SOURCE: Lithia Motors

Lithia Motors

October 21, 2015 06:55 ET

Lithia Reports Adjusted EPS of $2.03 for Third Quarter of 2015; Revenues Increase 61%

Declares $0.20 per Share Dividend for Third Quarter

MEDFORD, OR--(Marketwired - Oct 21, 2015) - Lithia Motors, Inc. (NYSE: LAD) reported adjusted net income of $53.6 million for the third quarter of 2015, the highest quarterly net income in company history and a 54% increase over the prior year period.

2015 third quarter adjusted net income was $2.03 per diluted share. This compares to 2014 third quarter adjusted net income of $34.9 million, or $1.32 per diluted share.

Unadjusted net income for the third quarter of 2015 was $43.4 million, or $1.64 per diluted share, compared to $34.5 million, or $1.31 per diluted share, for the third quarter of 2014. As shown in the attached non-GAAP reconciliation tables, the 2015 third quarter adjusted results exclude a $0.39 non-core net charge related to a previously announced employee transition agreement partially offset by an equity investment. The 2014 third quarter adjusted results exclude a $0.01 non-core net charge related to acquisition expenses partially offset by a non-core benefit resulting from a tax attribute.

Third quarter 2015 revenue increased $788 million, or 61%, to $2.1 billion from $1.3 billion for the third quarter of 2014.

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 10%
  • Same store F&I per unit increased $71 to $1,274
  • Adjusted SG&A expense as a percentage of gross profit was 66.0%

"Our third quarter earnings were the highest in company history," said Bryan DeBoer, President and CEO. "Same store sales in all four business lines grew by double digits, led by a 13% increase in used vehicle sales. Total revenues increased 61% and adjusted earnings per share increased 54% over the prior year period. A robust new vehicle sales environment, improving supply of late model used vehicles, and the continued growth in our service, body and parts business is allowing our store leaders to unlock new opportunities to improve performance across our company. We remain positive on the overall outlook for both organic and acquisition growth in 2016."

For the first nine months of 2015, revenue from continuing operations increased 63% to $5.9 billion from $3.6 billion in 2014.

For the first nine months of 2015, adjusted net income per diluted share increased 43% to $5.28 from $3.69 for the first nine months of 2014. Unadjusted net income from continuing operations was $5.10 per diluted share for the first nine months of 2015, compared to $3.58 per diluted share for the first nine months of 2014.

Chris Holzshu, SVP and CFO, said, "Adjusted SG&A as a percentage of gross profit was 66.0% in the third quarter of 2015, bringing the first nine months of the year down to 67.8%, thanks to strong performance from both Lithia and DCH. For the third quarter, incremental throughput, or the percentage of additional same store gross profit dollars that we retain after deducting incremental selling costs, was 49.3% We are targeting consolidated SG&A as a percentage of gross profit in the mid-60s on a full year basis. Additionally, same store F&I per unit was $1,274 per unit, an increase of $71 over the prior year. We still believe opportunity remains to improve this number given continued focus by our store personnel."

Corporate Development
As previously announced, in the third quarter of 2015 we acquired a Ford store in Missoula, Montana, an Acura store in Honolulu, Hawaii, and a Subaru Hyundai GMC store in Great Falls, Montana. Also as previously announced, in October, 2015 we acquired a Chrysler Jeep Dodge Ram Fiat store in Concord, California. We estimate these stores will contribute approximately $175 million in annual revenues.

Bryan DeBoer, President and CEO, stated, "We have purchased or opened six stores in 2015 which will add cumulative annual revenues of approximately $220 million. We are actively seeking stores in both our Lithia exclusive market strategy and in our DCH metropolitan market strategy. The acquisition market remains robust and we anticipate further transactions for both Lithia and DCH in the near term."

Balance Sheet Update
We ended the second quarter with $33 million in cash and $163 million in availability on our credit facilities. Additionally, approximately $144 million of our operating real estate is currently unfinanced, which could provide an estimated additional $108 million in available liquidity, for total potential liquidity of $304 million.

Dividend Payment
Our Board of Directors has approved a dividend of $0.20 per share related to third quarter 2015 financial results. We will pay the dividend November 20, 2015 to shareholders of record on November 6, 2015.

2015 Outlook
We project 2015 fourth quarter earnings of $1.61 to $1.65 per diluted share and 2015 full year earnings of $6.89 to $6.93 per diluted share. Both projections are based on the following annual assumptions:

Continuing Operations Projections

  • Total revenues of $7.8 to $7.9 billion
  • New vehicle sales increasing 48%
  • New vehicle gross margin of 6.0% to 6.2%
  • Used vehicle sales increasing 41%
  • Used vehicle gross margin of 12.4% to 12.6%
  • Service body and parts sales increasing 44%
  • Service body and parts gross margin of 48.8% to 49.2%
  • Finance and insurance gross profit of $1,190 per unit
  • Tax rate of 39.0%
  • Average diluted shares outstanding of 26.5 million 

Same Store Projections

  • Total revenues of $5.7 to $5.9 billion
  • New vehicle same store sales increasing 9%
  • Used vehicle same store sales increasing 12.5%
  • Service body and parts same store sales increasing 10%
  • Finance and insurance gross profit of $1,230 per unit

2016 Earnings Guidance
We project 2016 first quarter earnings of $1.46 to $1.50 per diluted share and 2016 full year earnings of $7.15 to $7.35 per diluted share. Both projections are based on the following annual assumptions:

  • Total revenues of $8.3 to $8.4 billion
  • New vehicle sales increasing 5.5%
  • New vehicle gross margin of 5.9% to 6.1%
  • Used vehicle sales increasing 6%
  • Used vehicle gross margin of 12.4% to 12.6%
  • Service body and parts sales increasing 5%
  • 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 26.6 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.

Third Quarter Earnings Conference Call and Updated Presentation
The third quarter conference call may be accessed at 11:00 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 31 brands of new vehicles and all brands of used vehicles at 135 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; continued improvement of SG&A as a percentage of gross profit; generating 2015 fourth quarter earnings per share of $1.61 to $1.65 per diluted share and 2015 full year earnings of $6.89 to $6.93 per diluted share; generating 2016 first quarter earnings per share of $1.46 to $1.50 per diluted share and 2016 full year earnings of $7.15 to $7.35 per diluted share and all projections set forth under the headings "2015 Outlook", "Continuing Operations Projections", "Same Store Projections" and "2016 Earnings Guidance";
  • Anticipated continued success and growth of DCH;
  • Anticipated ability to improve store performance; ability to find accretive acquisitions; and additions of dealership locations to the company's portfolio in the future; and
  • Anticipated availability of liquidity from our unfinanced operating real estate.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events that depend on circumstances that may or may not occur in the future. Forward-looking statements are not guarantees of future performance, and our actual results of operations, financial condition and liquidity and development of the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements in this press release. The risks and uncertainties that could cause actual results to differ materially from estimated or projected results include, without limitation, future economic and financial conditions (both nationally and locally), changes in customer demand, our relationship with, and the financial and operational stability of, vehicle manufacturers and other suppliers, risks associated with our indebtedness (including available borrowing capacity, compliance with financial covenants and ability to refinance or repay indebtedness on favorable terms), government regulations, legislation and others set forth throughout Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations and in Part I, Item 1A. Risk Factors of our 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             %  
      September 30,       Increase     Increase  
      2015       2014       (Decrease)     (Decrease)  
Revenues:                              
New vehicle retail   $ 1,227,080     $ 732,121     $ 494,959     67.6 %
Used vehicle retail     505,885       340,522       165,363     48.6  
Used vehicle wholesale     69,472       48,853       20,619     42.2  
Finance and insurance     76,633       46,855       29,778     63.6  
Service, body and parts     189,796       120,772       69,024     57.2  
Fleet and other     15,979       7,988       7,991     100.0  
  Total revenues     2,084,845       1,297,111       787,734     60.7  
Cost of sales:                              
New vehicle retail     1,149,923       684,473       465,450     68.0  
Used vehicle retail     443,598       296,624       146,974     49.5  
Used vehicle wholesale     68,892       48,349       20,543     42.5  
Service, body and parts     95,846       62,351       33,495     53.7  
Fleet and other     15,399       7,474       7,925     106.0  
  Total cost of sales     1,773,658       1,099,271       674,387     61.3  
Gross profit     311,187       197,840       113,347     57.3  
Asset impairments     4,131       -       4,131     NM  
SG&A expense     223,728       131,627       92,101     70.0  
Depreciation and amortization     10,531       6,067       4,464     73.6  
Income from operations     72,797       60,146       12,651     21.0  
Floor plan interest expense     (4,951 )     (3,127 )     1,824     58.3  
Other interest expense     (4,900 )     (2,051 )     2,849     138.9  
Other (expense) income, net     (307 )     1,027       (1,334 )   NM  
Income before income taxes     62,639       55,995       6,644     11.9  
Income tax expense     (19,248 )     (21,458 )     2,210     10.3  
Income tax rate     30.7 %     38.3 %              
Net income   $ 43,391     $ 34,537     $ 8,854     25.6 %
                               
Diluted net income per share:                              
Net income per share   $ 1.64     $ 1.31     $ 0.33     25.2 %
                               
Diluted shares outstanding     26,480       26,359       121     0.5 %
                               
NM - not meaningful                              
                               
 
 
Lithia Motors, Inc.
Key Performance Metrics (Unaudited)
 
    Three months ended           %  
    September 30,     Increase     Increase  
    2015     2014     (Decrease)     (Decrease)  
Gross margin                              
New vehicle retail     6.3 %     6.5 %     (20) bps        
Used vehicle retail     12.3       12.9       (60) bps        
Used vehicle wholesale     0.8       1.0       (20) bps        
Finance and insurance     100.0       100.0       - bps        
Service, body and parts     49.5       48.4       110 bps        
Fleet and other     3.6       6.4       (280) bps        
Gross profit margin     14.9       15.3       (40) bps        
                               
Unit sales                              
New vehicle retail     37,401       21,320       16,081     75.4 %
Used vehicle retail     26,206       17,710       8,496     48.0  
Total retail units sold     63,607       39,030       24,577     63.0  
Used vehicle wholesale     10,239       6,989       3,250     46.5  
                               
Average selling price                              
New vehicle retail   $ 32,809     $ 34,340     $ (1,531 )   (4.5 )%
Used vehicle retail     19,304       19,228       76     0.4  
Used vehicle wholesale     6,785       6,990       (205 )   (2.9 )
                               
Average gross profit per unit                              
New vehicle retail   $ 2,063     $ 2,235     $ (172 )   (7.7 )%
Used vehicle retail     2,377       2,479       (102 )   (4.1 )
Used vehicle wholesale     57       72       (15 )   (20.8 )
Finance and insurance     1,205       1,200       5     0.4  
Total vehicle(1)     3,406       3,559       (153 )   (4.3 )
                               
Revenue mix                              
New vehicle retail     58.8 %     56.4 %              
Used vehicle retail     24.3       26.3                
Used vehicle wholesale     3.3       3.8                
Finance and insurance, net     3.7       3.6                
Service, body and parts     9.1       9.3                
Fleet and other     0.8       0.6                
                               
    Adjusted     As reported  
    Three months ended
September 30,
    Three months ended
September 30,
 
Other metrics     2015       2014       2015     2014  
SG&A as a % of revenue     9.9 %     10.1 %     10.7 %   10.1 %
SG&A as a % of gross profit     66.0       66.1       71.9     66.5  
Operating profit as a % of revenue     4.6       4.7       3.5     4.6  
Operating profit as a % of gross profit     30.6       30.8       23.4     30.4  
Pretax margin     4.2       4.4       3.0     4.3  
Net profit margin     2.6       2.7       2.1     2.7  
                       
(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  
      2015       2014       (Decrease)     (Decrease)  
Revenues                              
New vehicle retail   $ 810,720     $ 727,924     $ 82,796     11.4 %
Used vehicle retail     381,773       338,400       43,373     12.8  
Used vehicle wholesale     54,088       48,600       5,488     11.3  
Finance and insurance     54,099       46,607       7,492     16.1  
Service, body and parts     132,331       120,099       12,232     10.2  
Fleet and other     8,137       7,990       147     1.8  
Total revenues   $ 1,441,148     $ 1,289,620     $ 151,528     11.7  
                               
Gross profit                              
New vehicle retail   $ 50,730     $ 47,211     $ 3,519     7.5 %
Used vehicle retail     49,016       43,716       5,300     12.1  
Used vehicle wholesale     690       544       146     26.8  
Finance and insurance     54,099       46,607       7,492     16.1  
Service, body and parts     64,822       58,100       6,722     11.6  
Fleet and other     563       516       47     9.1  
Total gross profit   $ 219,920     $ 196,694     $ 23,226     11.8  
                               
Gross margin                              
New vehicle retail     6.3 %     6.5 %     (20) bps        
Used vehicle retail     12.8       12.9       (10) bps        
Used vehicle wholesale     1.3       1.1       20 bps        
Finance and insurance     100.0       100.0       - bps        
Service, body and parts     49.0       48.4       60 bps        
Fleet and other     6.9       6.5       40 bps        
Gross profit margin     15.3       15.3       - bps        
                               
Unit sales                              
New vehicle retail     23,219       21,163       2,056     9.7 %
Used vehicle retail     19,255       17,566       1,689     9.6  
Total retail units sold     42,474       38,729       3,745     9.7  
Used vehicle wholesale     7,226       6,916       310     4.5  
                               
Average selling price                              
New vehicle retail   $ 34,916     $ 34,396     $ 520     1.5 %
Used vehicle retail     19,827       19,265       562     2.9  
Used vehicle wholesale     7,485       7,027       458     6.5  
                               
Average gross profit per unit                              
New vehicle retail   $ 2,185     $ 2,231     $ (46 )   (2.1 )%
Used vehicle retail     2,546       2,489       57     2.3  
Used vehicle wholesale     96       79       17     21.5  
Finance and insurance     1,274       1,203       71     5.9  
Total vehicle(1)     3,638       3,565       73     2.0  
                               
(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  
    2015       2014       (Decrease)       (Decrease)  
Revenues:                                    
New vehicle retail   $ 3,384,408       $ 2,006,127       $ 1,378,281       68.7 %
Used vehicle retail     1,457,617         952,890         504,727       53.0  
Used vehicle wholesale     198,476         135,832         62,644       46.1  
Finance and insurance     213,700         130,324         83,376       64.0  
Service, body and parts     545,966         339,726         206,240       60.7  
Fleet and other     70,803         32,120         38,683       120.4  
  Total revenues     5,870,970         3,597,019         2,273,951       63.2  
Cost of sales:                                    
New vehicle retail     3,176,135         1,873,461         1,302,674       69.5  
Used vehicle retail     1,273,195         824,129         449,066       54.5  
Used vehicle wholesale     194,329         132,493         61,836       46.7  
Service, body and parts     276,828         174,291         102,537       58.8  
Fleet and other     68,272         30,444         37,828       124.3  
  Total cost of sales     4,988,759         3,034,818         1,953,941       64.4  
Gross profit     882,211         562,201         320,010       56.9  
Asset impairments     14,391         -         14,391       NM  
SG&A expense     610,956         378,919         232,037       61.2  
Depreciation and amortization     30,544         17,399         13,145       75.6  
Income from operations     226,320         165,883         60,437       36.4  
Floor plan interest expense     (14,255 )       (9,326 )       4,929       52.9  
Other interest expense     (14,700 )       (5,894 )       8,806       149.4  
Other (expense) income, net     (1,030 )       3,110         (4,140 )     NM  
Income from continuing operations before income taxes     196,334         153,773         42,561       27.7  
Income tax expense     (61,067 )       (59,372 )       1,695       2.9  
Income tax rate     31.1 %       38.6 %                  
Income from continuing operations   $ 135,267       $ 94,401       $ 40,866       43.3 %
Income from discontinued operations, net of tax     -         3,179         (3,179 )     NM  
Net income   $ 135,267       $ 97,580       $ 37,687       38.6 %
                                     
Diluted net income per share:                                    
Continuing operations   $ 5.10       $ 3.58       $ 1.52       42.5 %
Discontinued operations     -         0.13         (0.13 )     NM  
Net income per share   $ 5.10       $ 3.71       $ 1.39       37.5 %
                                     
Diluted shares outstanding     26,500         26,337         163       0.6 %
                                     
NM - not meaningful                                    
                                     
                                     
                                     
Lithia Motors, Inc.  
Key Performance Metrics (Unaudited)  
   
    Nine months ended           %  
    September 30,     Increase     Increase  
    2015     2014     (Decrease)     (Decrease)  
Gross margin                              
New vehicle retail     6.2       % 6.6       % (40) bps        
Used vehicle retail     12.7       13.5       (80) bps        
Used vehicle wholesale     2.1       2.5       (40) bps        
Finance and insurance     100.0       100.0       - bps        
Service, body and parts     49.3       48.7       60 bps        
Fleet and other     3.6       5.2       (160) bps        
Gross profit margin     15.0       15.6       (60) bps        
                               
Unit sales                              
New vehicle retail     103,136       59,040       44,096     74.7 %
Used vehicle retail     75,099       50,112       24,987     49.9  
Total retail units sold     178,235       109,152       69,083     63.3  
Used vehicle wholesale     28,822       18,889       9,933     52.6  
                               
Average selling price                              
New vehicle retail   $ 32,815     $ 33,979     $ (1,164 )   (3.4) %
Used vehicle retail     19,409       19,015       394     2.1  
Used vehicle wholesale     6,886       7,191       (305 )   (4.2 )
                               
Average gross profit per unit                              
New vehicle retail   $ 2,019     $ 2,247     $ (228 )   (10.1) %
Used vehicle retail     2,456       2,569       (113 )   (4.4 )
Used vehicle wholesale     144       177       (33 )   (18.6 )
Finance and insurance     1,199       1,194       5     0.4  
                               
Revenue mix                              
New vehicle retail     57.6 %     55.8 %              
Used vehicle retail     24.8       26.5                
Used vehicle wholesale     3.4       3.8                
Finance and insurance, net     3.6       3.6                
Service, body and parts     9.3       9.4                
Fleet and other     1.3       0.9                
                               
    Adjusted     As reported  
    Nine months ended
September 30,
    Nine months ended
September 30,
 
Other metrics     2015       2014       2015     2014  
SG&A as a % of revenue     10.2 %     10.4 %     10.4 %   10.5 %
SG&A as a % of gross profit     67.8       66.5       69.3     67.4  
Operating profit as a % of revenue     4.3       4.8       3.9     4.6  
Operating profit as a % of gross profit     28.7       30.4       25.7     29.5  
Pretax margin     3.9       4.4       3.3     4.3  
Net profit margin     2.4       2.7       2.3     2.6  
                               
                               
 
Lithia Motors, Inc.
Same Store Operating Highlights (Unaudited)
 
      Nine months ended             %  
      September 30,       Increase     Increase  
      2015       2014       (Decrease)     (Decrease)  
Revenues                              
New vehicle retail   $ 2,190,337     $ 1,988,665     $ 201,672     10.1 %
Used vehicle retail     1,071,691       943,360       128,331     13.6  
Used vehicle wholesale     148,249       135,173       13,076     9.7  
Finance and insurance     148,232       129,155       19,077     14.8  
Service, body and parts     371,432       336,881       34,551     10.3  
Fleet and other     42,480       32,120       10,360     32.3  
Total revenues   $ 3,972,421     $ 3,565,354     $ 407,067     11.4  
                               
Gross profit                              
New vehicle retail   $ 136,224     $ 131,168     $ 5,056     3.9 %
Used vehicle retail     141,666       127,768       13,898     10.9  
Used vehicle wholesale     3,741       3,446       295     8.6  
Finance and insurance     148,232       129,155       19,077     14.8  
Service, body and parts     181,850       163,944       17,906     10.9  
Fleet and other     2,177       1,676       501     29.9  
Total gross profit   $ 613,890     $ 557,157     $ 56,733     10.2  
                               
Gross margin                              
New vehicle retail     6.2 %     6.6 %     (40) bps        
Used vehicle retail     13.2       13.5       (30) bps        
Used vehicle wholesale     2.5       2.5       - bps        
Finance and insurance     100.0       100.0       - bps        
Service, body and parts     49.0       48.7       30 bps        
Fleet and other     5.1       5.2       (10) bps        
Total gross profit     15.5       15.6       (10) bps        
                               
Unit sales                              
New vehicle retail     63,113       58,431       4,682     8.0 %
Used vehicle retail     54,197       49,537       4,660     9.4  
Total retail units sold     117,310       107,968       9,342     8.7  
Used vehicle wholesale     19,437       18,701       736     3.9  
                               
Average selling price                              
New vehicle retail   $ 34,705     $ 34,034     $ 671     2.0 %
Used vehicle retail     19,774       19,044       730     3.8  
Used vehicle wholesale     7,627       7,228       399     5.5  
                               
Average gross profit per unit                              
New vehicle retail   $ 2,158     $ 2,245     $ (87 )   (3.9 )%
Used vehicle retail     2,614       2,579       35     1.4  
Used vehicle wholesale     192       184       8     4.3  
Finance and insurance     1,264       1,196       68     5.7  
Total vehicle(1)     3,664       3,626       38     1.0  
                               
(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       %  
  September 30,   Increase   Increase  
  2015   2014   (Decrease)   (Decrease)  
Revenues                      
Domestic $ 814,155   $ 684,835   $ 129,320   18.9 %
Import   893,465     412,136     481,329   116.8  
Luxury   374,390     196,646     177,744   90.4  
Total segment revenues   2,082,010     1,293,617     788,393   60.9  
Corporate and other   2,835     3,494     (659 ) (18.9 )
Total revenues $ 2,084,845   $ 1,297,111   $ 787,734   60.7  
                       
Segment Income(1)                      
Domestic $ 33,176   $ 26,659   $ 6,517   24.4 %
Import   30,506     13,407     17,099   127.5  
Luxury   8,140     6,227     1,913   30.7  
    71,822     46,293     25,529   55.1  
Corporate and other   6,555     16,793     (10,238 ) (61.0 )
Depreciation and amortization   (10,531 )   (6,067 )   4,464   73.6  
Other interest expense   (4,900 )   (2,051 )   2,849   138.9  
Other (expense) income, net   (307 )   1,027     1,334   NM  
Income from continuing operations before income taxes $ 62,639   $ 55,995   $ 6,644   11.9  
                       
(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   12,361     10,398     1,963   18.9 %
Import   20,658     8,921     11,737   131.6  
Luxury   4,455     2,006     2,449   122.1  
Total   37,474     21,325     16,149   75.7  
Allocated to management   (73 )   (5 )   (68 ) NM  
Total retail new vehicle unit sales   37,401     21,320     16,081   75.4  
                       
NM - not meaningful                       
   
   
   
Lithia Motors, Inc.  
Segment Operating Highlights (Unaudited)  
   
  Nine months ended         %  
  September 30,     Increase   Increase  
  2015     2014     (Decrease)   (Decrease)  
Revenues                      
Domestic $ 2,272,914     $1,893,014     $379,900   20.1 %
Import   2,507,181     1,160,250     1,346,931   116.1  
Luxury   1,083,680     541,082     542,598   100.3  
Total segment revenues   5,863,775     3,594,346     2,269,429   63.1  
Corporate and other   7,195     2,673     4,522   169.2  
Total revenues $ 5,870,970     $3,597,019     $2,273,951   63.2  
                       
Segment Income(1)                      
Domestic $ 91,691     $     17,163   23.0 %
Import   73,963     37,351     36,612   98.0  
Luxury   25,360     14,246     11,114   78.0  
Total segment income   191,014     126,125     64,889   51.4  
Corporate and other   51,594     47,831     3,764   7.9  
Depreciation and amortization   (30,544 )   (17,399 )   13,145   75.6  
Other interest expense   (14,700 )   (5,894 )   8,806   149.4  
Other (expense) income, net   (1,030 )   3,110     4,140   (133.1 )
Income from continuing operations before income taxes $ 196,334     $153,773     $42,562   27.7  
                       
(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   33,852     28,989     4,863   16.8 %
Import   56,814     24,632     32,182   130.7  
Luxury   12,650     5,583     7,067   126.6  
Total   103,316     59,204     44,112   74.5  
Allocated to management   (180 )   (164 )   (16 ) 9.8  
Total retail new vehicle unit sales   103,136     59,040     44,096   74.7  
                       
NM - not meaningful                      
Lithia Motors, Inc.
Other Highlights (Unaudited)
 
  As of
  September 30,   December 31,   September 30,
  2015   2014   2014
Days Supply(1)          
New vehicle inventory 64   62   72
Used vehicle inventory 54   53   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, 2015
Current ratio   Not less than 1.10 to 1   1.25 to 1
Fixed charge coverage ratio   Not less than 1.20 to 1   3.38 to 1
Leverage ratio   Not more than 5.00 to 1   1.84 to 1
Funded debt restriction   Not more than $600 million   $424.0 million
         
         
         
Lithia Motors, Inc.  
Other Highlights (Unaudited)  
   
  Three months ended
September 30,
  Nine months ended
September 30,
 
  2015   2014   2015   2014  
New vehicle unit sales brand mix                
Honda Acura 22.5 % 8.0 % 22.5 % 8.0 %
Chrysler 18.5   28.1   18.9   28.3  
Toyota 18.8   13.4   18.9   13.7  
General Motors 9.5   14.2   9.3   14.2  
Subaru 6.7   9.9   6.8   9.6  
BMW, MINI 5.5   6.1   5.6   6.2  
Ford 5.2   6.5   4.6   6.4  
Nissan 4.0   3.5   3.8   3.6  
Volkswagen, Audi 3.1   2.8   3.1   2.6  
Hyundai 2.1   3.0   2.1   3.1  
Mercedes 1.4   2.4   1.5   2.3  
Kia 1.3   1.3   1.3   1.1  
Lexus 0.9   -   1.0   -  
Other 0.5   0.8   0.6   0.9  
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
  2015   2014   2015   2014  
Revenue geographic mix                
California 21.3 % 12.8 % 21.4 % 13.0 %
Oregon 16.9   22.7   16.7   22.3  
Texas 14.9   22.8   15.4   23.5  
New Jersey 14.4   -   14.4   -  
Montana 6.3   8.2   6.0   8.2  
Alaska 5.4   7.5   5.4   7.3  
Washington 5.1   7.2   5.1   7.2  
Nevada 3.1   4.6   3.0   4.6  
New York 2.9   -   3.0   -  
Idaho 2.9   4.4   2.9   4.4  
Iowa 3.0   4.3   2.9   4.3  
North Dakota 1.4   2.1   1.5   2.2  
Hawaii 1.5   2.0   1.4   1.6  
New Mexico 0.9   1.4   0.9   1.4  
 
As of October 21, 2015
     
Current store count mix # of stores   % of total          
Chrysler 26   19.2 %        
Honda, Acura 21   15.6          
Toyota 19   14.1          
General Motors 17   12.6          
BMW, MINI 11   8.1          
Volkswagen, Audi 8   5.9          
Ford 7   5.2          
Subaru 7   5.2          
Nissan 6   4.4          
Hyundai 5   3.7          
Mercedes 4   3.0          
Other 4   3.0          
                 
   
   
Lithia Motors, Inc.  
Consolidated Balance Sheets (Unaudited)  
(In thousands)  
   
  September 30, 2015   December 31, 2014  
Cash and cash equivalents $ 32,707   $ 29,898  
Trade receivables, net   285,730     295,379  
Inventories, net   1,386,960     1,249,659  
Other current assets   32,640     32,010  
Assets held for sale   -     8,563  
Total current assets $ 1,738,037   $ 1,615,509  
             
Property and equipment, net   854,077     816,745  
Goodwill   210,627     199,375  
Franchise value   155,187     150,892  
Other non-current assets   101,901     98,411  
Total assets $ 3,059,829   $ 2,880,932  
             
Floor plan notes payable $ 46,651   $ 41,047  
Floor plan notes payable: non trade   1,168,223     1,137,632  
Current maturities of long-term debt   38,745     31,912  
Trade payables   77,723     70,853  
Accrued liabilities   167,135     153,661  
Deferred income taxes   3,792     2,603  
Liabilities related to assets held for sale   -     4,892  
Total current liabilities $ 1,502,269   $ 1,442,600  
             
Long-term debt   591,231     609,066  
Deferred revenue   63,238     54,403  
Deferred income taxes   29,013     42,795  
Other long-term liabilities   86,365     58,963  
Total liabilities $ 2,272,116   $ 2,207,827  
             
Class A common stock   263,531     276,058  
Class B common stock   319     319  
Additional paid-in capital   35,917     29,775  
Accumulated other comprehensive loss   (461 )   (926 )
Retained earnings   488,407     367,879  
Total liabilities & stockholders' equity $ 3,059,829   $ 2,880,932  
   
   
   
Lithia Motors, Inc.  
Summarized Cash Flow from Operations (Unaudited)  
(In thousands)  
   
  Nine months ended  
  September 30,  
  2015   2014  
Net income $ 135,267   $ 97,580  
             
Adjustments to reconcile net income to net cash provided by operating activities:            
Asset Impairment   14,391     -  
Depreciation and amortization   30,544     17,399  
Stock-based compensation   8,579     5,054  
Loss on disposal of assets   27     307  
Gain on sale of franchise   (5,919 )   (5,744 )
Deferred income taxes   (7,955 )   4,725  
Excess tax benefit from share-based payment arrangements   (4,923 )   (6,160 )
(Increase) decrease:            
  Trade receivables, net   9,685     (11,336 )
  Inventories   (132,407 )   (44,349 )
  Other assets   (5,339 )   (13,700 )
Increase (decrease):            
  Floor plan notes payable, net   5,604     1,132  
  Trade payables   7,768     4,246  
  Accrued liabilities   16,949     21,914  
  Other long-term liabilities and deferred revenue   34,651     16,634  
Net cash provided by operating activities $ 106,922   $ 87,702  
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 2015   2014
As reported $ 106,922   $ 87,702
  Floor plan notes payable, non-trade, net   36,204     30,375
Adjusted $ 143,126   $ 118,077
           
           
           
Lithia Motors, Inc.  
Reconciliation of Certain Non-GAAP Financial Measures (Unaudited)  
(In thousands, except for per share data)  
   
  Three Months Ended September 30, 2015  
  As reported   Transition agreement   Equity investment fair value adjustment   Adjusted  
Other asset impairments $ 4,131   $ -   $ (4,131 ) $ -  
                         
Selling, general and administrative   223,728     (18,296 )   -     205,432  
                         
Income from operations   72,797     18,296     4,131     95,224  
                         
Other (expense) income, net   (307 )   -     1,732     1,425  
                         
Income from continuing operations before income taxes $ 62,639   $ 18,296   $ 5,862   $ 86,797  
Income tax expense   (19,248 )   (6,507 )   (7,414 )   (33,169 )
Net income from continuing operations $ 43,391   $ 11,789   $ (1,552 ) $ 53,628  
                         
Diluted earnings per share from continuing operations $ 1.64   $ 0.45   $ (0.06 ) $ 2.03  
Diluted share count   26,480                    
                         
                         
                         
    Three Months Ended September 30, 2014  
    As reported     Acquisition expenses     Tax attributes   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 )   (318 )     (194 )   (21,971 )
Net income from continuing operations   $ 34,537   $ 565     $ (194 ) $ 34,908  
                             
Diluted earnings per share from continuing operations   $ 1.31   $ 0.02     $ (0.01 ) $ 1.32  
Diluted share count     26,359                      
                             
                             
                             
 
Lithia Motors, Inc.  
Reconciliation of Certain Non-GAAP Financial Measures (Unaudited)  
(In thousands, except for per share data)  
                                     
    Nine Months Ended September 30, 2015  
                                     
    As
reported
    Disposal
(gain)/
loss on
sale of
stores
  Asset impairments   Transition agreement    Equity investment
fair
value adjustment
 
  Adjusted  
                                                 
Other asset impairments   $ 14,391     $ -     $ (2,000 )   $ -     $ (12,391 )   $ -  
                                                 
Selling, general and administrative    
610,956
     
5,919
     
-
     
(18,296

)
   
-
     
598,579
 
                                                 
Income from operations     226,320       (5,919 )     2,000       18,296       12,391       253,088  
                                                 
Other (expense) income, net     (1,031 )     -       -       -       5,196       4,165  
                                                 
Income from continuing operations before income taxes  

$

 196,334
   

$

 (5,919


)
 

$

 2,000
   

$

 18,296
   

$

 17,587
   

$

 228,298
 
                                                 
Income tax expense     (61,067 )     2,309       (780 )     (6,507 )     (22,316 )     (88,361 )
                                                 
Net income from continuing operations  
$
 
135,267
   
$
 
(3,610

)
 
$
 
1,220
   
$
 
11,789
   
$
 
(4,729

)
 
$
 
139,937
 
                                                 
Diluted earnings per share from continuing operations  
$
 
5.10
   
$
 
(0.14

)
 
$
 
0.05
   
$
 
0.45
   
$
 
(0.18

)
 
$
 
5.28
 
                                                 
Diluted share count     26,500                                          
                                                 
                                                 
                                                 
       
    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 )   (382 )   (267 )   (61,566 )
Net income from continuing operations   $ 94,401   $ 2,386   $ 664   $ (267 ) $ 97,184  
                                 
Diluted earnings per share from continuing operations   $ 3.58   $ 0.09   $ 0.03   $ (0.01 ) $ 3.69  
Diluted share count     26,337                          

Contact Information

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