SOURCE: Lithia Motors

Lithia Motors

April 27, 2011 08:00 ET

Lithia Motors Reports Adjusted First Quarter 2011 Earnings of $0.34 per Share

MEDFORD, OR--(Marketwire - Apr 27, 2011) - Lithia Motors, Inc. (NYSE: LAD) today reported 2011 adjusted first quarter net income from continuing operations of $9.1 million, or $0.34 per diluted share. This compares to a 2010 adjusted first quarter net income from continuing operations of $2.3 million, or $0.09 per diluted share. First quarter 2011 revenue from continuing operations increased $143.8 million, or 31.3% to $603.0 million, compared to $459.2 million in the year-ago period.

First Quarter Operating Highlights:

  • New vehicle same store sales increased 41%
  • Used vehicle retail same store sales increased 17%
  • Service, body and parts same store sales increased 8%
  • Adjusted SG&A expense as a percentage of gross profit declined 680 basis points

As shown in the attached reconciliation table, the 2011 and 2010 first quarter adjusted results from continuing operations excluded non-core charges of $0.01 and $0.03 per share, respectively, on asset impairments, disposal gains, reserve adjustments, and a stock-based compensation tax shortfall. On a GAAP basis, net income from continuing operations for the first quarter of 2011 and 2010 was $8.7 million or $0.33 per diluted share and $1.4 million or $0.06 per diluted share, respectively.

Sid DeBoer, Lithia's Chairman and CEO, commented, "Our team delivered another strong performance in the first quarter. Although new vehicle sales increased 45%, we maintained a near 1:1 used-to-new ratio. Service, body and parts sales increased 11% despite difficult comparisons due to the Toyota recalls last year. The economic recovery is expanding in our western markets, and our stores are focused on exceeding customer expectations."

Balance Sheet Update
Lithia ended the period with $102.9 million in immediately available funds, including $13.1 million in cash, $37.6 million in availability on its revolving credit facility, and $52.2 million in unfinanced new vehicle inventory.

Acquisition
As previously announced, Lithia completed the acquisition of Rasmussen BMW / MINI, Mercedes-Benz of Portland and Mercedes-Benz of Wilsonville on April 18, 2011. The stores will add approximately $176 million in revenue over the next 12 months and are anticipated to add $0.08 per diluted share to full year 2011 results.

Outlook for 2011
Commenting on the Japanese tragedy, Mr. DeBoer continued, "Our sincere condolences go out to the people of Japan, and for the manufacturers and suppliers with employees impacted by the magnitude of events in March. While the entire supply chain is focused on minimizing the disruptions associated with the tragedy, it is clear that vehicle supply will be interrupted in the second and third quarters of 2011. Our guidance has been updated assuming our best estimate of the impact of these events on our operations. While we hope these assumptions prove to be conservative, the near-term outlook for our manufacturer partners remains uncertain."

Lithia projects its 2011 second quarter earnings guidance within a range of $0.32 to $0.34 per diluted share. Full-year 2011 earnings guidance is projected within a range of $1.42 to $1.50 per diluted share. Both projections are based on the following annual assumptions:

  • Total revenues in range of $2.5 to $2.6 billion
  • New vehicle same store sales increasing 14%
  • New vehicle gross margin ranging from 7.5% to 7.7%
  • Used vehicle same store sales increasing 16%
  • Used vehicle gross margin ranging from 14.0% to 14.3%
  • Service body and parts same store sales increasing 2%
  • Service body and parts gross margin ranging from 48.3% to 48.6%
  • Finance and insurance gross profit of $980 per unit
  • Tax rate of 40%
  • Estimated average diluted shares outstanding of 26.9 million
  • Capital expenditures of approximately $28 million
  • Guidance excludes the impact of future acquisitions, dispositions, and any potential non-core items

First Quarter Earnings Conference Call and Updated Presentation
The first quarter conference call may be accessed at 10:00 a.m. ET today by telephone at 877-407-8029. An updated presentation highlighting the first quarter results has been added to Investor Relations on www.lithia.com.

To listen live on our website or for replay, visit Investor Relations on www.lithia.com and click on webcasts. A playback of the conference call will be available after 1:00 p.m. ET on April 27, 2011 through May 4, 2011 by calling 877-660-6853 (Conference ID: 369958 Account: 305).

About Lithia
Lithia Motors, Inc. is the ninth largest automotive retailer in the United States. Lithia sells 26 brands of new and all brands of used vehicles at 86 stores, which are located in 12 states. Lithia also sells used vehicles; arranges finance, warranty, and credit insurance contracts; and provides vehicle parts, maintenance, and repair services at all of its locations.

For additional information on Lithia Motors, contact John North, VP Finance / Controller at (541) 618-5748 or visit www.lithia.com and click on "Investor Relations."

Sites
www.lithia.com
www.lithiacares.com
www.lithiajobs.com

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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, which management believes are a benefit to shareholders. Forward-looking statements in this press release include our guidance regarding second quarter and full year 2011 results, the effect of acquisitions on our full year 2011 EPS, the impact of the Japanese disaster on new vehicle sales levels and the sustainability of the economic recovery. 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 "expects," "anticipates," "intends," "plans," "believes," "seeks" or "will." These statements are necessarily subject to risk and uncertainty and actual results could differ materially due to certain risk factors, including without limitation, future economic conditions and others set forth from time to time in the company's filings with the SEC. We urge you to carefully consider this information. We undertake no duty to update our forward-looking statements, including our earnings outlook.

Non-GAAP Financial Measures
This press release and the attached financial tables contain certain non-GAAP financial measures as defined under SEC rules, 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. These measures exclude certain items disclosed in the attached financial tables. Cash flows from operations were adjusted to include the change in non-trade floorplan debt to improve the visibility of cash flows related to vehicle financing. As required by SEC rules, the Company has provided reconciliations of these measures to the most directly comparable GAAP measures, which are set forth in the attachments to this release. The Company believes that each of the foregoing non-GAAP financial measures improves the transparency of the Company's disclosure, provides a meaningful presentation of the Company's results from its core business operations excluding adjustments for items not related to the Company's ongoing core business operations or other non-cash adjustments, and improves the period-to-period comparability of the Company's results from its core business operations. These presentations are not intended to provide net income, cash flows from operations, operating income or selling, general and administrative costs in accordance with GAAP and should not be considered an alternative to GAAP measures.

Lithia Motors, Inc.
Consolidated Statement of Operations (Unaudited)
(In thousands except per share data)
Three Months Ended%
March 31,IncreaseIncrease
20112010(Decrease)(Decrease)
Revenues:
New vehicle retail$312,234$215,617$96,61744.8%
Used vehicle retail160,723135,89924,82418.3
Used vehicle wholesale30,38623,4656,92129.5
Finance and insurance19,92314,6385,28536.1
Service, body and parts76,58568,7977,78811.3
Fleet and other3,1468032,343291.8
Total revenues602,997459,219143,77831.3
Cost of sales:
New vehicle retail288,904197,21391,69146.5
Used vehicle retail137,131117,30519,82616.9
Used vehicle wholesale29,96623,0946,87229.8
Service, body and parts39,46735,2514,21612.0
Fleet and other2,5954512,144475.4
Total cost of sales498,063373,314124,74933.4
Gross profit104,93485,90519,02922.2
Asset impairment charges3821,491(1,109)(74.4)
SG&A expense79,74171,0398,70212.2
Depreciation and amortization4,1934,749(556)(11.7)
Income from operations20,6188,62611,992139.0
Floorplan interest expense(2,563)(2,751)(188)(6.8)
Other interest expense(3,304)(3,588)(284)(7.9)
Other income, net7768913.2
Income from continuing operations before income taxes14,8282,35512,473529.6
Income tax expense6,1239125,211571.4
Income tax rate41.3%38.7%
Income from continuing operations$8,705$1,443$7,262503.3%
Loss from discontinued operations, net of income tax-(176)176NM
Net income$8,705$1,267$7,438587.1%
Diluted net income (loss) per share:
Continuing operations$0.33$0.06$0.27450.0%
Discontinued operations-(0.01)0.01NM
Net income per share$0.33$0.05$0.28560.0%
Diluted shares outstanding26,69426,0196752.6%
Lithia Motors, Inc.
Key Performance Metrics (Unaudited)
Three Months Ended%
March 31,IncreaseIncrease
20112010(Decrease)(Decrease)
Gross margin
New vehicle retail7.5%8.5%(100) bps
Used vehicle retail14.713.7100 bps
Used vehicle wholesale1.41.6(20) bps
Finance & insurance100.0100.0- bps
Service, body & parts48.548.8(30) bps
Gross profit margin17.418.7(130) bps
Unit sales
New vehicle retail9,9296,8843,04544.2%
Used vehicle retail9,8128,2111,60119.5
Used vehicle wholesale3,8833,28659718.2
Total units sold23,62418,3815,24328.5
Average selling price
New vehicle retail$31,447$31,321$1260.4%
Used vehicle retail16,38016,551(171)(1.0)
Used vehicle wholesale7,8257,1416849.6
Average gross profit per unit
New vehicle retail$2,350$2,673$(323)
(12.1
)%
Used vehicle retail2,4042,2651396.1
Used vehicle wholesale108113(5)(4.4)
Finance & insurance1,009970394.0
Revenue mix
New vehicle retail51.8%47.0%
Used vehicle retail26.729.6
Used vehicle wholesale5.05.0
Finance & insurance, net3.33.2
Service, body & parts12.715.0
Fleet and other0.50.2
AdjustedAs reported
Three Months EndedThree Months Ended
March 31,March 31,
Other metrics2011201020112010
SG&A as a % of revenue13.2%15.5%13.2%15.5%
SG&A as a % of gross profit76.082.876.082.7
Operating profit as a % of revenue3.52.23.41.9
Operating profit as a % of gross profit20.011.719.610.0
Pretax margin2.50.82.50.5
Lithia Motors, Inc.
Same Store Operating Highlights (Unaudited)
(In thousands except per unit data)
Three Months Ended%
March 31,IncreaseIncrease
20112010(Decrease)(Decrease)
Revenues
New vehicle retail$305,345$215,981$89,36441.4%
Used vehicle retail157,130134,40222,72816.9
Used vehicle wholesale29,92922,8807,04930.8
Finance and insurance19,04513,7785,26738.2
Service, body and parts74,46768,7285,7398.3
Gross profit
New vehicle retail22,73018,3904,34023.6
Used vehicle retail22,82618,2204,60625.3
Used vehicle wholesale420397235.8
Finance and insurance19,04513,7785,26738.2
Service, body and parts35,04932,5842,4657.6
Unit sales
New vehicle retail9,7086,8972,81140.8%
Used vehicle retail9,5988,1091,48918.4
Used vehicle wholesale3,8143,22858618.2
Total units sold23,12018,2344,88626.8
Average selling price
New vehicle retail$31,453$31,315$1380.4%
Used vehicle retail16,37116,574(203)(1.2)
Used vehicle wholesale7,8477,08875910.7
Average gross profit per unit
New vehicle retail$2,341$2,666$(325)(12.2)%
Used vehicle retail2,3782,2471315.8
Used vehicle wholesale110123(13)(10.6)
Finance & insurance986918687.4

Lithia Motors, Inc.
Revenue Mix (Unaudited)
Three months ended
March 31,
20112010
New vehicle unit sales brand mix
Chrysler28.4%26.0%
General Motors16.916.2
Toyota13.914.7
Honda, Acura7.88.5
Hyundai5.96.4
Subaru5.85.9
Ford5.65.5
BMW4.65.6
Nissan4.23.9
Volkswagen, Audi3.23.3
Kia1.92.1
Mercedes0.91.1
Other0.90.8
Three months ended
March 31,
Revenue geographic mix20112010
Texas24.1%25.3%
Oregon16.014.8
California11.111.8
Washington10.310.4
Alaska8.79.9
Montana8.16.4
Iowa6.76.9
Idaho6.46.6
Nevada4.74.2
North Dakota2.01.9
New Mexico1.01.0
Colorado0.90.8

As of April 27, 2011
Current store count mix# of stores% of total
Chrysler2326.7%
General Motors1214.0
Honda, Acura910.5
Toyota89.3
BMW78.2
Hyundai67.0
Ford44.6
Volkswagen, Audi44.6
Nissan44.6
Mercedes33.5
Subaru22.3
Kia22.3
Porsche11.2
Mazda11.2
Lithia Motors, Inc.
Consolidated Balance Sheet (Unaudited)
(In thousands except per share data)
March 31, 2011December 31, 2010
Cash and cash equivalents$13,118$9,306
Trade receivables, net79,65975,011
Inventories, net456,945415,228
Deferred income taxes2,8152,937
Other current assets8,8806,062
Total current assets$561,417$508,544
Property and equipment, net357,303362,433
Goodwill6,1866,186
Franchise value45,19345,193
Deferred income taxes39,47939,524
Other non-current assets11,2129,796
Total assets$1,020,790$971,676
Floorplan notes payable$300,166$251,257
Current maturities of long-term debt14,23712,081
Trade payables27,04323,747
Accrued liabilities68,50258,784
Total current liabilities$409,948$345,869
Long-term debt245,864268,693
Deferred revenue21,06420,158
Other long-term liabilities15,04716,739
Total liabilities$691,923$651,459
Class A common stock286,295284,807
Class B common stock468468
Additional paid-in capital10,18310,972
Accumulated other comprehensive loss(4,307)(4,869)
Retained earnings36,22828,839
Total liabilities & stockholders' equity$1,020,790$971,676

Lithia Motors, Inc.
Summarized Cash Flow from Operations (Unaudited)
(In thousands)
Three Months Ended
March 31,
20112010
Net income$8,705$1,267
Adjustments to reconcile net income to cash provided by (used in) operating activities:
Asset impairments3821,491
Depreciation and amortization4,1934,749
Amortization of debt discount-4
Stock-based compensation491441
(Gain) loss on disposal of assets105(283)
Deferred income taxes(394)(5,264)
Excess tax benefit from share-based payment arrangements(21)-
(Increase) decrease, net of effect of acquisitions and divestitures
Trade receivables, net(4,648)(8,584)
Inventories(41,769)(24,744)
Other current assets(888)2,332
Other non-current assets(412)(987)
Increase (decrease), net of effect of acquisitions and divestitures
Floorplan notes payable9,9054,532
Trade payables3,2967,563
Accrued liabilities9,6837,234
Other long-term liabilities and deferred revenue132(160)
Net cash used in operating activities$(11,240)$(10,409)
Lithia Motors, Inc.
Reconciliation of Non-GAAP Cash Flow from Operations (Unaudited)
(In thousands)
Three Months Ended
March 31,
Net cash used in operating activities20112010
As reported$(11,240)$(10,409)
Floorplan notes payable, non-trade39,26220,615
Adjusted$28,022$10,206

Lithia Motors, Inc.
Other Highlights (Unaudited)
(In thousands except per share data)
March 31,December 31,March 31,
201120102010
Days Supply(1)
New vehicle inventory617569
Used vehicle inventory475347

(1) Days supply calculated based on current inventory levels, excluding in-transit vehicles, and a 30-day historical cost of sales level.
March 31,December 31,
20112010
Other information
Long-term debt/total capitalization(2)42.8%45.6%

(2)Total capitalization is comprised of long-term debt and total shareholder's equity.
Debt covenant ratios
RequirementAs of March 31, 2011
Minimum tangible net worthNot less than $200 million$275.7 million
Vehicle equityNot less than $65 million$185.7 million
Fixed charge coverage ratioNot less than 1.20 to 11.83 to 1
Liabilities to tangible net worth ratioNot more than 4.00 to 12.51 to 1
Lithia Motors, Inc.
Reconciliation of Certain Non-GAAP Financial Measures (Unaudited)
(In thousands)
Three months ended
March 31,
20112010
Selling, general & administrative
As reported$79,741$71,039
Impairments and disposal gain-367
Reserve adjustments-(258)
Adjusted$79,741$71,148
Income from operations
As reported$20,618$8,626
Impairments and disposal gain3821,190
Reserve adjustments-258
Adjusted$21,000$10,074
Income from continuing operations before income taxes
As reported$14,828$2,355
Impairments and disposal gain3821,190
Reserve adjustments-258
Adjusted$15,210$3,803
Lithia Motors, Inc.
Reconciliation of Certain Non-GAAP Financial Measures (Unaudited)
(In thousands except per share data)
Adjusted net income/(loss) and diluted earnings per share
Three Months Ended March 31,
Net income/(loss)Diluted earnings per share
2011201020112010
Continuing Operations
As reported$8,705$1,443$0.33$0.06
Impairments and disposal gain2297320.010.03
Reserve adjustments-164--
Stock-based compensation tax shortfall186---
Adjusted$9,120$2,339$0.34$0.09
Discontinued Operations
As reported$-$(176)$-$(0.01)
Impairments and disposal (gain) loss-10--
Adjusted$-$(166)$-$(0.01)
Consolidated Operations
As reported$8,705$1,267$0.33$0.05
Adjusted9,1202,1730.340.08

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