SOURCE: Lithia Motors

Lithia Motors

February 24, 2016 06:55 ET

Lithia Reports Adjusted EPS of $1.74 for Fourth Quarter 2015 and $7.02 for Full Year 2015; Fourth Quarter Adjusted Net Income Increases 23%

Declares $0.20 per Share Dividend for the Fourth Quarter

MEDFORD, OR--(Marketwired - Feb 24, 2016) - Lithia Motors, Inc. (NYSE: LAD) reported the highest fourth quarter and full year adjusted net income in company history and increased adjusted net income 23% for the fourth quarter 2015 over the prior year period.

2015 fourth quarter adjusted net income was $46.1 million or $1.74 per diluted share, compared to 2014 fourth quarter adjusted net income of $37.5 million, or $1.42 per diluted share.

Unadjusted net income for the fourth quarter 2015 was $47.7 million, or $1.80 per diluted share, compared to $41.1 million, or $1.55 per diluted share, for the fourth quarter of 2014. As shown in the attached non-GAAP reconciliation tables, the 2015 fourth quarter adjusted results exclude a $0.06 net non-core benefit related to an equity investment offset by an asset impairment charge. The 2014 fourth quarter adjusted results exclude a $0.13 non-core net benefit from an equity investment and a non-core tax attribute offset by a charge related to acquisition expenses.

Fourth quarter 2015 revenue increased $200.0 million, or 11%, to $2.0 billion from $1.8 billion for the fourth quarter 2014.

Fourth Quarter-over-Quarter Operating Highlights:

  • Total same store sales increased 9%
  • New vehicle same store sales increased 7%
  • Used vehicle retail same store sales increased 12%
  • Service, body and parts same store sales increased 10%
  • Same store F&I per unit increased $69 to $1,189
  • SG&A expense as a percentage of gross profit was 68.2%

For the full year 2015, revenues increased 46% to $7.9 billion from $5.4 billion in 2014.

Full Year-over-Year Operating Highlights:

  • Total same store sales increased 11%
  • New vehicle same store sales increased 9%
  • Used vehicle retail same store sales increased 13%
  • Service, body and parts same store sales increased 10%
  • Same store F&I per unit increased $73 to $1,244
  • Adjusted SG&A expense as a percentage of gross profit was 67.9%

"2015 finished ahead of our expectations," said Bryan DeBoer, President and CEO. "Despite significant headwinds reported by some in the industry, our store leaders successfully responded to their local market conditions. As a result of their efforts, we achieved our third and fourth EPS milestones by exceeding $7.00 per share in 2015. Our entrepreneurial culture, where each store has the autonomy to make individual decisions, will drive continued operational improvement. This improvement, along with growth through acquisitions, will be critical to achieving our next milestone of $8.00 per share."

For 2015, adjusted net income per diluted share increased 37% to $7.02 from $5.11 for 2014. Unadjusted net income from continuing operations was $6.91 per diluted share for 2015 compared to $5.14 per diluted share for 2014.

Chris Holzshu, SVP and CFO, said, "We are focused on two primary objectives: efficiently operating our stores and prudently allocating capital. We finished 2015 with adjusted SG&A as a percentage of gross profit at 67.9% and incremental same store throughput of 50%. We also allocated over $46 million in capital to repurchase shares since January 1, 2016. Our preferred use of capital will be growth through acquisitions, but we will look for opportunities to repurchase stock when we deem it to be an attractive use of funds."

Corporate Development
As previously announced, since October 2015 we acquired a Chrysler Jeep Dodge Ram Fiat store in Concord, California; a Chrysler Jeep Dodge Ram Alpha Fiat in Spokane, Washington; a Subaru store in Riverside, California and a Toyota store in Milford, Massachusetts. We estimate these stores will contribute approximately $200 million in annual revenues.

Bryan DeBoer, President and CEO, stated, "We acquired over $2.7 billion in annual revenues in 2014, and followed that by adding nine stores over the last 14 months with an estimated $380 million in annual revenues. We are excited to have acquired our first stores within the DCH metropolitan strategy on both the east and west coasts of the United States. We are continuing to actively seek acquisitions and anticipate further transactions in both rural and metropolitan markets."

Balance Sheet Update
We ended 2015 with $45 million in cash and $134 million in availability under our credit facilities. Additionally, approximately $211 million of our operating real estate is currently unfinanced, which we estimate could provide an additional $159 million in available liquidity, for total potential liquidity of $338 million.

Dividend Payment and Share Repurchase
Our Board of Directors has approved a dividend of $0.20 per share related to fourth quarter 2015 financial results. We expect to pay the dividend March 25, 2016 to shareholders of record on March 11, 2016.

Since the fourth quarter 2015, we have repurchased approximately 595,000 shares at a weighted average price of $79.11 per share. Under our existing share repurchase authorization, approximately 676,000 shares remain available for purchase.

2016 Outlook
We project 2016 first quarter earnings of $1.47 to $1.51 per diluted share and 2016 full year earnings of $7.30 to $7.50 per diluted share. Both projections are based on the following annual assumptions:

  • Total revenues of $8.4 to $8.5 billion
  • New vehicle sales increasing 5.5%
  • New vehicle gross margin of 5.8% to 6.0%
  • Used vehicle sales increasing 6.0%
  • Used vehicle gross margin of 12.4% to 12.6%
  • Service body and parts sales increasing 5.0%
  • Service body and parts gross margin of 49.0% to 49.4%
  • Finance and insurance gross profit of $1,210 per unit
  • Tax rate of 40.0%
  • Average diluted shares outstanding of 26.0 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.

Fourth Quarter Earnings Conference Call and Updated Presentation
The fourth quarter conference call may be accessed at 10:00 a.m. ET today by telephone at 877-407-8029. An updated presentation highlighting the fourth 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 31 brands of new vehicles and all brands of used vehicles at 139 stores in 15 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
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:

  • Expected operating results, such as improved store efficiency and performance; generating 2016 first quarter earnings per share of $1.47 to $1.51 per diluted share and 2016 full year earnings of $7.30 to $7.50 per diluted share and all projections set forth under the headings "2016 Outlook"; 
  • The increase in our annual revenues that we estimate will result from dealerships that we acquired;
  • Anticipated ability to improve store performance;
  • Anticipated additions of dealership locations to our portfolio in the future; and
  • Anticipated availability of liquidity from our credit facility and 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 most recent Annual Report on Form 10-K, 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           %  
    December 31,     Increase     Increase  
    2015     2014     (Decrease)     (Decrease)  
Revenues:                        
New vehicle retail   $ 1,167,893     $ 1,071,543     $ 96,350     9.0 %
Used vehicle retail     469,399       409,591       59,808     14.6  
Used vehicle wholesale     63,054       59,867       3,187     5.3  
Finance and insurance     69,318       60,057       9,261     15.4  
Service, body and parts     193,024       172,398       20,626     12.0  
Fleet and other     30,594       19,851       10,743     54.1  
  Total revenues     1,993,282       1,793,307       199,975     11.2  
Cost of sales:                              
New vehicle retail     1,095,796       1,006,025       89,771     8.9  
Used vehicle retail     412,572       359,099       53,473     14.9  
Used vehicle wholesale     62,744       59,560       3,184     5.3  
Service, body and parts     98,241       88,097       10,144     11.5  
Fleet and other     30,506       19,405       11,101     57.2  
  Total cost of sales     1,699,859       1,532,186       167,673     10.9  
Gross profit     293,423       261,121       32,302     12.4  
Asset impairments     5,733       1,853       3,880     NM  
SG&A expense     200,219       184,288       15,931     8.6  
Depreciation and amortization     11,056       8,964       2,092     23.3  
Income from operations     76,415       66,016       10,399     15.8  
Floor plan interest expense     (5,279 )     (4,535 )     744     16.4  
Other interest expense     (4,791 )     (4,848 )     (57 )   (1.2 )
Other income, net     25       89       (64 )   (71.9 )
Income before income taxes     66,370       56,722       9,648     17.0  
Income tax expense     (18,638 )     (15,582 )     3,056     19.6  
Income tax rate     28.1 %     27.5 %              
Net income   $ 47,732     $ 41,140     $ 6,592     16.0 %
                               
Diluted net income per share:                              
Net income per share   $ 1.80     $ 1.55     $ 0.25     16.1 %
                               
Diluted shares outstanding     26,462       26,517       (55 )   (0.2 )%
NM - not meaningful
 
 
Lithia Motors, Inc.
Key Performance Metrics (Unaudited)
 
    Three months ended           %  
    December 31,     Increase     Increase  
    2015     2014     (Decrease)     (Decrease)  
Gross margin                        
New vehicle retail     6.2 %     6.1 %     10 bps        
Used vehicle retail     12.1       12.3       (20) bps        
Used vehicle wholesale     0.5       0.5       - bps        
Finance and insurance     100.0       100.0       - bps        
Service, body and parts     49.1       48.9       20 bps        
Fleet and other     0.3       2.2       (190) bps        
Gross profit margin     14.7       14.6       10 bps        
                               
Unit sales                              
New vehicle retail     34,350       32,064       2,286     7.1 %
Used vehicle retail     24,010       21,562       2,448     11.4  
Total retail units sold     58,360       53,626       4,734     8.8  
Used vehicle wholesale     9,345       9,029       316     3.5  
                               
Average selling price                              
New vehicle retail   $ 34,000     $ 33,419     $ 581     1.7 %
Used vehicle retail     19,550       18,996       554     2.9  
Used vehicle wholesale     6,747       6,631       116     1.7  
                               
Average gross profit per unit                              
New vehicle retail   $ 2,099     $ 2,043     $ 56     2.7 %
Used vehicle retail     2,367       2,342       25     1.1  
Used vehicle wholesale     33       34       (1 )   (2.9 )
Finance and insurance     1,188       1,120       68     6.1  
Total vehicle(1)     3,402       3,289       113     3.4  
                               
Revenue mix                              
New vehicle retail     58.6 %     59.8 %              
Used vehicle retail     23.5       22.8                
Used vehicle wholesale     3.2       3.3                
Finance and insurance, net     3.5       3.3                
Service, body and parts     9.7       9.6                
Fleet and other     1.5       1.2                
             
             
    Adjusted     As reported  
    Three months ended
 December 31,
    Three months ended
 December 31,
 
Other metrics   2015     2014     2015     2014  
SG&A as a % of revenue   10.0 %   10.2 %   10.0 %   10.3 %
SG&A as a % of gross profit   68.2     70.3     68.2     70.6  
Operating profit as a % of revenue   4.1     3.8     3.8     3.7  
Operating profit as a % of gross profit   28.0     26.3     26.0     25.3  
Pretax margin   3.7     3.4     3.3     3.2  
Net profit margin   2.3     2.1     2.4     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.
Same Store Operating Highlights (Unaudited)
 
    Three Months Ended           %  
    December 31,     Increase     Increase  
    2015     2014     (Decrease)     (Decrease)  
Revenues                        
New vehicle retail   $ 1,137,113     $ 1,067,701     $ 69,412     6.5 %
Used vehicle retail     457,112       407,453       49,659     12.2  
Used vehicle wholesale     62,219       59,753       2,466     4.1  
Finance and insurance     67,521       59,758       7,763     13.0  
Service, body and parts     189,285       171,704       17,581     10.2  
Fleet and other     30,504       19,851       10,653     53.7  
Total revenues   $ 1,943,754     $ 1,786,220     $ 157,534     8.8  
                               
Gross profit                              
New vehicle retail   $ 70,076     $ 65,186     $ 4,890     7.5 %
Used vehicle retail     55,683       50,231       5,452     10.9  
Used vehicle wholesale     281       336       (55 )   (16.4 )
Finance and insurance     67,521       59,758       7,763     13.0  
Service, body and parts     92,999       83,956       9,043     10.8  
Fleet and other     83       445       (362 )   (81.3 )
Total gross profit   $ 286,643     $ 259,912     $ 26,731     10.3  
                               
Gross margin                              
New vehicle retail     6.2 %     6.1 %     10 bps        
Used vehicle retail     12.2       12.3       (10) bps        
Used vehicle wholesale     0.5       0.6       (10) bps        
Finance and insurance     100.0       100.0       - bps        
Service, body and parts     49.1       48.9       20 bps        
Fleet and other     0.3       2.2       (190) bps        
Gross profit margin     14.7       14.6       10 bps        
                               
Unit sales                              
New vehicle retail     33,443       31,921       1,522     4.8 %
Used vehicle retail     23,355       21,430       1,925     9.0  
Total retail units sold     56,798       53,351       3,447     6.5  
Used vehicle wholesale     9,176       8,995       181     2.0  
                               
Average selling price                              
New vehicle retail   $ 34,002     $ 33,448     $ 554     1.7 %
Used vehicle retail     19,572       19,013       559     2.9  
Used vehicle wholesale     6,781       6,643       138     2.1  
                               
Average gross profit per unit                              
New vehicle retail   $ 2,095     $ 2,042     $ 53     2.6 %
Used vehicle retail     2,384       2,344       40     1.7  
Used vehicle wholesale     31       37       (6 )   (16.2 )
Finance and insurance     1,189       1,120       69     6.2  
Total vehicle(1)     3,408       3,290       118     3.6  
 
(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.
Consolidated Statements of Operations (Unaudited)
(In thousands except per share data)
 
    Twelve months ended           %  
    December 31,     Increase     Increase  
    2015     2014     (Decrease)     (Decrease)  
Revenues:                        
New vehicle retail   $ 4,552,301     $ 3,077,670     $ 1,474,631     47.9 %
Used vehicle retail     1,927,016       1,362,481       564,535     41.4  
Used vehicle wholesale     261,530       195,699       65,831     33.6  
Finance and insurance     283,018       190,381       92,637     48.7  
Service, body and parts     738,990       512,124       226,866     44.3  
Fleet and other     101,397       51,971       49,426     95.1  
  Total revenues     7,864,252       5,390,326       2,473,926     45.9  
Cost of sales:                              
New vehicle retail     4,271,931       2,879,486       1,392,445     48.4  
Used vehicle retail     1,685,767       1,183,228       502,539     42.5  
Used vehicle wholesale     257,073       192,053       65,020     33.9  
Service, body and parts     375,069       262,388       112,681     42.9  
Fleet and other     98,778       49,849       48,929     98.2  
  Total cost of sales     6,688,618       4,567,004       2,121,614     46.5  
Gross profit     1,175,634       823,322       352,312     42.8  
Asset impairments     20,124       1,853       18,271     NM  
SG&A expense     811,175       563,207       247,968     44.0  
Depreciation and amortization     41,600       26,363       15,237     57.8  
Income from operations     302,735       231,899       70,836     30.5  
Floor plan interest expense     (19,534 )     (13,861 )     5,673     40.9  
Other interest expense     (19,491 )     (10,742 )     8,749     81.4  
Other (expense) income, net     (1,006 )     3,199       (4,205 )   NM  
Income from continuing operations before income taxes     262,704       210,495       52,209     24.8  
Income tax expense     (79,705 )     (74,955 )     4,750     6.3  
Income tax rate     30.3 %     35.6 %              
Income from continuing operations   $ 182,999     $ 135,540     $ 47,459     35.0 %
Income from discontinued operations, net of tax     --       3,180       (3,180 )   NM  
Net income   $ 182,999     $ 138,720     $ 44,279     31.9 %
                               
Diluted net income per share:                              
Continuing operations   $ 6.91     $ 5.14     $ 1.77     34.4 %
Discontinued operations     --       0.12       (0.12 )   NM  
Net income per share   $ 6.91     $ 5.26     $ 1.65     31.4 %
                               
Diluted shares outstanding     26,490       26,382       108     0.4 %
NM - not meaningful
 
 
Lithia Motors, Inc.
Key Performance Metrics (Unaudited)
 
    Twelve months ended           %  
    December 31,     Increase     Increase  
    2015     2014     (Decrease)     (Decrease)  
Gross margin                        
New vehicle retail     6.2 %     6.4 %     (20) bps        
Used vehicle retail     12.5       13.2       (70) bps        
Used vehicle wholesale     1.7       1.9       (20) bps        
Finance and insurance     100.0       100.0       - bps        
Service, body and parts     49.2       48.8       40 bps        
Fleet and other     2.6       4.1       (150) bps        
Gross profit margin     14.9       15.3       (40) bps        
                               
Unit sales                              
New vehicle retail     137,486       91,104       46,382     50.9 %
Used vehicle retail     99,109       71,674       27,435     38.3  
Total retail units sold     236,595       162,778       73,817     45.3  
Used vehicle wholesale     38,167       27,918       10,249     36.7  
                               
Average selling price                              
New vehicle retail   $ 33,111     $ 33,782     $ (671 )   (2.0 )%
Used vehicle retail     19,443       19,009       434     2.3  
Used vehicle wholesale     6,852       7,010       (158 )   (2.3 )
                               
Average gross profit per unit                              
New vehicle retail   $ 2,039     $ 2,175     $ (136 )   (6.3 )%
Used vehicle retail     2,434       2,501       (67 )   (2.7 )
Used vehicle wholesale     117       131       (14 )   (10.7 )
Finance and insurance     1,196       1,170       26     2.2  
Total vehicle(1)     3,420       3,511       (91 )   (2.6 )
                               
Revenue mix                              
New vehicle retail     57.9 %     57.1 %              
Used vehicle retail     24.5       25.3                
Used vehicle wholesale     3.3       3.6                
Finance and insurance, net     3.6       3.5                
Service, body and parts     9.4       9.5                
Fleet and other     1.3       1.0                
                               
    Adjusted     As reported  
    Twelve months ended
December 31,
    Twelve months ended
December 31,
 
Other metrics   2015     2014     2015     2014  
SG&A as a % of revenue   10.2 %   10.3 %   10.3 %   10.4 %
SG&A as a % of gross profit   67.9     67.7     69.0     68.4  
Operating profit as a % of revenue   4.3     4.4     3.8     4.3  
Operating profit as a % of gross profit   28.5     29.1     25.8     28.2  
Pretax margin   3.8     4.1     3.3     3.9  
Net profit margin   2.4     2.5     2.3     2.5  
 
(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)
 
    Twelve months ended           %  
    December 31,     Increase     Increase  
    2015     2014     (Decrease)     (Decrease)  
Revenues                        
New vehicle retail   $ 3,327,450     $ 3,056,366     $ 271,084     8.9 %
Used vehicle retail     1,528,803       1,350,813       177,990     13.2  
Used vehicle wholesale     210,468       194,926       15,542     8.0  
Finance and insurance     216,590       188,913       27,677     14.7  
Service, body and parts     560,717       508,585       52,132     10.3  
Fleet and other     72,984       51,971       21,013     40.4  
Total revenues   $ 5,917,012     $ 5,351,574     $ 565,438     10.6 %
                               
Gross profit                              
New vehicle retail   $ 205,802     $ 196,354     $ 9,448     4.8 %
Used vehicle retail     197,380       177,999       19,381     10.9  
Used vehicle wholesale     4,022       3,782       240     6.3  
Finance and insurance     216,590       188,913       27,677     14.7  
Service, body and parts     274,855       247,900       26,955     10.9  
Fleet and other     2,261       2,121       140     6.6  
Total gross profit   $ 900,910     $ 817,069     $ 83,841     10.3 %
                               
Gross margin                              
New vehicle retail     6.2 %     6.4 %     (20) bps        
Used vehicle retail     12.9       13.2       (30) bps        
Used vehicle wholesale     1.9       1.9       - bps        
Finance and insurance     100.0       100.0       - bps        
Service, body and parts     49.0       48.7       30 bps        
Fleet and other     3.1       4.1       (100) bps        
Total gross profit     15.2       15.3       (10) bps        
                               
Unit sales                              
New vehicle retail     96,556       90,352       6,204     6.9 %
Used vehicle retail     77,552       70,967       6,585     9.3  
Total retail units sold     174,108       161,319       12,789     7.9  
Used vehicle wholesale     28,613       27,696       917     3.3  
                               
Average selling price                              
New vehicle retail   $ 34,461     $ 33,827     $ 634     1.9 %
Used vehicle retail     19,713       19,034       679     3.6  
Used vehicle wholesale     7,356       7,038       318     4.5  
                               
Average gross profit per unit                              
New vehicle retail   $ 2,131     $ 2,173     $ (42 )   (1.9 )%
Used vehicle retail     2,545       2,508       37     1.5  
Used vehicle wholesale     141       137       4     2.9  
Finance and insurance     1,244       1,171       73     6.2  
Total vehicle(1)     3,583       3,515       68     1.9  
 
(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.
Segment Operating Highlights (Unaudited)
 
    Three months ended           %  
    December 31,     Increase     Increase  
    2015     2014     (Decrease)     (Decrease)  
Revenues                        
Domestic   $ 761,780     $ 673,459     $ 88,321     13.1 %
Import     825,227       732,784       92,443     12.6  
Luxury     406,581       385,774       20,807     5.4  
Total segment revenues     1,993,588       1,792,017       201,571     11.2  
Corporate and other     (306 )     1,290       (1,596 )   NM  
Total revenues   $ 1,993,282     $ 1,793,307     $ 199,975     11.2  
                               
Segment Income(1)                              
Domestic   $ 23,672     $ 22,360     $ 1,312     5.9 %
Import     21,706       13,518       8,188     60.6  
Luxury     10,627       11,202       (575 )   (5.1 )
      56,005       47,080       8,925     19.0  
Corporate and other     26,187       23,365       2,822     12.1  
Depreciation and amortization     (11,056 )     (8,964 )     (2,092 )   23.3  
Other interest expense     (4,791 )     (4,848 )     57     (1.2 )
Other (expense) income, net     25       89       (64 )   (71.9 )
Income from continuing operations before income taxes   $ 66,370     $ 56,722     $ 9,648     17.0  
 
(1) Segment income for each of the segments is defined as Income from continuing operations before income taxes, less Depreciation and amortization, Other interest expense and Other income, net.
 
 
Retail New Vehicle Unit Sales                        
Domestic   11,074     10,017     1,057     10.6 %
Import   18,431     17,090     1,341     7.8  
Luxury   4,906     4,987     (81 )   (1.6 )
Total   34,411     32,094     2,317     7.2  
Allocated to management   (61 )   (30 )   (31 )   NM  
Total retail new vehicle unit sales   34,350     32,064     2,286     7.1  
NM - not meaningful
 
 
Lithia Motors, Inc.
Segment Operating Highlights (Unaudited)
 
    Twelve months ended           %  
    December 31,     Increase     Increase  
    2015     2014     (Decrease)     (Decrease)  
Revenues                        
Domestic   $ 3,034,849     $ 2,566,473     $ 468,376     18.2 %
Import     3,334,983       1,893,034       1,441,949     76.2  
Luxury     1,490,632       926,856       563,776     60.8  
Total segment revenues     7,860,464       5,386,363       2,474,101     45.9  
Corporate and other     3,788       3,963       (175 )   (4.4 )
Total revenues   $ 7,864,252     $ 5,390,326     $ 2,473,926     45.9  
                               
Segment Income(1)                              
Domestic   $ 115,525     $ 96,888     $ 18,637     19.2 %
Import     98,371       50,870       47,501     93.4  
Luxury     36,391       25,448       10,943     43.0  
Total segment income     250,287       173,206       77,081     44.5  
Corporate and other     74,514       71,195       3,319     4.7  
Depreciation and amortization     (41,600 )     (26,363 )     (15,237 )   57.8  
Other interest expense     (19,491 )     (10,742 )     (8,749 )   81.4  
Other (expense) income, net     (1,006 )     3,199       (4,205 )   NM  
Income from continuing operations before income taxes   $ 262,704     $ 210,495     $ 52,209     24.8  
 
(1) Segment income for each of the segments is defined as Income from continuing operations before income taxes, less Depreciation and amortization, Other interest expense and Other income, net.
 
 
Retail New Vehicle Unit Sales                        
Domestic   44,926     39,006     5,920     15.2 %
Import   75,245     41,722     33,523     80.3  
Luxury   17,556     10,570     6,986     66.1  
Total   137,727     91,298     46,429     50.9  
Allocated to management   (241 )   (194 )   (47 )   NM  
Total retail new vehicle unit sales   137,486     91,104     46,382     50.9  
 
NM - not meaningful
 
 
Lithia Motors, Inc.
Other Highlights (Unaudited)
 
    As of
    December 31,   December 31,
    2015   2014
Days Supply(1)        
New vehicle inventory   67   62
Used vehicle inventory   55   53
 
(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 December 31, 2015
Current ratio   Not less than 1.10 to 1   1.26 to 1
Fixed charge coverage ratio   Not less than 1.20 to 1   3.36 to 1
Leverage ratio   Not more than 5.00 to 1   1.79 to 1
Funded debt restriction   Not more than $600 million   $413.4 million
 
 
Lithia Motors, Inc.
Other Highlights (Unaudited)
 
    Three months ended
December 31,
    Twelve months ended
December 31,
 
    2015     2014     2015     2014  
New vehicle unit sales brand mix                        
Honda, Acura   22.2 %   22.7 %   22.4 %   13.2 %
Toyota, Lexus   19.7     19.3     19.9     15.6  
Chrysler   18.4     17.8     18.8     24.6  
General Motors   8.9     9.3     9.2     12.5  
Subaru   7.4     7.0     6.9     8.7  
BMW, Mini   6.9     7.9     5.9     6.8  
Ford   4.9     4.1     4.7     5.6  
Nissan   3.5     3.8     3.7     3.7  
Volkswagen, Audi   2.9     3.0     3.1     2.8  
Hyundai   1.9     1.6     2.1     2.5  
Mercedes Benz   1.6     1.9     1.5     2.2  
Kia   1.2     1.1     1.3     1.1  
Other   0.5     0.5     0.5     0.7  
                         
                         
    Three months ended
December 31,
    Twelve months ended
December 31,
 
    2015     2014     2015     2014  
Revenue geographic mix                        
California   22.0 %   21.4 %   21.6 %   15.8 %
Oregon   16.8     16.0     16.7     20.2  
Texas   13.6     14.9     15.0     20.7  
New Jersey   15.1     15.2     14.6     5.0  
Montana   6.2     5.5     6.0     7.3  
Alaska   5.4     5.4     5.4     6.6  
Washington   5.5     5.9     5.2     6.8  
Nevada   3.0     3.3     3.0     4.2  
New York   2.8     2.8     2.9     0.9  
Idaho   2.8     2.9     2.9     3.9  
Iowa   2.7     3.1     2.8     3.9  
Hawaii   1.9     1.3     1.5     1.5  
North Dakota   1.4     1.4     1.5     1.9  
New Mexico   0.8     0.9     0.9     1.3  
                         
    As of February 24, 2016  
Current store count mix   # of stores   % of total  
Chrysler   27   19.4 %
Honda, Acura   21   15.1  
Toyota, Lexus   20   14.4  
General Motors   17   12.2  
BMW, Mini   11   7.9  
Volkswagen, Audi   8   5.8  
Ford   7   5.0  
Subaru   8   5.8  
Nissan   6   4.3  
Hyundai   4   2.9  
Mercedes Benz   4   2.9  
Other   6   4.3  
 
 
 
Lithia Motors, Inc.
Consolidated Balance Sheets (Unaudited)
(In thousands)
 
    December 31, 2015     December 31, 2014  
Cash and cash equivalents   $ 45,008     $ 29,898  
Trade receivables, net     308,462       295,379  
Inventories, net     1,470,987       1,249,659  
Other current assets     54,408       32,010  
Assets held for sale     --       8,563  
Total current assets   $ 1,878,865     $ 1,615,509  
                 
Property and equipment, net     876,660       816,745  
Goodwill     213,220       199,375  
Franchise value     157,699       150,892  
Other non-current assets     100,855       98,411  
Total assets   $ 3,227,299     $ 2,880,932  
                 
Floor plan notes payable   $ 48,083     $ 41,047  
Floor plan notes payable: non trade     1,265,872       1,137,632  
Current maturities of long-term debt     38,891       31,912  
Trade payables     70,871       70,853  
Accrued liabilities     167,108       153,661  
Deferred income taxes     --       2,603  
Liabilities related to assets held for sale     --       4,892  
Total current liabilities   $ 1,590,825     $ 1,442,600  
                 
Long-term debt     606,463       609,066  
Deferred revenue     66,734       54,403  
Deferred income taxes     53,129       42,795  
Other long-term liabilities     81,984       58,963  
Total liabilities   $ 2,399,135     $ 2,207,827  
                 
Class A common stock     258,410       276,058  
Class B common stock     316       319  
Additional paid-in capital     38,822       29,775  
Accumulated other comprehensive loss     (277 )     (926 )
Retained earnings     530,893       367,879  
Total liabilities & stockholders' equity   $ 3,227,299     $ 2,880,932  
                 
                 
Lithia Motors, Inc.
Summarized Cash Flow from Operations (Unaudited)
(In thousands)
 
    Twelve months ended  
    December 31,  
    2015     2014  
Net income   $ 182,999     $ 138,720  
Adjustments to reconcile net income to net cash provided by operating activities:                
Asset impairments     20,124       1,853  
Depreciation and amortization     41,600       26,363  
Stock-based compensation     11,871       7,436  
Loss on disposal of assets     203       271  
Gain on sale of franchise     (5,919 )     (5,744 )
Deferred income taxes     12,341       13,355  
Excess tax benefit from share-based payment arrangements     (5,012 )     (6,186 )
(Increase) decrease:                
  Trade receivables, net     (13,047 )     (59,474 )
  Inventories     (197,079 )     (76,002 )
  Other assets     (31,620 )     (31,182 )
Increase (decrease):                
  Floor plan notes payable, net     7,035       (647 )
  Trade payables     674       (3,105 )
  Accrued liabilities     16,273       (13,472 )
  Other long-term liabilities and deferred revenue     33,766       38,133  
Net cash provided by operating activities   $ 74,209     $ 30,319  
                 
                 
Lithia Motors, Inc.
Reconciliation of Non-GAAP Cash Flow from Operations (Unaudited)
(In thousands)
 
    Twelve months ended  
    December 31,  
Net cash provided by operating activities   2015     2014  
As reported   $ 74,209     $ 30,319  
  Floor plan notes payable, non-trade, net     136,201       440,341  
  Borrowings on floor plan notes payable associated with acquired inventory     (25,642 )     (257,363 )
Adjusted   $ 184,768     $ 213,297  
                 
                 
Lithia Motors, Inc.
Reconciliation of Certain Non-GAAP Financial Measures (Unaudited)
(In thousands, except for per share data)
 
    Three Months Ended December 31, 2015  
    As reported     Asset Impairments     Equity investment fair value adjustment     Adjusted  
Asset impairments   $ 5,733     $ (1,603 )   $ (4,130 )   $ --  
                                 
Income from operations     76,415       1,603       4,130       82,148  
                                 
Other (expense) income, net     25       --       1,733       1,758  
                                 
Income from continuing operations before income taxes   $ 66,370     $ 1,603     $ 5,864     $ 73,837  
Income tax expense     (18,638 )     (605 )     (8,516 )     (27,759 )
Net income from continuing operations   $ 47,732     $ 998     $ (2,652 )   $ 46,078  
                                 
Diluted earnings per share from continuing operations   $ 1.80     $ 0.04     $ (0.10 )   $ 1.74  
Diluted share count     26,462                          
                                 
                                 
    Three Months Ended December 31, 2014  
    As reported     Acquisition expenses     Equity investment fair value adjustment     Tax attributes     Adjusted  
Asset impairments   $ 1,853     $ --     $ (1,853 )   $ --     $ --  
                                         
Selling, general and administrative     184,288       (819 )     --       --       183,469  
                                         
Income from operations     66,016       819       1,853       --       68,688  
                                         
Other (expense) income, net     90       --       1,160       --       1,250  
                                         
Income from continuing operations before income taxes   $ 56,722     $ 819     $ 3,013     $ --     $ 60,554  
Income tax expense     (15,583 )     (338 )     (6,506 )     (600 )     (23,027 )
Net income from continuing operations   $ 41,139     $ 481     $ (3,493 )   $ (600 )   $ 37,527  
                                         
Diluted earnings per share from continuing operations   $ 1.55     $ 0.02     $ (0.13 )   $ (0.02 )   $ 1.42  
Diluted share count     26,517                                  
                                         
                                         
Lithia Motors, Inc.
Reconciliation of Certain Non-GAAP Financial Measures (Unaudited)
(In thousands, except for per share data)
 
    Twelve Months Ended December 31, 2015 
    As reported    Disposal (gain)/ loss on sale of stores    Asset impairments    Transition agreement    Equity investment fair value adjustment    Adjusted 
Asset impairments   $ 20,124     $ --     $ (3,603 )   $ --     $ (16,521 )   $ --  
                                                 
Selling, general and administrative     811,175       5,919       --       (18,296 )     --       798,798  
                                                 
Income from operations     302,735       (5,919 )     3,603       18,296       16,521       335,236  
                                                 
Other (expense) income, net     (1,006 )     --       --       --       6,930       5,924  
                                                 
Income from continuing operations before income taxes   $ 262,704     $ (5,919 )   $ 3,603     $ 18,296     $ 23,451     $ 302,135  
Income tax expense     (79,705 )     2,309       (1,385 )     (6,507 )     (30,832 )     (116,120 )
Net income from continuing operations   $ 182,999     $ (3,610 )   $ 2,218     $ 11,789     $ (7,381 )   $ 186,015  
                                                 
Diluted earnings per share from continuing operations   $ 6.91     $ (0.14 )   $ 0.08     $ 0.45     $ (0.28 )   $ 7.02  
Diluted share count     26,490                                          
                                                 
                                                 
    Twelve Months Ended December 31, 2014 
    As reported    Reserve adjustments    Acquisition expenses    Equity investment fair value adjustment    Tax attribute    Adjusted  
Asset impairments   $ 1,853     $ --     $ --     $ (1,853 )   $ --     $ --  
                                                 
Selling, general and administrative     563,207       (3,931 )     (1,865 )     --       --       557,411  
                                                 
Income from operations     231,899       3,931       1,865       1,853       --       239,548  
                                                 
Other (expense) income, net     3,198       --       --       1,160       --       4,358  
                                                 
Income from continuing operations before income taxes   $ 210,495     $ 3,931     $ 1,865     $ 3,013     $ --     $ 219,304  
Income tax expense     (74,955 )     (1,545 )     (720 )     (6,506 )     (867 )     (84,593 )
Net income from continuing operations   $ 135,540     $ 2,386     $ 1,145     $ (3,493 )   $ (867 )   $ 134,711  
                                                 
Diluted earnings per share from continuing operations   $ 5.14     $ 0.09     $ 0.04     $ (0.13 )   $ (0.03 )   $ 5.11  
Diluted share count     26,382                                          
                                                 

Contact Information

  • Contact:
    John North
    VP Finance and Chief Accounting Officer
    (541) 618-5748