gross margin of 13.0% to 13.3%
  • Service body and parts sales increasing 33.5%
  • Service body and parts gross margin of 48.3% to 48.5%
  • Finance and insurance gross profit of $1,170 per unit
  • Tax rate of 40%
  • Average diluted shares outstanding of 26.4 million
  • Full year capital expenditures of $90 million

Same Store Projections

  • Total revenues of $4.2 to $4.4 billion
  • New vehicle same store sales increasing 9.5%
  • Used vehicle same store sales increasing 12.0%
  • Service body and parts same store sales increasing 10.5%
  • Finance and insurance gross profit of $1,200 per unit

2015 Earnings Guidance
We project 2015 first quarter earnings $1.18 to $1.21 per diluted share and 2015 full year earnings of $5.60 to $5.80 per diluted share, with Lithia operations contributing $4.95 to $5.05 per diluted share and DCH operations contributing $0.65 to $0.75 per diluted share. Both projections are based on the following annual assumptions:

Continuing Operations Projections

  • Total revenues of $7.4 to $7.6 billion
  • New vehicle sales increasing 45.0%
  • New vehicle gross margin of 5.9% to 6.1%
  • Used vehicle sales increasing 38.0%
  • Used vehicle gross margin of 12.3% to 12.5%
  • Service body and parts sales increasing 41.0%
  • Service body and parts gross margin of 48.0% to 48.1%
  • Finance and insurance gross profit of $1,125 per unit
  • Tax rate of 40%
  • Average diluted shares outstanding of 26.7 million
  • Full year capital expenditures are $80 million

Same Store Projections

  • Total revenues of $5.4 to $5.6 billion
  • New vehicle same store sales increasing 6.5%
  • Used vehicle same store sales increasing 10.5%
  • Service body and parts same store sales increasing 8.0%
  • Finance and insurance gross profit of $1,200 per unit

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.

Third Quarter Earnings Conference Call and Updated Presentation
The third quarter conference call may be accessed at 10:00 a.m. ET today by telephone at 877-407-8029. An updated presentation highlighting the third 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 one of the largest automotive retailers in the United States. Lithia sells 30 brands of new vehicles and all brands of used vehicles at 129 stores in 14 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

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," "continue," "remain," "target" or "will" and similar references to future periods. Examples of forward-looking statements in this press release include, among others, statements regarding:

  • Future market conditions;
  • Expected operating results, such as improved store performance, maintaining incremental throughput above 50%, increasing same store F&I per unit and all projections set forth under the heading "Outlook for 2014" and "2015 Earnings Guidance";
  • The increase in our annual revenues that we estimate will result from the dealerships that we acquired and from the DCH Auto Group transaction as set forth under the heading "Corporate Development";
  • Anticipated availability of liquidity from our unfinanced operating real estate; and
  • Anticipated levels of capital expenditures in the future.

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, including in Part II, Item 1A. Risk Factors of our Quarterly Reports on Form 10-Q. 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           %  
    September 30,     Increase     Increase  
    2014     2013     (Decrease)     (Decrease)  
Revenues:                              
New vehicle retail   $ 732,121     $ 604,135     $ 127,986     21.2 %
Used vehicle retail     340,522       280,734       59,788     21.3  
Used vehicle wholesale     48,853       43,396       5,457     12.6  
Finance and insurance     46,855       37,132       9,723     26.2  
Service, body and parts     120,772       97,784       22,988     23.5  
Fleet and other     7,988       6,109       1,879     30.8  
  Total revenues     1,297,111       1,069,290       227,821     21.3  
Cost of sales:                              
New vehicle retail     684,473       565,549       118,924     21.0  
Used vehicle retail     296,624       239,093       57,531     24.1  
Used vehicle wholesale     48,349       42,686       5,663     13.3  
Service, body and parts     62,351       50,793       11,558     22.8  
Fleet and other     7,474       5,780       1,694     29.3  
  Total cost of sales     1,099,271       903,901       195,370     21.6  
Gross profit     197,840       165,389       32,451     19.6  
SG&A expense     131,627       108,570       23,057     21.2  
Depreciation and amortization     6,067       5,099       968     19.0  
Income from operations     60,146       51,720       8,426     16.3  
Floor plan interest expense     (3,127 )     (2,909 )     218     7.5  
Other interest expense     (2,051 )     (1,933 )     118     6.1  
Other income, net     1,027       835       192     23.0  
Income from continuing operations before income taxes     55,995       47,713       8,282     17.4  
Income tax expense     (21,458 )     (16,822 )     4,636     27.6  
Income tax rate     38.3 %     35.3 %              
Income from continuing operations   $ 34,537     $ 30,891     $ 3,646     11.8 %
Income from discontinued operations, net of tax     -       127       (127 )   NM  
Net income   $ 34,537     $ 31,018     $ 3,519     11.3 %
                               
Diluted net income per share:                              
Continuing operations   $ 1.31     $ 1.18     $ 0.13     11.0 %
Discontinued operations     -       -       -     -  
Net income per share   $ 1.31     $ 1.18     $ 0.13     11.0 %
                               
Diluted shares outstanding     26,359       26,237       122     0.5 %
                               
NM - not meaningful
   
Lithia Motors, Inc.  
Key Performance Metrics  
(Unaudited)  
    Three months ended           %  
    September 30,     Increase     Increase  
    2014     2013     (Decrease)     (Decrease)  
Gross margin                              
New vehicle retail     6.5 %     6.4 %     10 bps        
Used vehicle retail     12.9       14.8       (190) bps        
Used vehicle wholesale     1.0       1.6       (60) bps        
Finance and insurance     100.0       100.0       - bps        
Service, body and parts     48.4       48.1       30 bps        
Fleet and other     6.4       5.4       100 bps        
Gross profit margin     15.3       15.5       (20) bps        
                               
Unit sales                              
New vehicle retail     21,320       18,109       3,211     17.7 %
Used vehicle retail     17,710       15,496       2,214     14.3  
Total retail units sold     39,030       33,605       5,425     16.1  
Used vehicle wholesale     6,989       6,059       930     15.3  
                               
Average selling price                              
New vehicle retail     34,340       33,361       979     2.9 %
Used vehicle retail     19,228       18,117       1,111     6.1  
Used vehicle wholesale     6,990       7,162       (172 )   (2.4 )
                               
Average gross profit per unit                              
New vehicle retail   $ 2,235     $ 2,131     $ 104     4.9 %
Used vehicle retail     2,479       2,687       (208 )   (7.7 )
Used vehicle wholesale     72       117       (45 )   (38.5 )
Finance and insurance     1,200       1,105       95     8.6  
Total vehicle(1)     3,559       3,513       46     1.3  
                               
Revenue mix                              
New vehicle retail     56.4 %     56.5 %              
Used vehicle retail     26.3       26.3                
Used vehicle wholesale     3.8       4.1                
Finance and insurance, net     3.6       3.5                
Service, body and parts     9.3       9.1                
Fleet and other     0.6       0.5                
   
Adjusted
   
As reported
 
    Three months ended
September 30,
    Three months ended
September 30,
 
Other metrics   2014     2013     2014     2013  
SG&A as a % of revenue     10.1 %     10.2 %     10.1 %   10.2 %
SG&A as a % of gross profit     66.1       65.6       66.5     65.6  
Operating profit as a % of revenue     4.7       4.8       4.6     4.8  
Operating profit as a % of gross profit     30.8       31.3       30.4     31.3  
Pretax margin     4.4       4.5       4.3     4.5  
Net profit margin     2.7       2.8       2.7     2.9  
                               
                               
(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           %  
    September 30,     Increase     Increase  
    2014     2013     (Decrease)     (Decrease)  
Revenues                              
New vehicle retail   $ 668,677     $ 604,135     $ 64,542     10.7 %
Used vehicle retail     317,342       280,734       36,608     13.0  
Used vehicle wholesale     46,333       43,396       2,937     6.8  
Finance and insurance     43,041       37,141       5,900     15.9  
Service, body and parts     110,491       97,784       12,707     13.0  
Fleet and other     6,241       6,109       132     2.2  
Total revenues   $ 1,192,125     $ 1,069,299     $ 122,826     11.5  
                               
Gross profit                              
New vehicle retail   $ 43,366     $ 38,586     $ 4,780     12.4 %
Used vehicle retail     41,733       41,641       92     0.2  
Used vehicle wholesale     465       710       (245 )   (34.5 )
Finance and insurance     43,041       37,141       5,900     15.9  
Service, body and parts     53,572       46,993       6,579     14.0  
Fleet and other     415       328       87     26.5  
Total gross profit   $ 182,592     $ 165,399     $ 17,193     10.4  
                               
Gross margin                              
New vehicle retail     6.5 %     6.4 %     10 bps        
Used vehicle retail     13.2       14.8       (160) bps        
Used vehicle wholesale     1.0       1.6       (60) bps        
Finance and insurance     100.0       100.0       - bps        
Service, body and parts     48.5       48.1       40 bps        
Fleet and other     6.6       5.4       120 bps        
Gross profit margin     15.3       15.5       (20) bps        
                               
Unit sales                              
New vehicle retail     19,344       18,109       1,235     6.8 %
Used vehicle retail     16,451       15,496       955     6.2  
Total retail units sold     35,795       33,605       2,190     6.5  
Used vehicle wholesale     6,568       6,059       509     8.4  
                               
Average selling price                              
New vehicle retail   $ 34,568     $ 33,361     $ 1,207     3.6 %
Used vehicle retail     19,290       18,117       1,173     6.5  
Used vehicle wholesale     7,054       7,162       (108 )   (1.5 )
                               
Average gross profit per unit                              
New vehicle retail   $ 2,242     $ 2,131     $ 111     5.2 %
Used vehicle retail     2,537       2,687       (150 )   (5.6 )
Used vehicle wholesale     71       117       (46 )   (39.3 )
Finance and insurance     1,202       1,105       97     8.8  
Total vehicle(1)     3,593       3,514       79     2.3  
                               
                               
(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.  
Consolidated Statements of Operations  
(Unaudited)  
(In thousands except per share data)  
   
    Nine months ended           %  
    September 30,     Increase     Increase  
    2014     2013     (Decrease)     (Decrease)  
Revenues:                              
New vehicle retail   $ 2,006,127     $ 1,667,063     $ 339,064     20.3 %
Used vehicle retail     952,890       778,427       174,463     22.4  
Used vehicle wholesale     135,832       120,593       15,239     12.6  
Finance and insurance     130,324       103,013       27,311     26.5  
Service, body and parts     339,726       282,686       57,040     20.2  
Fleet and other     32,120       29,093       3,027     10.4  
  Total revenues     3,597,019       2,980,875       616,144     20.7  
Cost of sales:                              
New vehicle retail     1,873,461       1,555,042       318,419     20.5  
Used vehicle retail     824,129       662,920       161,209     24.3  
Used vehicle wholesale     132,493       118,214       14,279     12.1  
Service, body and parts     174,291       145,223       29,068     20.0  
Fleet and other     30,444       27,816       2,628     9.4  
  Total cost of sales     3,034,818       2,509,215       525,603     20.9  
Gross profit     562,201       471,660       90,541     19.2  
SG&A expense     378,919       318,984       59,935     18.8  
Depreciation and amortization     17,399       14,719       2,680     18.2  
Income from operations     165,883       137,957       27,926     20.2  
Floor plan interest expense     (9,326 )     (9,394 )     (68 )   (0.7 )
Other interest expense     (5,894 )     (6,235 )     (341 )   (5.5 )
Other income, net     3,110       2,220       890     40.1  
Income from continuing operations before income taxes     153,773       124,548       29,225     23.5  
Income tax expense     (59,372 )     (46,494 )     12,878     27.7  
Income tax rate     38.6 %     37.3 %              
Income from continuing operations   $ 94,401     $ 78,054     $ 16,347     20.9 %
Income from discontinued operations, net of tax     3,179       574       2,605     NM  
Net income   $ 97,580     $ 78,628     $ 18,952     24.1 %
                               
Diluted net income per share:                              
Continuing operations   $ 3.58     $ 2.98     $ 0.60     20.1 %
Discontinued operations     0.13       0.03       0.10     NM  
Net income per share   $ 3.71     $ 3.01     $ 0.70     23.3 %
                               
Diluted shares outstanding     26,337       26,159       178     0.7 %
                               
NM - not meaningful
 
   
Lithia Motors, Inc.  
Key Performance Metrics  
(Unaudited)  
    Nine months ended           %  
    September 30,     Increase     Increase  
    2014     2013     (Decrease)     (Decrease)  
Gross margin                              
New vehicle retail     6.6 %     6.7 %     (10) bps        
Used vehicle retail     13.5       14.8       (130) bps        
Used vehicle wholesale     2.5       2.0       50 bps        
Finance and insurance     100.0       100.0       - bps        
Service, body and parts     48.7       48.6       10 bps        
Fleet and other     5.2       4.4       80 bps        
Gross profit margin     15.6       15.8       (20) bps        
                               
Unit sales                              
New vehicle retail     59,040       49,853       9,187     18.4 %
Used vehicle retail     50,112       43,231       6,881     15.9  
Total retail units sold     109,152       93,084       16,068     17.3  
Used vehicle wholesale     18,889       16,624       2,265     13.6  
                               
Average selling price                              
New vehicle retail   $ 33,979     $ 33,440     $ 539     1.6 %
Used vehicle retail     19,015       18,006       1,009     5.6  
Used vehicle wholesale     7,191       7,254       (63 )   (0.9 )
                               
Average gross profit per unit                              
New vehicle retail   $ 2,247     $ 2,247     $ -     - %
Used vehicle retail     2,569       2,672       (103 )   (3.9 )
Used vehicle wholesale     177       143       34     23.8  
Finance and insurance     1,194       1,107       87     7.9  
                               
Revenue mix                              
New vehicle retail     55.8 %     55.9 %              
Used vehicle retail     26.5       26.1                
Used vehicle wholesale     3.8       4.0                
Finance and insurance, net     3.6       3.5                
Service, body and parts     9.4       9.5                
Fleet and other     0.9       1.0                
                               
    Adjusted     As reported  
 
 
 
 
Nine months ended
September 30,
    Nine months ended
September 30,
 
Other metrics   2014     2013     2014     2013  
SG&A as a % of revenue     10.4 %     10.6 %     10.5 %   10.7 %
SG&A as a % of gross profit     66.5       66.8       67.4     67.6  
Operating profit as a % of revenue     4.8       4.8       4.6     4.6  
Operating profit as a % of gross profit     30.4       30.1       29.5     29.2  
Pretax margin     4.4       4.3       4.3     4.2  
Net profit margin     2.7       2.6       2.6     2.6  
                               
   
Lithia Motors, Inc.  
Same Store Operating Highlights  
(Unaudited)  
    Nine months ended           %  
    September 30,     Increase     Increase  
    2014     2013     (Decrease)     (Decrease)  
Revenues                              
New vehicle retail   $ 1,844,436     $ 1,664,438     $ 179,998     10.8 %
Used vehicle retail     888,101       777,716       110,385     14.2  
Used vehicle wholesale     129,393       120,569       8,824     7.3  
Finance and insurance     120,363       102,950       17,413     16.9  
Service, body and parts     313,190       282,261       30,929     11.0  
Fleet and other     28,655       29,093       (438 )   (1.5 )
Total revenues   $ 3,324,138     $ 2,977,027     $ 347,111     11.7  
                               
Gross profit                              
New vehicle retail   $ 121,770     $ 111,822     $ 9,948     8.9 %
Used vehicle retail     121,554       115,405       6,149     5.3  
Used vehicle wholesale     3,223       2,491       732     29.4  
Finance and insurance     120,363       102,950       17,413     16.9  
Service, body and parts     152,478       137,270       15,208     11.1  
Fleet and other     1,500       1,277       223     17.5  
Total gross profit   $ 520,888     $ 471,215     $ 49,673     10.5  
                               
Gross margin                              
New vehicle retail     6.6 %     6.7 %     (10) bps        
Used vehicle retail     13.7       14.8       (110) bps        
Used vehicle wholesale     2.5       2.1       40 bps        
Finance and insurance     100.0       100.0       - bps        
Service, body and parts     48.7       48.6       10 bps        
Fleet and other     5.2       4.4       80 bps        
Total gross profit     15.7       15.8       (10) bps        
                               
Unit sales                              
New vehicle retail     53,667       49,766       3,901     7.8 %
Used vehicle retail     46,415       43,190       3,225     7.5  
Total retail units sold     100,082       92,956       7,126     7.7  
Used vehicle wholesale     17,768       16,623       1,145     6.9  
                               
Average selling price                              
New vehicle retail   $ 34,368     $ 33,445     $ 923     2.8 %
Used vehicle retail     19,134       18,007       1,127     6.3  
Used vehicle wholesale     7,282       7,253       29     0.4  
                               
Average gross profit per unit                              
New vehicle retail   $ 2,269     $ 2,247     $ 22     1.0 %
Used vehicle retail     2,619       2,672       (53 )   (2.0 )
Used vehicle wholesale     181       150       31     20.7  
Finance and insurance     1,203       1,108       95     8.6  
Total vehicle(1)     3,666       3,579       87     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.
Other Highlights
(Unaudited)
    As of
    September 30,   December 31,   September 30,
    2014   2013   2013
Days Supply(1)            
New vehicle inventory   72   74   76
Used vehicle inventory   54   63   54
             
(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 September 30, 2014
Current ratio   Not less than 1.20 to 1   1.41 to 1
Fixed charge coverage ratio   Not less than 1.20 to 1   4.00 to 1
Leverage ratio   Not more than 5.00 to 1   1.53 to 1
Funded debt restriction   Not more than $375 million   $242.4 million
         
   
Lithia Motors, Inc.  
Other Highlights  
(Unaudited)  
    Three months ended
September 30,
    Nine months ended
September 30,
 
    2014     2013     2014     2013  
New vehicle unit sales brand mix                        
Chrysler   28.1 %   29.4 %   28.4 %   30.1 %
General Motors   14.2     14.5     14.2     15.5  
Toyota   13.6     14.9     13.7     14.8  
Subaru   9.9     8.0     9.6     7.8  
Honda, Acura   8.0     8.8     8.0     7.7  
Ford   6.5     5.9     6.4     5.9  
BMW, MINI   6.1     6.4     6.2     6.4  
Nissan   3.5     2.8     3.6     2.8  
Hyundai   3.0     2.6     3.0     2.7  
Volkswagen, Audi   2.8     2.8     2.6     2.3  
Mercedes   2.4     2.5     2.3     2.5  
Kia   1.2     0.7     1.1     0.6  
Mazda   0.4     0.4     0.4     0.5  
Other   0.3     0.3     0.5     0.4  
                         
    Three months ended
September 30,
    Nine months ended
September 30,
 
    2014     2013     2014     2013  
Revenue geographic mix                        
Texas   22.8 %   24.1 %   23.5 %   24.9 %
Oregon   22.7     22.0     22.3     21.1  
California   12.8     10.1     13.0     10.4  
Montana   8.2     9.0     8.2     8.9  
Alaska   7.5     7.9     7.3     7.8  
Washington   7.2     8.0     7.2     8.1  
Nevada   4.6     5.0     4.6     4.8  
Idaho   4.4     5.0     4.4     5.1  
Iowa   4.3     4.9     4.3     4.8  
North Dakota   2.1     2.3     2.2     2.4  
Hawaii   2.0     0.0     1.6     0.0  
New Mexico   1.4     1.7     1.4     1.7  
                         
    As of October 30, 2014        
Current store count mix   # of stores     % of total              
Chrysler, Fiat   25     19.4 %            
Honda, Acura   22     17.0              
Toyota, Lexus   19     14.7              
General Motors   16     12.4              
BMW, MINI   11     8.5              
Volkswagen, Audi   7     5.4              
Nissan   6     4.7              
Ford   6     4.7              
Subaru   5     3.9              
Hyundai   5     3.9              
Mercedes   3     2.3              
Other   4     3.1              
                         
   
Lithia Motors, Inc.  
Consolidated Balance Sheets  
(Unaudited)  
(In thousands)  
    September 30, 2014     December 31, 2013  
Cash and cash equivalents   $ 21,666     $ 23,686  
Trade receivables, net     181,855       170,519  
Inventories, net     941,756       859,019  
Deferred income taxes     500       1,548  
Other current assets     11,088       15,251  
Assets held for sale     8,920       11,526  
Total current assets   $ 1,165,785     $ 1,081,549  
                 
Property and equipment, net     536,519       481,212  
Goodwill     65,745       49,511  
Franchise value     77,482       71,199  
Deferred income taxes     12,450       10,256  
Other non-current assets     46,922       31,394  
Total assets   $ 1,904,903     $ 1,725,121  
                 
Floor plan notes payable   $ 21,362     $ 18,789  
Floor plan notes payable: non trade     718,227       695,066  
Current maturities of long-term debt     9,305       7,083  
Trade payables     59,481       51,159  
Accrued liabilities     116,619       94,143  
Liabilities related to assets held for sale     4,776       6,271  
Total current liabilities   $ 929,770     $ 872,511  
                 
Long-term debt     263,117       245,471  
Deferred revenue     51,913       44,005  
Other long-term liabilities     36,190       28,412  
Total liabilities   $ 1,280,990     $ 1,190,399  
                 
Class A common stock     266,075       268,255  
Class B common stock     319       319  
Additional paid-in capital     27,657       22,598  
Accumulated other comprehensive loss     (1,075 )     (1,538 )
Retained earnings     330,937       245,088  
Total liabilities & stockholders' equity   $ 1,904,903     $ 1,725,121  
                 
   
Lithia Motors, Inc.  
Summarized Cash Flow from Operations  
(Unaudited)  
(In thousands)  
    Nine months ended  
    September 30,  
    2014     2013  
Net income   $ 97,580     $ 78,628  
                 
Adjustments to reconcile net income to net cash provided by operating activities:                
Depreciation and amortization     17,399       14,719  
Stock-based compensation     5,054       4,161  
Loss on disposal of assets     307       107  
Gain on sale of franchise     (5,744 )     -  
Deferred income taxes     4,725       8,504  
Excess tax benefit from share-based payment arrangements     (6,160 )     (5,956 )
(Increase) decrease:                
  Trade receivables, net     (11,336 )     (6,937 )
  Inventories     (44,349 )     (18,187 )
  Other assets     (13,700 )     1,660  
Increase (decrease):                
  Floor plan notes payable, net     1,132       5,721  
  Trade payables     4,246       4,848  
  Accrued liabilities     21,913       13,099  
  Other long-term liabilities and deferred revenue     16,635       12,307  
Net cash provided by operating activities   $ 87,702     $ 112,674  
                 
 
Lithia Motors, Inc.
Reconciliation of Non-GAAP Cash Flow from Operations
(Unaudited)
(In thousands)
    Nine months ended
    September 30,
Net cash provided by operating activities   2014   2013
As reported   $ 87,702   $ 112,674
  Floor plan notes payable, non-trade, net     30,375     2,685
Adjusted   $ 118,077   $ 115,359
             
   
Lithia Motors, Inc.  
Reconciliation of Certain Non-GAAP Financial Measures  
(Unaudited)  
(In thousands, except for per share data)  
   
    Three Months Ended September 30, 2014  
    As reported     Acquisition expenses     One-time tax items     Adjusted  
Selling, general and administrative   $ 131,627     $ (883 )   $ -     $ 130,744  
                                 
Income from operations     60,146       883       -       61,029  
                                 
Income from continuing operations before income taxes   $ 55,995     $ 883     $ -     $ 56,878  
Income tax expense     (21,458 )     (319 )     (194 )     (21,971 )
Net income from continuing operations   $ 34,537     $ 564     $ (194 )   $ 34,907  
                                 
Diluted earnings per share from continuing operations   $ 1.31     $ $0.02     $ (0.01 )   $ 1.32  
Diluted share count     26,359                          
                                 
       
    Three Months Ended September 30, 2013  
    As reported     Tax attribute     Adjusted  
Income from continuing operations before income taxes   $ 47,713     $ -     $ 47,713  
Income tax expense     (16,822 )     (1,284 )     (18,106 )
Net income from continuing operations   $ 30,891     $ (1,284 )   $ 29,607  
                         
Diluted earnings per share from continuing operations   $ 1.18     $ (0.05 )   $ 1.13  
Diluted share count     26,237                  
                         
   
Lithia Motors, Inc.  
Reconciliation of Certain Non-GAAP Financial Measures  
(Unaudited)  
(In thousands, except for per share data)  
   
    Nine Months Ended September 30, 2014  
    As reported     Reserve adjustments     Acquisition expenses     Tax attribute     Adjusted  
Selling, general and administrative   $ 378,919     $ (3,931 )   $ (1,046 )   $ -     $ 373,942  
                                         
Income from operations     165,883       3,931       1,046       -       170,860  
                                         
Income from continuing operations before income taxes   $ 153,773     $ 3,931     $ 1,046     $ -     $ 158,750  
Income tax expense     (59,372 )     (1,545 )     (406 )     (267 )     (61,590 )
Net income from continuing operations   $ 94,401     $ 2,386     $ 640     $ (267 )   $ 97,160  
                                         
Diluted earnings per share from continuing operations   $ 3.58     $ 0.09     $ 0.03     $ (0.01 )   $ 3.69  
Diluted share count     26,337                                  
                                         
       
    Nine months ended September 30, 2013  
    As reported     Reserve adjustment     Tax attribute     Adjusted  
Selling, general and administrative   $ 318,984     $ (3,813 )   $ -     $ 315,171  
                                 
Income from operations   $ 137,957     $ 3,813     $ -     $ 141,770  
                                 
Income from continuing operations before income taxes   $ 124,548     $ 3,813     $ -     $ 128,361  
Income tax expense     (46,494 )     (1,484 )     (1,512 )     (49,490 )
Net income from continuing operations   $ 78,054     $ 2,329     $ (1,512 )   $ 78,871  
                                 
Diluted earnings per share from continuing operations   $ 2.98     $ 0.09     $ (0.05 )   $ 3.02  
Diluted share count     26,159                          

Contact Information

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