SOURCE: Lithia Motors

Lithia Motors

July 28, 2016 06:55 ET

Lithia Reports Record Second Quarter Results and Increases 2016 Guidance

Declares Dividend of $0.25 per Share for Second Quarter

MEDFORD, OR--(Marketwired - Jul 28, 2016) - Lithia Motors, Inc. (NYSE: LAD) reported the highest second quarter adjusted net income in company history, an increase of 2% over the prior year period.

2016 second quarter unadjusted net income was $51.4 million, or $2.01 per diluted share, compared to $51.2 million, or $1.93 per diluted share, for the second quarter of 2015. Adjusted net income for the second quarter of 2016 was $50.2 million, or $1.96 per diluted share, compared to 2015 second quarter adjusted net income of $49.4 million, or $1.86 per diluted share.

As shown in the attached non-GAAP reconciliation tables, the 2016 second quarter adjusted results exclude a non-core benefit of $0.05 related to an equity investment. The 2015 second quarter adjusted results exclude a $0.07 non-core net benefit from an equity investment and a gain on the sale of a store partially offset by an asset impairment.

Second quarter 2016 revenue increased $136.4 million, or 7%, to $2.1 billion from $2.0 billion for the second quarter 2015.

Second Quarter-over-Quarter Operating Highlights:

  • Total same store sales increased 3.8%
  • New vehicle same store sales increased 2.3%
  • Used vehicle retail same store sales increased 10.2%
  • Service, body and parts same store sales increased 7.4%
  • Same store F&I per unit increased $60 to $1,273
  • SG&A expense as a percentage of gross profit was 66.9%

For the first six months of 2016, revenues increased 8.7% to $4.1 billion from $3.8 billion in the first six months of 2015 and unadjusted net income was $3.56 per diluted share, compared to $3.47 per diluted share. Adjusted net income per diluted share for the first six months of 2016 increased 8.0% to $3.52 from $3.26 for the first six months of 2015.

"Our stores delivered strong results in the quarter, growing all business lines," said Bryan DeBoer, President and CEO. "Led by a 10.2% increase in used vehicle sales and a 7.4% increase in service, body and parts sales, our team is capitalizing on both a growing supply of used vehicles and units in operation sold over the past seven years that are now returning for service. We are capturing new vehicle market share and increasing F&I per unit, which we believe are the key drivers to future organic growth, while maintaining adjusted SG&A as a percentage of gross profit below 67%."

Corporate Development
With the addition of a GMC Buick franchise in Helena, Montana during the quarter, we have completed three acquisitions in 2016.

Mr. DeBoer added, "We anticipate a sustained new vehicle sales environment of 17 million units in the coming years. This provides Lithia several benefits including a predictable and profitable cadence of new car sales and incrementally higher service revenues as the vehicles sold over the past six years age and require maintenance. Additionally, the increasing supply of used vehicles will drive incremental revenue opportunities. Most importantly, a static SAAR level will spur further acquisitions as the aging dealer body seeks the optimal time to retire. These factors increase our confidence in establishing a new milestone of $9.00 in earnings per share, which we will strive to achieve through improvement in our existing locations and acquisition activity in both the Lithia and DCH platforms. We will continue our growth and believe the best use of capital is expanding our store base."

Balance Sheet Update
We ended the second quarter with $15 million in cash and $135 million in availability under our credit facilities. Additionally, approximately $218 million of our operating real estate is currently unfinanced, which we estimate could provide $164 million in capital, for total potential liquidity of $314 million.

On July 27, 2016, we amended our credit agreement to increase the facility by $300 million to $2.05 billion and extended the maturity to July 2021. The amended agreement provides for up to $1.3 billion in new vehicle inventory floor plan financing, $350 million in used vehicle inventory floor plan financing and $400 million in revolving loan financing.

Chris Holzshu, SVP and CFO, said, "We appreciate the support of our 18 commercial lender partners to increase the capacity and extend the duration of our credit facility. The primary reason for the amendment is to provide new vehicle floor plan financing for future acquisitions. We believe it is an opportune time to secure incremental capacity to meet our robust growth objectives and our $9.00 earnings milestone."

Dividend Payment and Share Repurchase
Our Board of Directors has approved a dividend of $0.25 per share related to second quarter 2016 financial results. We expect to pay the dividend on August 26, 2016 to shareholders of record on August 12, 2016.

In the second quarter 2016, we repurchased 603,225 shares at a weighted average price of $78.09 per share. In the first six months of 2016, we have repurchased approximately 5% of our outstanding float or 1.2 million shares at a weighted average price of $78.86. Approximately $201 million remains available under our existing repurchase authorization.

2016 Outlook
We project 2016 third quarter earnings of $2.11 to $2.15 per diluted share and 2016 full year earnings of $7.50 to $7.65 per diluted share. Both projections are based on the following annual assumptions:

  • Total revenues of $8.5 to $8.6 billion
  • New vehicle sales increasing 3.5%
  • New vehicle gross margin of 5.9% to 6.1%
  • Used vehicle sales increasing 9.5%
  • Used vehicle gross margin of 11.9% to 12.1%
  • Service body and parts sales increasing 7.5%
  • Service body and parts gross margin of 48.8% to 49.0%
  • Finance and insurance gross profit of $1,270 to $1,290 per unit
  • Tax rate of 39.5%
  • Average diluted shares outstanding of 25.6 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.

In October 2016, we expect to provide only annual earnings guidance with our regular quarterly and annual earnings announcements.

Second Quarter Earnings Conference Call and Updated Presentation
The second quarter conference call may be accessed at 11:00 a.m. ET today by telephone at 877-407-8029. An updated presentation highlighting the second 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 and is among the fastest growing companies in the Fortune 500. 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. In addition, Lithia 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 third quarter earnings per share of $2.11 to $2.15 per diluted share and 2016 full year earnings of $7.50 to $7.65 per diluted share and all projections set forth under the headings "2016 Outlook"; 
  • Anticipated national new car sales levels
  • Anticipated ability to improve store performance;
  • Anticipated acquisition opportunities and 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, 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           %  
  June 30,     Increase     Increase  
  2016     2015     (Decrease)     (Decrease)  
Revenues:                            
New vehicle retail $ 1,209,037     $ 1,149,512     $ 59,525     5.2 %
Used vehicle retail   553,647       488,801       64,846     13.3  
Used vehicle wholesale   66,714       66,796       (82 )   (0.1 )
Finance and insurance   81,043       72,463       8,580     11.8  
Service, body and parts   202,265       182,695       19,570     10.7  
Fleet and other   20,633       36,680       (16,047 )   (43.7 )
  Total revenues   2,133,339       1,996,947       136,392     6.8  
Cost of sales:                            
New vehicle retail   1,136,175       1,080,170       56,005     5.2  
Used vehicle retail   486,422       426,108       60,314     14.2  
Used vehicle wholesale   65,228       65,390       (162 )   (0.2 )
Service, body and parts   103,666       91,946       11,720     12.7  
Fleet and other   19,812       35,684       (15,872 )   (44.5 )
  Total cost of sales   1,811,303       1,699,298       112,005     6.6  
Gross profit   322,036       297,649       24,387     8.2  
Asset impairments   3,498       6,130       (2,632 )   NM  
SG&A expense   215,526       195,610       19,916     10.2  
Depreciation and amortization   12,503       10,287       2,216     21.5  
Income from operations   90,509       85,622       4,887     5.7  
Floor plan interest expense   (6,209 )     (4,655 )     1,554     33.4  
Other interest expense   (5,502 )     (4,972 )     530     10.7  
Other expense, net   (1,495 )     (356 )     1,139     NM  
Income before income taxes   77,303       75,639       1,664     2.2  
Income tax expense   (25,875 )     (24,416 )     1,459     6.0  
Income tax rate   33.5 %     32.3 %              
Net income $ 51,428     $ 51,223     $ 205     0.4 %
                             
Diluted net income per share:                            
Net income per share $ 2.01     $ 1.93     $ 0.08     4.1 %
                             
Diluted shares outstanding   25,534       26,496       (962 )   (3.6 )%
NM - not meaningful                            
                             
                             
                             

Lithia Motors, Inc.
Key Performance Metrics
(Unaudited)

  Three months ended         %
  June 30,     Increase   Increase
  2016     2015     (Decrease)   (Decrease)
Gross margin                          
New vehicle retail   6.0 %     6.0 %     -- bps    
Used vehicle retail   12.1       12.8       (70 )    
Used vehicle wholesale   2.2       2.1       10      
Finance and insurance   100.0       100.0       --      
Service, body and parts   48.7       49.7       (100 )    
Fleet and other   4.0       2.7       130      
Gross profit margin   15.1       14.9       20      
                           
Unit sales                          
New vehicle retail   36,059       35,112       947   2.7 %
Used vehicle retail   27,716       24,689       3,027   12.3  
Total retail units sold   63,775       59,801       3,974   6.6  
Used vehicle wholesale   9,774       9,439       335   3.5  
                           
Average selling price                          
New vehicle retail $ 33,529     $ 32,738     $ 791   2.4 %
Used vehicle retail   19,976       19,798       178   0.9  
Used vehicle wholesale   6,826       7,077       (251 ) (3.5 )
                           
Average gross profit per unit                          
New vehicle retail $ 2,021     $ 1,975     $ 46   2.3 %
Used vehicle retail   2,425       2,539       (114 ) (4.5 )
Used vehicle wholesale   152       149       3   2.0  
Finance and insurance   1,271       1,212       59   4.9  
Total vehicle(1)   3,491       3,443       48   1.4  
                           
Revenue mix                          
New vehicle retail   56.7 %     57.6 %            
Used vehicle retail   26.0       24.5              
Used vehicle wholesale   3.1       3.3              
Finance and insurance, net   3.8       3.6              
Service, body and parts   9.5       9.1              
Fleet and other   0.9       1.9              
                           
                           
  Adjusted     As reported  
  Three months ended June 30,     Three months ended June 30,  
Other metrics 2016     2015     2016     2015  
SG&A as a % of revenue 10.1 %   9.9 %   10.1 %   9.8 %
SG&A as a % of gross profit 66.9     66.6     66.9     65.7  
Operating profit as a % of revenue 4.4     4.5     4.2     4.3  
Operating profit as a % of gross profit 29.2     30.0     28.1     28.8  
Pretax margin 3.9     4.1     3.6     3.8  
Net profit margin 2.4     2.5     2.4     2.6  
(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.
Same Store Operating Highlights
(Unaudited)

  Three Months Ended         %
  June 30, Increase   Increase
  2016     2015     (Decrease)   (Decrease)
Revenues                          
New vehicle retail $ 1,172,249     $ 1,145,910     $ 26,339   2.3 %
Used vehicle retail   536,454       486,600       49,854   10.2  
Used vehicle wholesale   64,900       66,356       (1,456 ) (2.2 )
Finance and insurance   78,634       72,284       6,350   8.8  
Service, body and parts   195,164       181,720       13,444   7.4  
Fleet and other   18,358       36,678       (18,320 ) (49.9 )
Total revenues $ 2,065,759     $ 1,989,548     $ 76,211   3.8  
                           
Gross profit                          
New vehicle retail $ 70,532     $ 69,178     $ 1,354   2.0 %
Used vehicle retail   65,169       62,584       2,585   4.1  
Used vehicle wholesale   1,452       1,455       (3 ) (0.2 )
Finance and insurance   78,634       72,284       6,350   8.8  
Service, body and parts   95,330       90,266       5,064   5.6  
Fleet and other   811       959       (148 ) (15.4 )
Total gross profit $ 311,928     $ 296,726     $ 15,202   5.1  
                           
Gross margin                          
New vehicle retail   6.0 %     6.0 %     -- bps    
Used vehicle retail   12.1       12.9       (80 )    
Used vehicle wholesale   2.2       2.2       --      
Finance and insurance   100.0       100.0       --      
Service, body and parts   48.8       49.7       (90 )    
Fleet and other   4.4       2.6       180      
Gross profit margin   15.1       14.9       20      
                           
Unit sales                          
New vehicle retail   34,995       35,017       (22 ) (0.1 )%
Used vehicle retail   26,778       24,568       2,210   9.0  
Total retail units sold   61,773       59,585       2,188   3.7  
Used vehicle wholesale   9,429       9,390       39   0.4  
                           
Average selling price                          
New vehicle retail $ 33,498     $ 32,724     $ 774   2.4 %
Used vehicle retail   20,033       19,806       227   1.1  
Used vehicle wholesale   6,883       7,067       (184 ) (2.6 )
                           
Average gross profit per unit                          
New vehicle retail $ 2,015     $ 1,976     $ 39   2.0 %
Used vehicle retail   2,434       2,547       (113 ) (4.4 )
Used vehicle wholesale   154       155       (1 ) (0.6 )
Finance and insurance   1,273       1,213       60   4.9  
Total vehicle(1)   3,493       3,449       44   1.3  
(1) - includes the sales and gross profit related to new, used retail, used wholesale and finance and insurance and unit sales for new and used retail  
   
   
   

Lithia Motors, Inc.
Consolidated Statements of Operations
(Unaudited)
(In thousands except per share data)

              %  
  Six months ended June 30, Increase     Increase  
  2016     2015     (Decrease)     (Decrease)  
Revenues:                            
New vehicle retail $ 2,305,092     $ 2,157,328     $ 147,764     6.8 %
Used vehicle retail   1,086,373       951,732       134,641     14.1  
Used vehicle wholesale   131,860       129,004       2,856     2.2  
Finance and insurance   158,681       137,067       21,614     15.8  
Service, body and parts   398,940       356,170       42,770     12.0  
Fleet and other   35,254       54,824       (19,570 )   (35.7 )
  Total revenues   4,116,200       3,786,125       330,075     8.7  
Cost of sales:                            
New vehicle retail   2,165,464       2,026,212       139,252     6.9  
Used vehicle retail   954,871       829,597       125,274     15.1  
Used vehicle wholesale   128,544       125,437       3,107     2.5  
Service, body and parts   204,222       180,982       23,240     12.8  
Fleet and other   33,881       52,873       (18,992 )   (35.9 )
  Total cost of sales   3,486,982       3,215,101       271,881     8.5  
Gross profit   629,218       571,024       58,194     10.2  
Asset impairments   6,996       10,260       (3,264 )   NM  
SG&A expense   434,632       387,228       47,404     12.2  
Depreciation and amortization   24,166       20,013       4,153     20.8  
Income from operations   163,424       153,523       9,901     6.4  
Floor plan interest expense   (12,118 )     (9,304 )     2,814     30.2  
Other interest expense   (10,961 )     (9,800 )     1,161     11.8  
Other expense, net   (3,021 )     (724 )     2,297     NM  
Income before income taxes   137,324       133,695       3,629     2.7  
Income tax expense   (45,626 )     (41,819 )     3,807     9.1  
Income tax rate   33.2 %     31.3 %              
Net income $ 91,698     $ 91,876     $ (178 )   (0.2 )%
                             
Diluted net income per share:                            
Net income per share $ 3.56     $ 3.47     $ 0.09     2.6 %
                             
Diluted shares outstanding   25,754       26,509       (755 )   (2.8 )%
NM - not meaningful                            
                             
                             
                             

Lithia Motors, Inc.
Key Performance Metrics
(Unaudited)

            %
  Six months ended June 30,   Increase   Increase
  2016     2015     (Decrease)   (Decrease)
Gross margin                          
New vehicle retail   6.1 %     6.1 %     -- bps    
Used vehicle retail   12.1       12.8       (70 )    
Used vehicle wholesale   2.5       2.8       (30 )    
Finance and insurance   100.0       100.0       --      
Service, body and parts   48.8       49.2       (40 )    
Fleet and other   3.9       3.6       30      
Gross profit margin   15.3       15.1       20      
                           
Unit sales                          
New vehicle retail   68,808       65,735       3,073   4.7 %
Used vehicle retail   55,147       48,893       6,254   12.8  
Total retail units sold   123,955       114,628       9,327   8.1  
Used vehicle wholesale   19,287       18,583       704   3.8  
                           
Average selling price                          
New vehicle retail $ 33,500     $ 32,819     $ 681   2.1 %
Used vehicle retail   19,700       19,466       234   1.2  
Used vehicle wholesale   6,837       6,942       (105 ) (1.5 )
                           
Average gross profit per unit                          
New vehicle retail $ 2,029     $ 1,995     $ 34   1.7 %
Used vehicle retail   2,385       2,498       (113 ) (4.5 )
Used vehicle wholesale   172       192       (20 ) (10.4 )
Finance and insurance   1,280       1,196       84   7.0  
Total vehicle(1)   3,494       3,436       58   1.7  
                           
Revenue mix                          
New vehicle retail   56.0 %     57.0 %            
Used vehicle retail   26.4       25.1              
Used vehicle wholesale   3.2       3.4              
Finance and insurance, net   3.9       3.6              
Service, body and parts   9.7       9.4              
Fleet and other   0.8       1.5              
                           
                           
  Adjusted     As reported  
  Six Months Ended June 30,     Six months ended June 30,  
Other metrics 2016     2015     2016   2015  
SG&A as a % of revenue 10.5 %   10.4 %   10.6   10.2 %
SG&A as a % of gross profit 68.9     68.8     69.1   67.8  
Operating profit as a % of revenue 4.2     4.2     4.0   4.1  
Operating profit as a % of gross profit 27.2     27.6     26.0   26.9  
Pretax margin 3.6     3.7     3.3   3.5  
Net profit margin 2.2     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)

            %  
  Six months ended June 30,   Increase   Increase  
  2016     2015     (Decrease)   (Decrease)  
Revenues                          
New vehicle retail $ 2,234,584     $ 2,146,678     $ 87,906   4.1 %
Used vehicle retail   1,052,731       945,792       106,939   11.3  
Used vehicle wholesale   128,705       128,305       400   0.3  
Finance and insurance   153,999       136,490       17,509   12.8  
Service, body and parts   385,132       353,836       31,296   8.8  
Fleet and other   32,941       54,823       (21,882 ) (39.9 )
Total revenues $ 3,988,092     $ 3,765,924     $ 222,168   5.9  
                           
Gross profit                          
New vehicle retail $ 135,350     $ 130,456     $ 4,894   3.8 %
Used vehicle retail   127,712       121,610       6,102   5.0  
Used vehicle wholesale   3,207       3,677       (470 ) (12.8 )
Finance and insurance   153,999       136,490       17,509   12.8  
Service, body and parts   188,286       174,015       14,271   8.2  
Fleet and other   1,355       1,915       (560 ) (29.2 )
Total gross profit $ 609,909     $ 568,163     $ 41,746   7.3  
                           
Gross margin                          
New vehicle retail   6.1 %     6.1 %     -- bps    
Used vehicle retail   12.1       12.9       (80 )    
Used vehicle wholesale   2.5       2.9       (40 )    
Finance and insurance   100.0       100.0       --      
Service, body and parts   48.9       49.2       (30 )    
Fleet and other   4.1       3.5       60      
Total gross profit   15.3       15.1       20      
                           
Unit sales                          
New vehicle retail   66,774       65,408       1,366   2.1 %
Used vehicle retail   53,309       48,540       4,769   9.8  
Total retail units sold   120,083       113,948       6,135   5.4  
Used vehicle wholesale   18,684       18,453       231   1.3  
                           
Average selling price                          
New vehicle retail $ 33,465     $ 32,820     $ 645   2.0 %
Used vehicle retail   19,748       19,485       263   1.3  
Used vehicle wholesale   6,889       6,953       (64 ) (0.9 )
                           
Average gross profit per unit                          
New vehicle retail $ 2,027     $ 1,994     $ 33   1.7 %
Used vehicle retail   2,396       2,505       (109 ) (4.4 )
Used vehicle wholesale   172       199       (27 ) (13.6 )
Finance and insurance   1,282       1,198       84   7.0  
Total vehicle(1)   3,500       3,442       58   1.7  
(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.
Segment Operating Highlights
(Unaudited)

  Three months
ended June 30,
    Increase     %
Increase
 
  2016     2015     (Decrease)     (Decrease)  
Revenues                            
Domestic $ 826,709     $ 768,170     $ 58,539     7.6 %
Import   934,018       855,305       78,713     9.2  
Luxury   371,866       372,500       (634 )   (0.2 )
Total segment revenues   2,132,593       1,995,975       136,618     6.8  
Corporate and other   746       972       (226 )   (23.3 )
Total revenues $ 2,133,339     $ 1,996,947     $ 136,392     6.8  
                             
Segment Income(1)                            
Domestic $ 27,614     $ 31,320     $ (3,706 )   (11.8 )%
Import   28,228       28,149       79     0.3  
Luxury   9,398       10,801       (1,403 )   (13.0 )
Total segment income   65,240       70,270       (5,030 )   (7.2 )
Corporate and other   31,563       20,984       10,579     50.4  
Depreciation and amortization   (12,503 )     (10,287 )     2,216     21.5  
Other interest expense   (5,502 )     (4,972 )     530     10.7  
Other expense, net   (1,495 )     (356 )     1,139     NM  
Income before income taxes $ 77,303     $ 75,639     $ 1,664     2.2  
(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 11,634     11,479     155     1.4 %
Import 20,158     19,351     807     4.2  
Luxury 4,317     4,330     (13 )   (0.3 )
Total 36,109     35,160     949     2.7  
Allocated to management (50 )   (48 )   (2 )   NM  
Total retail new vehicle unit sales 36,059     35,112     947     2.7  
                       
NM - not meaningful                      
                       
                       
                       

Lithia Motors, Inc.
Segment Operating Highlights
(Unaudited)

              %  
  Six months ended June 30,   Increase     Increase  
  2016     2015     (Decrease)     (Decrease)  
Revenues                            
Domestic $ 1,595,611     $ 1,458,853     $ 136,758     9.4 %
Import   1,799,761       1,615,385       184,376     11.4  
Luxury   718,679       709,493       9,186     1.3  
Total segment revenues   4,114,051       3,783,731       330,320     8.7  
Corporate and other   2,149       2,394       (245 )   (10.2 )
Total revenues $ 4,116,200     $ 3,786,125     $ 330,075     8.7  
                             
Segment Income(1)                            
Domestic $ 49,344     $ 58,613     $ (9,269 )   (15.8 )%
Import   50,861       45,212       5,649     12.5  
Luxury   13,633       17,446       (3,813 )   (21.9 )
Total segment income   113,838       121,271       (7,433 )   (6.1 )
Corporate and other   61,634       42,961       18,673     43.5  
Depreciation and amortization   (24,166 )     (20,013 )     4,153     20.8  
Other interest expense   (10,961 )     (9,800 )     1,161     11.8  
Other expense, net   (3,021 )     (724 )     2,297     NM  
Income before income taxes $ 137,324       133,695     $ 3,629     2.7  
(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 22,283     21,491     792     3.7 %
Import 38,272     36,156     2,116     5.9  
Luxury 8,380     8,195     185     2.3  
Total 68,935     65,842     3,093     4.7  
Allocated to management (127 )   (107 )   (20 )   NM  
Total retail new vehicle unit sales 68,808     65,735     3,073     4.7  
                       
NM - not meaningful                      
                       
                       
                       

Lithia Motors, Inc.
Other Highlights
(Unaudited)

  As of
  June 30,   December 31,   June 30,
  2016   2015   2015
Days Supply(1)          
New vehicle inventory 77   67   65
Used vehicle inventory 57   55   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 June 30, 2016
Current ratio   Not less than 1.10 to 1   1.25 to 1
Fixed charge coverage ratio   Not less than 1.20 to 1   2.48 to 1
Leverage ratio   Not more than 5.00 to 1   1.78 to 1
Funded debt restriction   Not more than $900 million   $404.6 million
         
         
         

Lithia Motors, Inc.
Other Highlights
(Unaudited)

  Three months ended June 30,     Six months ended June 30,  
  2016     2015     2016     2015  
New vehicle unit sales brand mix                      
Honda, Acura 23.8 %   23.1 %   23.5 %   22.6 %
Toyota, Lexus 19.8     20.0     19.7     20.1  
Chrysler 18.9     19.1     18.8     19.1  
General Motors 8.7     9.6     8.8     9.3  
Subaru 6.8     6.5     7.0     6.8  
BMW, Mini 5.3     5.5     5.4     5.6  
Ford 4.6     4.0     4.9     4.3  
Nissan 3.8     3.4     3.8     3.6  
Volkswagen, Audi 2.9     3.4     2.8     3.1  
Hyundai 2.1     2.0     2.0     2.1  
Mercedes Benz 1.3     1.5     1.3     1.5  
Kia 1.3     1.4     1.3     1.4  
Other 0.7     0.5     0.7     0.5  
                       
  Three months ended June 30,     Six months ended June 30,  
  2016     2015     2016     2015  
Revenue geographic mix                      
California 22.5 %   20.7 %   22.7 %   21.5 %
Oregon 16.7     16.3     16.7     16.6  
New Jersey 14.4     15.1     14.2     14.4  
Texas 13.7     15.8     13.8     15.7  
Montana 6.4     5.8     6.4     5.8  
Washington 5.2     5.1     5.3     5.1  
Alaska 5.1     5.6     4.9     5.4  
New York 3.0     3.3     3.0     3.0  
Nevada 2.9     2.9     3.1     3.0  
Idaho 2.7     2.8     2.7     2.9  
Iowa 2.7     2.9     2.6     2.8  
Hawaii 2.0     1.4     2.0     1.4  
North Dakota 1.4     1.5     1.3     1.5  
New Mexico 0.8     0.8     0.9     0.9  
Massachusetts 0.5     --     0.4     --  
                       
  As of June 30, 2016  
Current store count mix # of stores   % of total  
Chrysler 27   19.6 %
Honda, Acura 21   15.2  
Toyota, Lexus 20   14.5  
General Motors 16   11.6  
BMW, Mini 11   8.0  
Subaru 8   5.8  
Volkswagen, Audi 8   5.8  
Ford 7   5.1  
Nissan 6   4.3  
Hyundai 4   2.9  
Mercedes Benz 4   2.9  
Other 7   5.0  
         
         
         

Lithia Motors, Inc.
Consolidated Balance Sheets
(Unaudited)
(In thousands)

  June 30, 2016   December 31, 2015  
Cash and cash equivalents $ 15,044   $ 45,008  
Trade receivables, net   305,293     308,462  
Inventories, net   1,582,274     1,470,987  
Other current assets   38,192     54,408  
Total current assets $ 1,940,803   $ 1,878,865  
             
Property and equipment, net   898,239     876,660  
Goodwill   214,444     213,220  
Franchise value   162,296     157,699  
Other non-current assets   106,288     100,855  
Total assets $ 3,322,070   $ 3,227,299  
             
Floor plan notes payable $ 56,767   $ 48,083  
Floor plan notes payable: non trade   1,316,747     1,265,872  
Current maturities of long-term debt   28,053     38,891  
Trade payables   77,979     70,871  
Accrued liabilities   184,160     167,108  
Total current liabilities $ 1,663,706   $ 1,590,825  
             
Long-term debt   626,543     606,463  
Deferred revenue   73,540     66,734  
Deferred income taxes   54,647     53,129  
Other long-term liabilities   86,173     81,984  
Total liabilities $ 2,504,609   $ 2,399,135  
             
Class A common stock   168,950     258,410  
Class B common stock   219     316  
Additional paid-in capital   37,230     38,822  
Accumulated other comprehensive loss   --     (277 )
Retained earnings   611,062     530,893  
Total liabilities & stockholders' equity $ 3,322,070   $ 3,227,299  
             
             
             

Lithia Motors, Inc.
Summarized Cash Flow from Operations
(Unaudited)
(In thousands)

  Six Months Ended June 30,  
  2016     2015  
Net income $ 91,698     $ 91,876  
Adjustments to reconcile net income to net cash provided by operating activities:              
Asset impairments   6,996       10,260  
Depreciation and amortization   24,166       20,013  
Stock-based compensation   6,018       5,822  
(Gain) loss on disposal of assets   (4,512 )     44  
Gain on sale of franchise   (1,102 )     (5,919 )
Deferred income taxes   5,704       (1,145 )
Excess tax benefit from share-based payment arrangements   (4,384 )     (4,865 )
(Increase) decrease:              
  Trade receivables, net   6,564       7,570  
  Inventories   (114,052 )     (122,660 )
  Other assets   5,688       (3,815 )
Increase (decrease):              
  Floor plan notes payable, net   8,685       4,417  
  Trade payables   6,678       8,854  
  Accrued liabilities   17,595       7,717  
  Other long-term liabilities and deferred revenue   10,668       11,161  
Net cash provided by operating activities $ 66,410     $ 29,330  
               
               
               

Lithia Motors, Inc.
Reconciliation of Non-GAAP Cash Flow from Operations
(Unaudited)
(In thousands)

  Six Months Ended June 30,
Net cash provided by operating activities 2016   2015
As reported $ 66,410   $ 29,330
  Floor plan notes payable, non-trade, net   58,622     35,685
Adjusted $ 125,032   $ 65,015
           
           
           

Lithia Motors, Inc.
Reconciliation of Certain Non-GAAP Financial Measures
(Unaudited)
(In thousands, except for per share data)

  Three Months Ended June 30, 2016  
  As reported     Equity investment fair value adjustment     Adjusted  
Asset impairments $ 3,498     $ (3,498 )   $ --  
                       
Income from operations   90,509       3,498       94,007  
                       
Other (expense) income, net   (1,495 )     2,065       570  
                       
Income before income taxes $ 77,303     $ 5,563     $ 82,866  
Income tax expense   (25,875 )     (6,837 )     (32,712 )
Net income $ 51,428     $ (1,274 )   $ 50,154  
                       
Diluted earnings per share $ 2.01     $ (0.05 )   $ 1.96  
Diluted share count   25,534                  
                       
                       
  Three Months Ended June 30, 2015  
  As reported     Disposal gain on sale of stores     Asset impairment     Equity investment fair value adjustment     Adjusted  
Asset impairments $ 6,130     $ --     $ (2,000 )   $ (4,130 )   $ --  
                                       
Selling, general and administrative   195,610       2,570       --       --       198,180  
                                       
Income from operations   85,622       (2,570 )     2,000       4,130       89,182  
                                       
Other (expense) income, net   (356 )     --       --       1,733       1,377  
                                       
Income before income taxes $ 75,639     $ (2,570 )   $ 2,000     $ 5,863     $ 80,932  
Income tax expense   (24,416 )     1,305       (780 )     (7,652 )     (31,543 )
Net income $ 51,223     $ (1,265 )   $ 1,220     $ (1,789 )   $ 49,389  
                                       
Diluted earnings per share $ 1.93     $ (0.05 )   $ 0.05     $ (0.07 )   $ 1.86  
Diluted share count   26,496                                  
                                       
                                       
                                       

Lithia Motors, Inc.
Reconciliation of Certain Non-GAAP Financial Measures
(Unaudited)
(In thousands, except for per share data)

  Six Months Ended June 30, 2016  
  As reported     Disposal gain on sale of store     Equity investment fair value adjustment     Legal reserve adjustment     Adjusted  
Asset impairments $ 6,996     $ --     $ (6,996 )   $ --     $ --  
                                       
Selling, general and administrative   434,632       1,087       --       (1,906 )     433,813  
                                       
Income from operations   163,424       (1,087 )     6,996       1,906       171,239  
                                       
Other expense, net   (3,021 )     --       4,131       --       1,110  
                                       
Income before income taxes $ 137,324     $ (1,087 )   $ 11,127     $ 1,906     $ 149,270  
Income tax expense   (45,626 )     426       (12,782 )     (747 )     (58,729 )
Net income $ 91,698     $ (661 )   $ (1,655 )   $ 1,159     $ 90,541  
                                       
Diluted earnings per share $ 3.56     $ (0.03 )   $ (0.06 )   $ 0.05     $ 3.52  
Diluted share count   25,754                                  
                                       
                                       
  Six Months Ended June 30, 2015  
  As reported     Disposal gain on sale of store     Asset impairment     Equity investment fair value adjustment     Adjusted  
Asset impairments $ 10,260     $ --     $ (2,000 )   $ (8,260 )   $ --  
                                       
Selling, general and administrative   387,228       5,919       --       --       393,147  
                                       
Income from operations   153,523       (5,919 )     2,000       8,260       157,864  
                                       
Other expense, net   (724 )     --       --       3,465       2,741  
                                       
Income before income taxes $ 133,695     $ (5,919 )   $ 2,000     $ 11,725     $ 141,501  
Income tax expense   (41,819 )     2,309       (780 )     (14,902 )     (55,192 )
Net income $ 91,876     $ (3,610 )   $ 1,220     $ (3,177 )   $ 86,309  
                                       
Diluted earnings per share $ 3.47     $ (0.14 )   $ 0.05     $ (0.12 )   $ 3.26  
Diluted share count   26,509                                  
                                       

Contact Information

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