SOURCE: Lithia Motors

Lithia Motors

February 15, 2017 07:00 ET

Lithia Reports Record Fourth Quarter and Full Year 2016 Results

Declares Dividend of $0.25 per Share for Fourth Quarter

MEDFORD, OR--(Marketwired - Feb 15, 2017) - Lithia Motors, Inc. (NYSE: LAD) today reported the highest fourth quarter and full year revenue and earnings per share in company history.

Fourth quarter 2016 net income per diluted share increased 13% to $2.03 from $1.80 for 2015. Adjusted net income per diluted share increased 7% to $1.86 from $1.74 for 2015. Fourth quarter 2016 net income increased 8% to $51.3 million from $47.7 million for 2015. Adjusted net income increased 2% to $46.9 million from $46.1 million for 2015.

As shown in the attached non-GAAP reconciliation tables, the fourth quarter 2016 adjusted results exclude a $0.17 non-core benefit related to an equity investment, an indemnified legal reserve and a tax attribute. The fourth quarter 2015 adjusted results exclude a $0.06 net non-core benefit related to an equity investment offset by an asset impairment.

Fourth quarter 2016 revenue increased 15% to $2.3 billion from $2.0 billion in 2015.

Fourth Quarter-over-Quarter Operating Highlights:

  • Total same store sales increased 5%
  • New vehicle same store sales increased 4%
  • Used vehicle retail same store sales increased 11%
  • Service, body and parts same store sales increased 7%
  • Same store F&I per unit increased $108 to $1,295
  • Adjusted SG&A expense as a percentage of gross profit was 70.1%

2016 net income per diluted share increased 12% to $7.72 from $6.91 for 2015. Adjusted net income per diluted share increased 6% to $7.42 from $7.02 for 2015. 2016 net income increased 8% to $197.1 million from $183.0 million for 2015. 2016 adjusted net income increased 2% to $189.5 million from $186.0 million for 2015.

As shown in the attached non-GAAP reconciliation tables, the 2016 adjusted results exclude a $0.30 net non-core benefit related to an equity investment, a disposal gain and a tax attribute offset by an indemnified legal reserve. The 2015 adjusted results exclude a $0.11 net non-core charge from an asset impairment and a transition agreement offset by an equity investment and a disposal gain.

Full year 2016 revenue increased 10% to $8.7 billion from $7.9 billion in 2015.

Full Year-over-Year Operating Highlights:

  • Total same store sales increased 5%
  • New vehicle same store sales increased 3%
  • Used vehicle retail same store sales increased 11%
  • Service, body and parts same store sales increased 9%
  • Same store F&I per unit increased $94 to $1,291
  • Adjusted SG&A expense as a percentage of gross profit was 68.9%

Bryan DeBoer, President and CEO, said, "We increased same store sales in all core business lines, including double digit growth in used vehicle sales and record performance in F&I. Our store leaders remain focused on capturing incremental used vehicle sales and driving additional service work. 60 locations attained record profitability in 2016, while significant opportunities remain in the roughly 90 stores that did not achieve record performance this year. We will continue to target gaining market share and controlling costs to improve store performance in 2017 and beyond."

Corporate Development
In 2016, we completed the acquisition of 15 stores: a Ford store in Honolulu, Hawaii; the Carbone Auto Group, a nine store platform based in New York and Vermont; a Subaru store in Riverside, California; a Toyota store in Milford, Massachusetts; a Ford store in Thousand Oaks, California; a Ford store in Casper, Wyoming and an Audi store in Calabasas, California. We also opened a Volkswagen store in Freehold, New Jersey. These stores are expected to add over $1.1 billion in annual revenues.

Commenting on the acquired stores, Bryan DeBoer said, "Our entrepreneurial culture allows our team to rapidly grow our store base through accretive acquisitions. Since 2010, when we completed our first acquisitions after the great recession, we have increased our store count from 85 locations to 154, and grown our revenue nearly four hundred percent, from $1.8 billion to $8.7 billion. During this time, we have diversified our brand mix, added metropolitan locations from coast to coast, and maintained our sector low leverage ratio. We remain optimistic that significant acquisition opportunities remain across the United States, and will continue to seek accretive purchases."

Balance Sheet Update
We ended the fourth quarter with approximately $50 million in cash and $138 million in availability under our credit facilities. Additionally, approximately $225 million of our operating real estate is currently unfinanced, which we estimate could provide $168 million in capital, for total potential liquidity of $356 million.

Dividend Payment and Share Repurchase
Our Board of Directors has approved a dividend of $0.25 per share related to fourth quarter 2016 financial results. We expect to pay the dividend on March 24, 2017 to shareholders of record on March 10, 2017.

In the fourth quarter 2016, we repurchased 47,250 shares at a weighted average price of $91.68 per share. In 2016, we deployed $113 million to repurchase 6% of our outstanding float or 1.4 million shares at a weighted average price of $80.24. Approximately $193 million remains available under our existing repurchase authorization.

2017 Earnings Guidance
We project 2017 full year earnings of $8.00 to $8.30 per diluted share. This projection is based on the following annual assumptions:

  • Total revenue of $9.2 to $9.4 billion
  • New vehicle same store sales increasing 1.5%
  • New vehicle gross margin of 5.5% to 5.7%
  • Used vehicle same store sales increasing 5.5%
  • Used vehicle gross margin of 11.5% to 11.7%
  • Service body and parts same store sales increasing 5.0%
  • Service body and parts gross margin of 48.2% to 48.4%
  • Finance and insurance gross profit of $1,270 to $1,295 per unit
  • Tax rate of 39.5%
  • Average diluted shares outstanding of 25.3 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 our investor relations website.

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 and is among the fastest growing companies in the Fortune 500. Lithia sells 30 brands of new vehicles and all brands of used vehicles at 154 stores in 17 states. Lithia also arranges finance, warranty, and credit insurance contracts. In addition, Lithia provides vehicle parts, maintenance and repair services at all of its locations.

Sites
www.lithiamotors.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 2017 full year earnings of $8.00 to $8.30 per diluted share and all projections set forth under the headings "2017 Earnings Guidance"; 
  • Our ability to improve store performance;
  • Anticipated acquisition opportunities and additions of dealership locations to our portfolio in the future, and our ability to achieve returns on investments;
  • Anticipated revenues from acquired stores; 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, adjusted SG&A as a percentage of revenue 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  
    2016     2015     (Decrease)     (Decrease)  
Revenues:                        
New vehicle retail   $ 1,335,833     $ 1,167,893     $ 167,940     14.4 %
Used vehicle retail     559,693       469,399       90,294     19.2  
Used vehicle wholesale     69,485       63,054       6,431     10.2  
Finance and insurance     84,532       69,318       15,214     21.9  
Service, body and parts     228,417       193,024       35,393     18.3  
Fleet and other     14,030       30,594       (16,564 )   (54.1 )
  Total revenues     2,291,990       1,993,282       298,708     15.0 %
Cost of sales:                              
New vehicle retail     1,261,892       1,095,796       166,096     15.2  
Used vehicle retail     496,320       412,572       83,748     20.3  
Used vehicle wholesale     69,406       62,744       6,662     10.6  
Service, body and parts     117,194       98,241       18,953     19.3  
Fleet and other     12,342       30,506       (18,164 )   (59.5 )
  Total cost of sales     1,957,154       1,699,859       257,295     15.1  
Gross profit     334,836       293,423       41,413     14.1 %
Asset impairments     3,498       5,733       (2,235 )   (39.0 )
SG&A expense     236,824       200,219       36,605     18.3  
Depreciation and amortization     12,997       11,056       1,941     17.6  
Income from operations     81,517       76,415       5,102     6.7 %
Floor plan interest expense     (7,227 )     (5,279 )     1,948     36.9  
Other interest expense     (6,599 )     (4,791 )     1,808     37.7  
Other (expense) income, net     (1,569 )     25       1,594     NM  
Income before income taxes     66,122       66,370       (248 )   (0.4 )%
Income tax expense     (14,803 )     (18,638 )     (3,835 )   (20.6 )
Income tax rate     22.4 %     28.1 %              
Net income   $ 51,319     $ 47,732     $ 3,587     7.5 %
                               
Diluted net income per share:                              
Net income per share   $ 2.03     $ 1.80     $ 0.23     12.8 %
                               
Diluted shares outstanding     25,294       26,462       (1,168 )   (4.4 )%
NM - not meaningful
 
 
Lithia Motors, Inc.
Key Performance Metrics (Unaudited)
 
    Three months ended           %  
    December 31,     Increase     Increase  
    2016     2015     (Decrease)     (Decrease)  
Gross margin                        
New vehicle retail     5.5 %     6.2 %     (70 )bps      
Used vehicle retail     11.3       12.1       (80 )      
Used vehicle wholesale     0.1       0.5       (40 )      
Finance and insurance     100.0       100.0       -        
Service, body and parts     48.7       49.1       (40 )      
Fleet and other     12.0       0.3       1,170        
Gross profit margin     14.6       14.7       (10 )      
                               
Unit sales                              
New vehicle retail     38,547       34,350       4,197     12.2 %
Used vehicle retail     28,715       24,010       4,705     19.6  
Total retail units sold     67,262       58,360       8,902     15.3  
Used vehicle wholesale     10,475       9,345       1,130     12.1  
                               
Average selling price                              
New vehicle retail   $ 34,655     $ 34,000     $ 655     1.9 %
Used vehicle retail     19,491       19,550       (59 )   (0.3 )
Used vehicle wholesale     6,633       6,747       (114 )   (1.7 )
                               
Average gross profit per unit                              
New vehicle retail   $ 1,918     $ 2,099     $ (181 )   (8.6 )%
Used vehicle retail     2,207       2,367       (160 )   (6.8 )
Used vehicle wholesale     8       33       (25 )   (75.8 )
Finance and insurance     1,257       1,188       69     5.8  
Total vehicle(1)     3,299       3,402       (103 )   (3.0 )
                               
Revenue mix                              
New vehicle retail     58.3 %     58.6 %              
Used vehicle retail     24.4       23.5                
Used vehicle wholesale     3.0       3.2                
Finance and insurance, net     3.7       3.5                
Service, body and parts     10.0       9.7                
Fleet and other     0.6       1.5                
             
             
    Adjusted     As reported  
    Three months ended
December 31,
    Three months ended
December 31,
 
Other metrics   2016     2015     2016     2015  
SG&A as a % of revenue   10.2 %   10.0 %   10.3 %   10.0 %
SG&A as a % of gross profit   70.1     68.2     70.7     68.2  
Operating profit as a % of revenue   3.8     4.1     3.6     3.8  
Operating profit as a % of gross profit   26.0     28.0     24.3     26.0  
Pretax margin   3.2     3.7     2.9     3.3  
Net profit margin   2.0     2.3     2.2     2.4  
(1) - includes the sales and gross profit related to new, used retail, used wholesale and finance and insurance and unit sales for new and used retail
 
 
Lithia Motors, Inc.
Same Store Operating Highlights (Unaudited)
 
    Three Months Ended
December 31,
   
Increase
    %
Increase
 
    2016     2015     (Decrease)     (Decrease)  
Revenues                        
New vehicle retail   $ 1,212,572     $ 1,164,172     $ 48,400     4.2 %
Used vehicle retail     519,369       466,604       52,765     11.3  
Used vehicle wholesale     60,835       62,828       (1,993 )   (3.2 )
Finance and insurance     79,169       69,033       10,136     14.7  
Service, body and parts     205,110       191,858       13,252     6.9  
Fleet and other     9,422       30,591       (21,169 )   (69.2 )
Total revenues   $ 2,086,477     $ 1,985,086     $ 101,391     5.1  
                               
Gross profit                              
New vehicle retail   $ 67,093     $ 71,826     $ (4,733 )   (6.6 )%
Used vehicle retail     58,701       56,589       2,112     3.7  
Used vehicle wholesale     115       339       (224 )   (66.1 )
Finance and insurance     79,169       69,033       10,136     14.7  
Service, body and parts     101,294       94,243       7,051     7.5  
Fleet and other     1,626       86       1,540     1,790.7  
Total gross profit   $ 307,998     $ 292,116     $ 15,882     5.4  
                               
Gross margin                              
New vehicle retail     5.5 %     6.2 %     (70 )bps      
Used vehicle retail     11.3       12.1       (80 )      
Used vehicle wholesale     0.2       0.5       (30 )      
Finance and insurance     100.0       100.0       -        
Service, body and parts     49.4       49.1       30        
Fleet and other     17.3       0.3       1,700        
Gross profit margin     14.8       14.7       10        
                               
Unit sales                              
New vehicle retail     34,855       34,259       596     1.7 %
Used vehicle retail     26,288       23,883       2,405     10.1  
Total retail units sold     61,143       58,142       3,001     5.2  
Used vehicle wholesale     9,134       9,316       (182 )   (2.0 )
                               
Average selling price                              
New vehicle retail   $ 34,789     $ 33,981     $ 808     2.4 %
Used vehicle retail     19,757       19,537       220     1.1  
Used vehicle wholesale     6,660       6,744       (84 )   (1.2 )
                               
Average gross profit per unit                              
New vehicle retail   $ 1,925     $ 2,097     $ (172 )   (8.2 )%
Used vehicle retail     2,233       2,369       (136 )   (5.7 )
Used vehicle wholesale     13       36       (23 )   (63.9 )
Finance and insurance     1,295       1,187       108     9.1  
Total vehicle(1)     3,354       3,402       (48 )   (1.4 )
(1) - includes the sales and gross profit related to new, used retail, used wholesale and finance and insurance and unit sales for new and used retail
 
 
Lithia Motors, Inc.
Consolidated Statements of Operations (Unaudited)
(In thousands except per share data)
 
 
 
 
 
Twelve months ended
December 31,
     
Increase
 
 
 
 
%
Increase
 
 
    2016     2015     (Decrease)     (Decrease)  
Revenues:                        
New vehicle retail   $ 4,938,436     $ 4,552,301     $ 386,135     8.5 %
Used vehicle retail     2,226,951       1,927,016       299,935     15.6  
Used vehicle wholesale     276,616       261,530       15,086     5.8  
Finance and insurance     330,922       283,018       47,904     16.9  
Service, body and parts     844,505       738,990       105,515     14.3  
Fleet and other     60,727       101,397       (40,670 )   (40.1 )
  Total revenues     8,678,157       7,864,252       813,905     10.3 %
Cost of sales:                              
New vehicle retail     4,649,024       4,271,931       377,093     8.8  
Used vehicle retail     1,963,267       1,685,767       277,500     16.5  
Used vehicle wholesale     272,303       257,073       15,230     5.9  
Service, body and parts     434,222       375,069       59,153     15.8  
Fleet and other     58,026       98,778       (40,752 )   (41.3 )
  Total cost of sales     7,376,842       6,688,618       688,224     10.3  
Gross profit     1,301,315       1,175,634       125,681     10.7  
Asset impairments     13,992       20,124       (6,132 )   (30.5 )
SG&A expense     899,590       811,175       88,415     10.9  
Depreciation and amortization     49,369       41,600       7,769     18.7  
Income from operations     338,364       302,735       35,629     11.8  
Floor plan interest expense     (25,531 )     (19,534 )     5,997     30.7  
Other interest expense     (23,207 )     (19,491 )     3,716     19.1  
Other expense, net     (6,103 )     (1,006 )     5,097     NM  
Income before income taxes     283,523       262,704       20,819     7.9  
Income tax expense     (86,465 )     (79,705 )     6,760     8.5  
Income tax rate     30.5 %     30.3 %              
Net income   $ 197,058     $ 182,999     $ 14,059     7.7 %
                               
Diluted net income per share:                              
Net income per share   $ 7.72     $ 6.91     $ 0.81     11.7 %
                               
Diluted shares outstanding     25,521       26,490       (969 )   (3.7 )%
NM - not meaningful
 
 
Lithia Motors, Inc.
Key Performance Metrics (Unaudited)
 
 
 
 
 
Twelve months ended
December 31,
     
Increase
 
 
 
 
%
Increase
 
 
    2016     2015     (Decrease)     (Decrease)  
Gross margin                        
New vehicle retail     5.9 %     6.2 %     (30 )bps      
Used vehicle retail     11.8       12.5       (70 )      
Used vehicle wholesale     1.6       1.7       (10 )      
Finance and insurance     100.0       100.0       -        
Service, body and parts     48.6       49.2       (60 )      
Fleet and other     4.4       2.6       180        
Gross profit margin     15.0       14.9       10        
                               
Unit sales                              
New vehicle retail     145,772       137,486       8,286     6.0 %
Used vehicle retail     113,498       99,109       14,389     14.5  
Total retail units sold     259,270       236,595       22,675     9.6  
Used vehicle wholesale     40,615       38,167       2,448     6.4  
                               
Average selling price                              
New vehicle retail   $ 33,878     $ 33,111     $ 767     2.3 %
Used vehicle retail     19,621       19,443       178     0.9  
Used vehicle wholesale     6,811       6,852       (41 )   (0.6 )
                               
Average gross profit per unit                              
New vehicle retail   $ 1,985     $ 2,039     $ (54 )   (2.6 )%
Used vehicle retail     2,323       2,434       (111 )   (4.6 )
Used vehicle wholesale     106       117       (11 )   (9.4 )
Finance and insurance     1,276       1,196       80     6.7  
Total vehicle(1)     3,426       3,420       6     0.2  
                               
Revenue mix                              
New vehicle retail     56.9 %     57.9 %              
Used vehicle retail     25.7       24.5                
Used vehicle wholesale     3.2       3.3                
Finance and insurance, net     3.8       3.6                
Service, body and parts     9.7       9.4                
Fleet and other     0.7       1.3                
             
             
    Adjusted     As reported  
    Twelve Months Ended
 December 31,
    Twelve months ended
 December 31,
 
Other metrics   2016     2015     2016     2015  
SG&A as a % of revenue   10.3 %   10.2 %   10.4 %   10.3 %
SG&A as a % of gross profit   68.9     67.9     69.1     69.0  
Operating profit as a % of revenue   4.1     4.3     3.9     3.8  
Operating profit as a % of gross profit   27.3     28.5     26.0     25.8  
Pretax margin   3.6     3.8     3.3     3.3  
Net profit margin   2.2     2.4     2.3     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)
 
 
 
 
 
Twelve months ended
December 31,
     
Increase
 
 
 
 
%
Increase
 
 
    2016     2015     (Decrease)     (Decrease)  
Revenues                        
New vehicle retail   $ 4,686,693     $ 4,534,865     $ 151,828     3.3 %
Used vehicle retail     2,129,402       1,916,309       213,093     11.1  
Used vehicle wholesale     261,957       260,341       1,616     0.6  
Finance and insurance     317,780       281,898       35,882     12.7  
Service, body and parts     797,397       734,508       62,889     8.6  
Fleet and other     52,992       101,396       (48,404 )   (47.7 )
Total revenues   $ 8,246,221     $ 7,829,317     $ 416,904     5.3  
                               
Gross profit                              
New vehicle retail   $ 274,772     $ 279,201     $ (4,429 )   (1.6 )%
Used vehicle retail     252,554       240,299       12,255     5.1  
Used vehicle wholesale     4,184       4,608       (424 )   (9.2 )
Finance and insurance     317,780       281,898       35,882     12.7  
Service, body and parts     389,557       361,692       27,865     7.7  
Fleet and other     2,593       2,583       10     0.4  
Total gross profit   $ 1,241,440     $ 1,170,281     $ 71,159     6.1  
                               
Gross margin                              
New vehicle retail     5.9 %     6.2 %     (30 )bps      
Used vehicle retail     11.9       12.5       (60 )      
Used vehicle wholesale     1.6       1.8       (20 )      
Finance and insurance     100.0       100.0       -        
Service, body and parts     48.9       49.2       (30 )      
Fleet and other     4.9       2.5       240        
Total gross profit     15.1       14.9       20        
                               
Unit sales                              
New vehicle retail     138,310       136,993       1,317     1.0 %
Used vehicle retail     107,919       98,531       9,388     9.5  
Total retail units sold     246,229       235,524       10,705     4.5  
Used vehicle wholesale     38,234       37,966       268     0.7  
                               
Average selling price                              
New vehicle retail   $ 33,885     $ 33,103     $ 782     2.4 %
Used vehicle retail     19,731       19,449       282     1.4  
Used vehicle wholesale     6,851       6,857       (6 )   (0.1 )
                               
Average gross profit per unit                              
New vehicle retail   $ 1,987     $ 2,038     $ (51 )   (2.5 )%
Used vehicle retail     2,340       2,439       (99 )   (4.1 )
Used vehicle wholesale     109       121       (12 )   (9.9 )
Finance and insurance     1,291       1,197       94     7.9  
Total vehicle(1)     3,449       3,422       27     0.8  
(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
 
 
    2016     2015     (Decrease)     (Decrease)  
Revenues                        
Domestic   $ 886,247     $ 763,289     $ 122,958     16.1 %
Import     987,248       823,718       163,530     19.9  
Luxury     417,544       406,581       10,963     2.7  
Total segment revenues     2,291,039       1,993,588       297,451     14.9  
Corporate and other     951       (306 )     1,257     (410.8 )
Total revenues   $ 2,291,990     $ 1,993,282     $ 298,708     15.0  
                               
Segment Income(1)                              
Domestic   $ 21,790     $ 23,532     $ (1,742 )   (7.4 )%
Import     23,326       21,846       1,480     6.8  
Luxury     9,731       10,627       (896 )   (8.4 )
Total segment income     54,847       56,005       (1,158 )   (2.1 )
Corporate and other     32,440       26,187       6,253     23.9  
Depreciation and amortization     (12,997 )     (11,056 )     1,941     17.6  
Other interest expense     (6,599 )     (4,791 )     1,808     37.7  
Other (expense) income, net     (1,569 )     25       1,594     NM  
Income before income taxes   $ 66,122     $ 66,370     $ (248 )   (0.4 )
(1) Segment income for each of the segments is defined as Income before income taxes, less Depreciation and amortization, Other interest expense and Other income, net.
Retail New Vehicle Unit Sales                        
Domestic   12,531     11,124     1,407     12.6 %
Import   21,188     18,381     2,807     15.3  
Luxury   4,924     4,906     18     0.4  
Total   38,643     34,411     4,232     12.3  
Allocated to management   (96 )   (61 )   (35 )   NM  
Total retail new vehicle unit sales   38,547     34,350     4,197     12.2  
NM - not meaningful
 
 
Lithia Motors, Inc.
Segment Operating Highlights (Unaudited)
 
    Twelve months ended
December 31,
   
Increase
    %
Increase
 
    2016     2015     (Decrease)     (Decrease)  
Revenues                        
Domestic   $ 3,381,715     $ 3,038,882     $ 342,833     11.3 %
Import     3,764,255       3,330,949       433,306     13.0  
Luxury     1,528,760       1,490,632       38,128     2.6  
Total segment revenues     8,674,730       7,860,463       814,267     10.4  
Corporate and other     3,427       3,789       (362 )   (9.6 )
Total revenues   $ 8,678,157     $ 7,864,252     $ 813,905     10.3  
                               
Segment Income(1)                              
Domestic   $ 106,210     $ 115,145     $ (8,935 )   (7.8 )%
Import     110,204       98,751       11,453     11.6  
Luxury     31,467       36,391       (4,924 )   (13.5 )
Total segment income     247,881       250,287       (2,406 )   (1.0 )
Corporate and other     114,321       74,514       39,807     53.4  
Depreciation and amortization     (49,369 )     (41,600 )     7,769     18.7  
Other interest expense     (23,207 )     (19,491 )     3,716     19.1  
Other expense, net     (6,103 )     (1,006 )     5,097     NM  
Income before income taxes   $ 283,523       262,704     $ 20,819     7.9  
(1) Segment income for each of the segments is defined as Income before income taxes, less Depreciation and amortization, Other interest expense and Other expense, net.
Retail New Vehicle Unit Sales                        
Domestic   47,707     45,080     2,627     5.8 %
Import   80,769     75,091     5,678     7.6  
Luxury   17,591     17,556     35     0.2  
Total   146,067     137,727     8,340     6.1  
Allocated to management   (295 )   (241 )   (54 )   NM  
Total retail new vehicle unit sales   145,772     137,486     8,286     6.0  
NM - not meaningful
 
 
Lithia Motors, Inc.
Other Highlights  (Unaudited)
 
    As of
    December 31,   December 31,   December 31,
    2016   2015   2014
Days Supply(1)            
New vehicle inventory   68   67   62
Used vehicle inventory   56   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, 2016
Current ratio   Not less than 1.10 to 1     1.26 to 1
Fixed charge coverage ratio   Not less than 1.20 to 1     2.63 to 1
Leverage ratio   Not more than 5.00 to 1     2.18 to 1
Funded debt restriction   Not more than $900 million   $ 485.2 million
           
 
Lithia Motors, Inc.
Other Highlights (Unaudited)
 
    Three months ended
December 31,
    Twelve months ended
December 31,
 
    2016     2015     2016     2015  
New vehicle unit sales brand mix                        
Honda, Acura   21.5 %   22.1 %   22.7 %   22.4 %
Toyota, Lexus   19.0     19.6     19.5     19.9  
Chrysler, Fiat   16.9     18.6     18.4     18.9  
General Motors   9.3     9.0     9.0     9.2  
Subaru   8.5     7.4     7.6     6.9  
Ford   6.3     4.9     5.4     4.7  
BMW, Mini   5.5     6.9     5.3     5.9  
Nissan   4.3     3.5     3.9     3.7  
Volkswagen, Audi   4.0     2.9     3.2     3.1  
Hyundai   2.1     1.9     2.0     2.1  
Mercedes Benz   1.3     1.6     1.3     1.5  
Kia   1.1     1.2     1.3     1.3  
Other   0.2     0.4     0.4     0.4  
             
    Three months ended
 December 31,
    Twelve months ended
December 31,
 
    2016     2015     2016     2015  
Revenue geographic mix                        
California   22.2 %   22.1 %   22.5 %   21.6 %
Oregon   16.6     16.8     16.7     16.7  
New Jersey   13.8     15.1     14.0     14.6  
Texas   11.9     13.6     13.1     15.0  
Montana   5.4     6.2     6.1     6.0  
Washington   5.2     5.5     5.3     5.2  
Alaska   4.4     5.4     4.8     5.4  
New York   6.7     2.8     4.2     2.9  
Nevada   2.8     3.0     3.0     3.0  
Idaho   2.5     2.8     2.7     2.9  
Iowa   2.4     2.7     2.6     2.8  
Hawaii   2.1     1.8     2.0     1.5  
North Dakota   1.2     1.4     1.3     1.5  
New Mexico   0.7     0.8     0.8     0.9  
Massachusetts   0.7     -     0.5     -  
Vermont   0.9     -     0.3     -  
Wyoming   0.5     -     0.1     -  
                         
    As of February 15, 2017  
Current store count mix   # of stores   % of total  
Chrysler, Fiat   30   19.5 %
Honda, Acura   22   14.3  
Toyota, Lexus   21   13.6  
General Motors   18   11.7  
Ford   12   7.8  
BMW, Mini   11   7.1  
Volkswagen, Audi   10   6.5  
Subaru   9   5.8  
Nissan   7   4.5  
Hyundai   5   3.2  
Mercedes Benz   4   2.6  
Kia   3   1.9  
Other   2   1.5  
           
           
Lithia Motors, Inc.
Consolidated Balance Sheets (Unaudited)
(In thousands)
 
    December 31, 2016   December 31, 2015  
Cash and cash equivalents   $ 50,282   $ 45,008  
Trade receivables, net     417,714     308,462  
Inventories, net     1,772,587     1,470,987  
Other current assets     46,611     54,022  
Total current assets   $ 2,287,194   $ 1,878,479  
               
Property and equipment, net     1,006,130     876,660  
Goodwill     259,399     213,220  
Franchise value     184,268     157,699  
Other non-current assets     107,159     99,072  
Total assets   $ 3,844,150   $ 3,225,130  
               
Floor plan notes payable   $ 94,602   $ 48,083  
Floor plan notes payable: non trade     1,506,895     1,265,872  
Current maturities of long-term debt     20,965     38,506  
Trade payables     88,423     70,871  
Accrued liabilities     211,109     167,107  
Total current liabilities   $ 1,921,994   $ 1,590,439  
               
Long-term debt     769,916     604,680  
Deferred revenue     81,929     66,734  
Deferred income taxes     59,075     53,129  
Other long-term liabilities     100,460     81,984  
Total liabilities   $ 2,933,374   $ 2,396,966  
               
Class A common stock     165,512     258,410  
Class B common stock     219     316  
Additional paid-in capital     41,225     38,822  
Accumulated other comprehensive loss     -     (277 )
Retained earnings     703,820     530,893  
Total liabilities & stockholders' equity   $ 3,844,150   $ 3,225,130  
 
 
Lithia Motors, Inc.
Summarized Cash Flow from Operations (Unaudited)
(In thousands)
 
  Twelve Months Ended December 31,  
  2016   2015  
Net income $ 197,058   $ 182,999  
Adjustments to reconcile net income to net cash provided by operating activities:            
Asset impairments   13,992     20,124  
Depreciation and amortization   49,369     41,600  
Stock-based compensation   11,047     11,871  
(Gain) loss on disposal of assets   (4,343 )   203  
Gain on sale of franchise   (1,102 )   (5,919 )
Deferred income taxes   10,138     12,341  
Excess tax benefit from share-based payment arrangements   (4,389 )   (5,012 )
(Increase) decrease:            
  Trade receivables, net   (105,961 )   (13,047 )
  Inventories   (168,847 )   (197,079 )
  Other assets   (13,305 )   (31,290 )
Increase (decrease):            
  Floor plan notes payable, net   16,385     7,035  
  Trade payables   16,449     674  
  Accrued liabilities   42,853     16,273  
  Other long-term liabilities and deferred revenue   27,173     33,766  
Net cash provided by operating activities $ 86,517   $ 74,539  
 
 
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   2016     2015  
As reported   $ 86,517     $ 74,539  
  Floor plan notes payable, non-trade, net     252,893       136,201  
  Less: Borrowings on floor plan notes payable, non-trade associated with acquired new vehicle inventory     (94,550 )     (25,642 )
Adjusted   $ 244,860     $ 185,098  
 
 
Lithia Motors, Inc.
Reconciliation of Certain Non-GAAP Financial Measures (Unaudited)
(In thousands, except for per share data)
 
    Three Months Ended December 31, 2016  
    As reported     Equity
investment
fair value
adjustment
    Legal
Reserve
    Tax
Attribute
    Adjusted  
Asset impairments   $ 3,498     $ (3,498 )   $ -     $ -     $ -  
Selling, general and administrative     236,824       -       (2,030 )     -       234,794  
Income from operations     81,517       3,498       2,030       -       87,045  
Other (expense) income, net     (1,569 )     2,065       -       -       497  
Income before income taxes   $ 66,122     $ 5,563     $ 2,030     $ -     $ 73,715  
Income tax expense     (14,803 )     (8,156 )     (2,503 )     (1,320 )     (26,782 )
Net income   $ 51,319     $ (2,593 )   $ (473 )   $ (1,320 )   $ 46,933  
Diluted earnings per share   $ 2.03     $ (0.10 )   $ (0.02 )   $ (0.05 )   $ 1.86  
Diluted share count     25,294                                  
       
       
    Three Months Ended December 31, 2015  
    As reported     Asset impairment     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 before income taxes   $ 66,370     $ 1,603     $ 5,864     $ 73,837  
Income tax expense     (18,638 )     (605 )     (8,516 )     (27,759 )
Net income   $ 47,732     $ 998     $ (2,652 )   $ 46,078  
Diluted earnings per share   $ 1.80     $ 0.04     $ (0.10 )   $ 1.74  
Diluted share count     26,462                          
 
 
Lithia Motors, Inc.
Reconciliation of Certain Non-GAAP Financial Measures (Unaudited)
(In thousands, except for per share data)
 
    Twelve Months Ended December 31, 2016  
    As reported     Disposal gain on sale of store    Equity investment fair value adjustment    Legal Reserve    Tax
Attribute
 
  Adjusted  
Asset impairments   $ 13,992     $ -     $ (13,992 )   -     $ -     $ -  
Selling, general and administrative     899,590       1,087       -     (3,936 )     -       896,741  
Income from operations     338,364       (1,087 )     13,992     3,936       -       355,205  
Other (expense) income, net     (6,103 )     -       8,262     -       -       2,159  
Income before income taxes   $ 283,523     $ (1,087 )   $ 22,254     3,936     $ -     $ 308,626  
Income tax expense     (86,465 )     426       (28,530 )   (3,250 )     (1,320 )     (119,139 )
Net income   $ 197,058     $ (661 )   $ (6,276 )   686     $ (1,320 )   $ 189,487  
Diluted earnings per share   $ 7.72     $ (0.03 )   $ (0.25 )   0.03     $ (0.05 )   $ 7.42  
Diluted share count     25,521                                        
                                               
                                               
    Twelve Months Ended December 31, 2015  
    As reported     Disposal gain on sale of store    Asset impairment    Equity investment
fair value
adjustment
 
  Transition Agreement    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       16,521       18,296       335,236  
Other (expense) income, net     (1,006 )     -       -       6,930               5,924  
Income before income taxes   $ 262,704     $ (5,919 )   $ 3,603     $ 23,451     $ 18,296     $ 302,135  
Income tax expense     (79,705 )     2,309       (1,385 )     (30,832 )     (6,507 )     (116,120 )
Net income   $ 182,999     $ (3,610 )   $ 2,218     $ (7,381 )   $ 11,789     $ 186,015  
Diluted earnings per share   $ 6.91     $ (0.14 )   $ 0.08     $ (0.28 )   $ 0.45     $ 7.02  
Diluted share count     26,490                                          
                                                 

Contact Information

  • Contact:
    John North
    Chief Financial Officer
    (541) 618-5748