SOURCE: Lithia Motors

Lithia Motors

October 20, 2016 06:59 ET

Lithia Reports Record Third Quarter Results

Declares Dividend of $0.25 per Share for Third Quarter

MEDFORD, OR--(Marketwired - Oct 20, 2016) - Lithia Motors, Inc. (NYSE: LAD) today reported the highest third quarter revenue and earnings per share in company history.

2016 third quarter unadjusted net income was $54.0 million, or $2.14 per diluted share, compared to $43.4 million, or $1.64 per diluted share, for the third quarter of 2015. Adjusted net income for the third quarter of 2016 was $52.0 million, or $2.06 per diluted share, compared to 2015 third quarter adjusted net income of $53.6 million, or $2.03 per diluted share.

As shown in the attached non-GAAP reconciliation tables, the 2016 third quarter adjusted results exclude a non-core benefit of $0.08 related to an equity investment. The 2015 third quarter adjusted results exclude a $0.39 non-core net loss related to an employee transition agreement partially offset by an equity investment.

Third quarter 2016 revenue increased $185.1 million, or 9%, to $2.3 billion from $2.1 billion for the third quarter 2015.

Third Quarter-over-Quarter Operating Highlights:

  • Total same store sales increased 4%
  • New vehicle same store sales increased 1%
  • Used vehicle retail same store sales increased 11%
  • Service, body and parts same store sales increased 10%
  • Same store F&I per unit increased $98 to $1,302
  • SG&A expense as a percentage of gross profit was 67.6%

For the first nine months of 2016, revenues increased 8.8% to $6.4 billion, compared to $5.9 billion in the first nine months of 2015. Unadjusted net income for the first nine months of 2016 was $5.69 per diluted share, compared to $5.10 per diluted share for the similar period in 2015. Adjusted net income per diluted share for the first nine months of 2016 increased 5.5% to $5.57 from $5.28 for the first nine months of 2015.

"Though considerable opportunities remain, we delivered record results in the third quarter," said Bryan DeBoer, President and CEO. "Our store leadership increased revenue in all departments, though selling expense grew slightly. In the moderating new vehicle sales environment, sustaining sales volume and taking market share from our competitors is crucial to future incremental used vehicle and service transactions, and maintains high performance levels for our manufacturer partners to earn continued support for acquisitions. Our entrepreneurial leaders are adjusting to the dynamic marketplace and will seek continued earnings growth in the future."

Corporate Development
Through October of this year, we have completed the acquisition of 14 stores and opened one store: 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 Volkswagen store in Freehold, New Jersey, a Ford store in Casper, Wyoming and an Audi store in Calabasas, California.

Mr. DeBoer added, "As we have previously discussed, the benefit of a moderating new vehicle sales environment is the rationalization of acquisition price expectations. We have added over $1.0 billion in estimated annualized revenue so far this year, and are optimistic that a significant number of targets remain available. By seeking stores where opportunities to improve performance are plentiful, we position ourselves to purchase at attractive multiples and generate industry-leading return on investment. Additionally, our low leverage ratio should ensure borrowing capacity to remain acquisitive through the vehicle sales cycle."

Executive Officer Changes
Effective January 1, 2017, Chris Holzshu, Senior Vice President and Chief Financial Officer, will be promoted to Executive Vice President and Chief Human Resources Officer. John North, Vice President, Finance and Chief Accounting Officer, will be promoted to Senior Vice President and Chief Financial Officer.

Commenting on the changes, Mr. DeBoer stated, "Given our ambitious growth objectives, ensuring we maximize employee potential to further improve our performance-based culture is critical to our success. Chris' promotion emphasizes the importance of each and every team member and how accelerating employee development to earn customers for life is vital to our future. As Executive Vice President, Chris will lead our human resource, information technology and store administration teams. Additionally, I am pleased with the success of our leadership development as demonstrated by John's promotion to CFO. Both Chris and John exemplify our core values of continuous improvement and personal ownership. On behalf of the entire organization and our Board of Directors, congratulations."

Balance Sheet Update
We ended the third quarter with $24 million in cash and $122 million in availability under our credit facilities. Additionally, approximately $258 million of our operating real estate is currently unfinanced, which we estimate could provide $193 million in capital, for total potential liquidity of $339 million.

Dividend Payment and Share Repurchase
Our Board of Directors has approved a dividend of $0.25 per share related to third quarter 2016 financial results. We expect to pay the dividend on November 25, 2016 to shareholders of record on November 11, 2016.

In the third quarter 2016, we repurchased 44,250 shares at a weighted average price of $84.12 per share. In the first nine months of 2016, we have deployed $108 million to repurchase 5% of our outstanding float or 1.2 million shares at a weighted average price of $79.05. Approximately $197 million remains available under our existing repurchase authorization.

2016 Outlook
We project 2016 full year earnings of $7.40 to $7.45 per diluted share. This projection is based on the following annual assumptions:

  • Total revenues of $8.5 to $8.6 billion
  • New vehicle same store sales increasing 2.5%
  • New vehicle gross margin of 5.7% to 5.9%
  • Used vehicle same store sales increasing 9.5%
  • Used vehicle gross margin of 11.7% to 11.9%
  • Service body and parts same store sales increasing 8.5%
  • Service body and parts gross margin of 48.2% to 48.4%
  • Finance and insurance gross profit of $1,260 to $1,280 per unit
  • Tax rate of 39.5%
  • Average diluted shares outstanding of 25.5 million

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 revenues 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.

Third Quarter Earnings Conference Call and Updated Presentation
The third quarter conference call may be accessed at 10:00 a.m. ET today by telephone at 877-407-8029. An updated presentation highlighting the third 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 152 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 2016 full year earnings of $7.40 to $7.45 per diluted share; generating 2017 full year earnings of $8.00 to $8.30 per diluted share and all projections set forth under the headings "2016 Outlook" and "2017 Earnings Guidance"; 
  • Anticipated national new car sales levels;
  • 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 investment;
  • 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 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  
    2016     2015     (Decrease)     (Decrease)  
Revenues:                              
New vehicle retail   $ 1,297,511     $ 1,227,080     $ 70,431     5.7 %
Used vehicle retail     580,885       505,885       75,000     14.8  
Used vehicle wholesale     75,271       69,472       5,799     8.3  
Finance and insurance     87,709       76,633       11,076     14.5  
Service, body and parts     217,148       189,796       27,352     14.4  
Fleet and other     11,443       15,979       (4,536 )   (28.4 )
  Total revenues     2,269,967       2,084,845       185,122     8.9 %
Cost of sales:                              
New vehicle retail     1,221,668       1,149,923       71,745     6.2  
Used vehicle retail     512,076       443,598       68,478     15.4  
Used vehicle wholesale     74,353       68,892       5,461     7.9  
Service, body and parts     112,806       95,846       16,960     17.7  
Fleet and other     11,803       15,399       (3,596 )   (23.4 )
  Total cost of sales     1,932,706       1,773,658       159,048     9.0  
Gross profit     337,261       311,187       26,074     8.4 %
Asset impairments     3,498       4,131       (633 )   NM  
SG&A expense     228,134       223,728       4,406     2.0  
Depreciation and amortization     12,206       10,531       1,675     15.9  
Income from operations     93,423       72,797       20,626     28.3 %
Floor plan interest expense     (6,186 )     (4,951 )     1,235     24.9  
Other interest expense     (5,647 )     (4,900 )     747     15.2  
Other expense, net     (1,513 )     (307 )     1,206     NM  
Income before income taxes     80,077       62,639       17,438     27.8 %
Income tax expense     (26,036 )     (19,248 )     6,788     35.3  
Income tax rate     32.5 %     30.7 %              
Net income   $ 54,041     $ 43,391     $ 10,650     24.5 %
                               
Diluted net income per share:                              
Net income per share   $ 2.14     $ 1.64     $ 0.50     30.5 %
                               
Diluted shares outstanding     25,290       26,480       (1,190 )   (4.5 )%
NM - not meaningful                              
                               
 
Lithia Motors, Inc.
Key Performance Metrics (Unaudited)
 
    Three months ended           %  
    September 30,     Increase     Increase  
    2016     2015     (Decrease)     (Decrease)  
Gross margin                              
New vehicle retail     5.8 %     6.3 %     (50 ) bps        
Used vehicle retail     11.8       12.3       (50 )      
Used vehicle wholesale     1.2       0.8       40        
Finance and insurance     100.0       100.0       --        
Service, body and parts     48.1       49.5       (140 )      
Fleet and other     (3.1 )     3.6       (670 )      
Gross profit margin     14.9       14.9       --        
                               
Unit sales                              
New vehicle retail     38,417       37,401       1,016     2.7 %
Used vehicle retail     29,636       26,206       3,430     13.1  
Total retail units sold     68,053       63,607       4,446     7.0  
Used vehicle wholesale     10,853       10,239       614     6.0  
                               
Average selling price                              
New vehicle retail   $ 33,774     $ 32,809     $ 965     2.9 %
Used vehicle retail     19,601       19,304       297     1.5  
Used vehicle wholesale     6,936       6,785       151     2.2  
                               
Average gross profit per unit                              
New vehicle retail   $ 1,974     $ 2,063     $ (89 )   (4.3) %
Used vehicle retail     2,322       2,377       (55 )   (2.3 )
Used vehicle wholesale     85       57       28     49.1  
Finance and insurance     1,289       1,205       84     7.0  
Total vehicle(1)     3,428       3,406       22     0.6  
                               
Revenue mix                              
New vehicle retail     57.2 %     58.9 %              
Used vehicle retail     25.6       24.3                
Used vehicle wholesale     3.3       3.3                
Finance and insurance, net     3.9       3.7                
Service, body and parts     9.6       9.1                
Fleet and other     0.4       0.7                
                               
             
    Adjusted     As reported  
    Three months ended     Three months ended  
September 30,  September 30, 
Other metrics   2016     2015     2016     2015  
SG&A as a % of revenue   10.1 %   9.9 %   10.1 %   10.7 %
SG&A as a % of gross profit   67.6     66.0     67.6     71.9  
Operating profit as a % of revenue   4.3     4.6     4.1     3.5  
Operating profit as a % of gross profit   28.7     30.6     27.7     23.4  
Pretax margin   3.8     4.2     3.5     3.0  
Net profit margin   2.3     2.6     2.4     2.1  
(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  
    2016     2015   (Decrease)     (Decrease)  
Revenues                            
New vehicle retail   $ 1,239,537     $ 1,224,015   $ 15,522     1.3 %
Used vehicle retail     557,302       503,913     53,389     10.6  
Used vehicle wholesale     72,417       69,208     3,209     4.6  
Finance and insurance     84,612       76,375     8,237     10.8  
Service, body and parts     207,155       188,814     18,341     9.7  
Fleet and other     10,629       15,982     (5,353 )   (33.5 )
Total revenues   $ 2,171,652     $ 2,078,307   $ 93,345     4.5  
                             
Gross profit                            
New vehicle retail   $ 72,329     $ 76,919   $ (4,590 )   (6.0 )%
Used vehicle retail     66,386       62,100     4,286     6.9  
Used vehicle wholesale     862       592     270     45.6  
Finance and insurance     84,612       76,375     8,237     10.8  
Service, body and parts     99,977       93,434     6,543     7.0  
Fleet and other     (388 )     582     (970 )   (166.7 )
Total gross profit   $ 323,778     $ 310,002   $ 13,776     4.4  
                             
Gross margin                            
New vehicle retail     5.8       % 6.3     % (50) bps        
Used vehicle retail     11.9       12.3     (40 )      
Used vehicle wholesale     1.2       0.9     30        
Finance and insurance     100.0       100.0     --        
Service, body and parts     48.3       49.5     (120 )      
Fleet and other     (3.7 )     3.6     (730 )      
Gross profit margin     14.9       14.9     --        
                             
Unit sales                            
New vehicle retail     36,681       37,326     (645 )   (1.7 )%
Used vehicle retail     28,322       26,108     2,214     8.5  
Total retail units sold     65,003       63,434     1,569     2.5  
Used vehicle wholesale     10,416       10,197     219     2.1  
                             
Average selling price                            
New vehicle retail   $ 33,792     $ 32,793   $ 999     3.0 %
Used vehicle retail     19,677       19,301     376     1.9  
Used vehicle wholesale     6,952       6,787     165     2.4  
                             
Average gross profit per unit                            
New vehicle retail   $ 1,972     $ 2,061   $ (89 )   (4.3 )%
Used vehicle retail     2,344       2,379     (35 )   (1.5 )
Used vehicle wholesale     83       58     25     43.1  
Finance and insurance     1,302       1,204     98     8.1  
Total vehicle(1)     3,449       3,405     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)
 
    Nine months ended           %  
    September 30,  Increase     Increase  
    2016     2015     (Decrease)     (Decrease)  
Revenues:                              
New vehicle retail   $ 3,602,603     $ 3,384,408     $ 218,195     6.4 %
Used vehicle retail     1,667,258       1,457,617       209,641     14.4  
Used vehicle wholesale     207,131       198,476       8,655     4.4  
Finance and insurance     246,390       213,700       32,690     15.3  
Service, body and parts     616,088       545,966       70,122     12.8  
Fleet and other     46,697       70,803       (24,106 )   (34.0 )
  Total revenues     6,386,167       5,870,970       515,197     8.8 %
Cost of sales:                              
New vehicle retail     3,387,132       3,176,135       210,997     6.6  
Used vehicle retail     1,466,947       1,273,195       193,752     15.2  
Used vehicle wholesale     202,897       194,329       8,568     4.4  
Service, body and parts     317,028       276,828       40,200     14.5  
Fleet and other     45,684       68,272       (22,588 )   (33.1 )
  Total cost of sales     5,419,688       4,988,759       430,929     8.6  
Gross profit     966,479       882,211       84,268     9.6  
Asset impairments     10,494       14,391       (3,897 )   NM  
SG&A expense     662,766       610,956       51,810     8.5  
Depreciation and amortization     36,372       30,544       5,828     19.1  
Income from operations     256,847       226,320       30,527     13.5  
Floor plan interest expense     (18,304 )     (14,255 )     4,049     28.4  
Other interest expense     (16,608 )     (14,700 )     1,908     13.0  
Other expense, net     (4,534 )     (1,031 )     3,503     NM  
Income before income taxes     217,401       196,334       21,067     10.7  
Income tax expense     (71,662 )     (61,067 )     10,595     17.3  
Income tax rate     33.0 %     31.1 %              
Net income   $ 145,739     $ 135,267     $ 10,472     7.7 %
                               
Diluted net income per share:                              
Net income per share   $ 5.69     $ 5.10     $ 0.59     11.6 %
                               
Diluted shares outstanding     25,598       26,500       (902 )   (3.4 )%
NM - not meaningful                              
                               
 
Lithia Motors, Inc.
Key Performance Metrics (Unaudited)
 
    Nine months ended           %  
    September 30,  Increase     Increase  
    2016     2015     (Decrease)     (Decrease)  
Gross margin                              
New vehicle retail     6.0 %     6.2 %     (20 ) bps        
Used vehicle retail     12.0       12.7       (70 )      
Used vehicle wholesale     2.0       2.1       (10 )      
Finance and insurance     100.0       100.0       --        
Service, body and parts     48.5       49.3       (80 )      
Fleet and other     2.2       3.6       (140 )      
Gross profit margin     15.1       15.0       10        
                               
Unit sales                              
New vehicle retail     107,225       103,136       4,089     4.0 %
Used vehicle retail     84,783       75,099       9,684     12.9  
Total retail units sold     192,008       178,235       13,773     7.7  
Used vehicle wholesale     30,140       28,822       1,318     4.6  
                               
Average selling price                              
New vehicle retail   $ 33,599     $ 32,815     $ 784     2.4 %
Used vehicle retail     19,665       19,409       256     1.3  
Used vehicle wholesale     6,872       6,886       (14 )   (0.2 )
                               
Average gross profit per unit                              
New vehicle retail   $ 2,010     $ 2,019     $ (9 )   (0.4) %
Used vehicle retail     2,363       2,456       (93 )   (3.8 )
Used vehicle wholesale     140       144       (4 )   (2.8 )
Finance and insurance     1,283       1,199       84     7.0  
Total vehicle(1)     3,471       3,425       46     1.3  
                               
Revenue mix                              
New vehicle retail     56.4 %     57.6 %              
Used vehicle retail     26.1       24.8                
Used vehicle wholesale     3.2       3.4                
Finance and insurance, net     3.9       3.6                
Service, body and parts     9.6       9.3                
Fleet and other     0.8       1.3                
                               
    Adjusted     As reported  
    Nine Months Ended
September 30,
    Nine months ended
September 30,
 
Other metrics   2016     2015     2016   2015  
SG&A as a % of revenue   10.4 %   10.2 %   10.4   10.4 %
SG&A as a % of gross profit   68.5     67.8     68.6   69.3  
Operating profit as a % of revenue   4.2     4.3     4.0   3.9  
Operating profit as a % of gross profit   27.7     28.7     26.6   25.7  
Pretax margin   3.7     3.9     3.4   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)
 
    Nine months ended         %  
    September 30,  Increase     Increase  
    2016   2015   (Decrease)     (Decrease)  
Revenues                          
New vehicle retail   $ 3,474,121   $ 3,370,693   $ 103,428     3.1 %
Used vehicle retail     1,610,033     1,449,705     160,328     11.1  
Used vehicle wholesale     201,122     197,513     3,609     1.8  
Finance and insurance     238,611     212,865     25,746     12.1  
Service, body and parts     592,287     542,650     49,637     9.1  
Fleet and other     43,570     70,805     (27,235 )   (38.5 )
Total revenues   $ 6,159,744   $ 5,844,231   $ 315,513     5.4  
                           
Gross profit                          
New vehicle retail   $ 207,679   $ 207,375   $ 304     0.1 %
Used vehicle retail     193,853     183,710     10,143     5.5  
Used vehicle wholesale     4,069     4,269     (200 )   (4.7 )
Finance and insurance     238,611     212,865     25,746     12.1  
Service, body and parts     288,263     267,449     20,814     7.8  
Fleet and other     967     2,497     (1,530 )   (61.3 )
Total gross profit   $ 933,442   $ 878,165   $ 55,277     6.3  
                           
Gross margin                          
New vehicle retail     6.0     % 6.2     % 20 bps        
Used vehicle retail     12.0     12.7     (70 )      
Used vehicle wholesale     2.0     2.2     (20 )      
Finance and insurance     100.0     100.0     --        
Service, body and parts     48.7     49.3     (60 )      
Fleet and other     2.2     3.5     (130 )      
Total gross profit     15.2     15.0     20        
                           
Unit sales                          
New vehicle retail     103,455     102,734     721     0.7 %
Used vehicle retail     81,631     74,648     6,983     9.4  
Total retail units sold     185,086     177,382     7,704     4.3  
Used vehicle wholesale     29,100     28,650     450     1.6  
                           
Average selling price                          
New vehicle retail   $ 33,581   $ 32,810   $ 771     2.3 %
Used vehicle retail     19,723     19,421     302     1.6  
Used vehicle wholesale     6,911     6,894     17     0.2  
                           
Average gross profit per unit                          
New vehicle retail   $ 2,007   $ 2,019   $ (12 )   (0.6) %
Used vehicle retail     2,375     2,461     (86 )   (3.5 )
Used vehicle wholesale     140     149     (9 )   (6.0 )
Finance and insurance     1,289     1,200     89     7.4  
Total vehicle(1)     3,481     3,429     52     1.5  
(1) - includes the sales and gross profit related to new, used retail, used wholesale and finance and insurance and unit sales for new and used retail
 
 
Lithia Motors, Inc.
Segment Operating Highlights (Unaudited)
 
    Three months ended
September 30,
          %  
    Increase     Increase  
    2016     2015     (Decrease)     (Decrease)  
Revenues                              
Domestic   $ 888,026     $ 814,216     $ 73,810     9.1 %
Import     989,077       894,371       94,706     10.6  
Luxury     392,537       374,558       17,979     4.8  
Total segment revenues     2,269,640       2,083,145       186,495     9.0  
Corporate and other     327       1,700       (1,373 )   (80.8 )
Total revenues   $ 2,269,967     $ 2,084,845     $ 185,122     8.9  
                               
Segment Income(1)                              
Domestic   $ 32,394     $ 33,240     $ (846 )   (2.5) %
Import     32,832       31,453       1,379     4.4  
Luxury     7,423       8,318       (895 )   (10.8 )
Total segment income     72,649       73,011       (362 )   (0.5 )
Corporate and other     26,794       5,366       21,428     399.3  
Depreciation and amortization     (12,206 )     (10,531 )     1,675     15.9  
Other interest expense     (5,647 )     (4,900 )     747     15.2  
Other expense, net     (1,513 )     (307 )     1,206     NM  
Income before income taxes   $ 80,077     $ 62,639     $ 17,438     27.8  
(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     12,634       12,361       273     2.2 %
Import     21,568       20,658       910     4.4  
Luxury     4,287       4,455       (168 )   (3.8 )
Total     38,489       37,474       1,015     2.7  
Allocated to management     (72 )     (73 )     1     NM  
Total retail new vehicle unit sales     38,417       37,401       1,016     2.7  
NM - not meaningful                              
                               
 
Lithia Motors, Inc.
Segment Operating Highlights (Unaudited)
 
    Nine months ended
September 30,
          %  
    Increase     Increase  
    2016     2015     (Decrease)     (Decrease)  
Revenues                              
Domestic   $ 2,483,637     $ 2,273,068     $ 210,569     9.3 %
Import     2,788,838       2,509,756       279,082     11.1  
Luxury     1,111,215       1,084,051       27,164     2.5  
Total segment revenues     6,383,690       5,866,875       516,815     8.8  
Corporate and other     2,477       4,095       (1,618 )   (39.5 )
Total revenues   $ 6,386,167     $ 5,870,970     $ 515,197     8.8  
                               
Segment Income(1)                              
Domestic   $ 84,913     $ 91,853     $ (6,940 )   (7.6) %
Import     86,385       76,665       9,720     12.7  
Luxury     21,736       25,764       (4,028 )   (15.6 )
Total segment income     193,034       194,282       (1,248 )   (0.6 )
Corporate and other     81,881       48,327       33,554     69.4  
Depreciation and amortization     (36,372 )     (30,544 )     5,828     19.1  
Other interest expense     (16,608 )     (14,700 )     1,908     13.0  
Other expense, net     (4,534 )     (1,031 )     3,503     NM  
Income before income taxes   $ 217,401       196,334     $ 21,067     10.7  
                               
(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     34,917       33,852       1,065     3.1 %
Import     59,840       56,814       3,026     5.3  
Luxury     12,667       12,650       17     0.1  
Total     107,424       103,316       4,108     4.0  
Allocated to management     (199 )     (180 )     (19 )   NM  
Total retail new vehicle unit sales     107,225       103,136       4,089     4.0  
                               
NM - not meaningful                              
 
Lithia Motors, Inc.
Other Highlights (Unaudited)
 
    As of
    September 30,   December 31,   September 30,
    2016   2015   2015
Days Supply(1)            
New vehicle inventory   65   67   64
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 September 30, 2016
Current ratio   Not less than 1.10 to 1     1.22 to 1
Fixed charge coverage ratio   Not less than 1.20 to 1     2.61 to 1
Leverage ratio   Not more than 5.00 to 1     2.06 to 1
Funded debt restriction   Not more than $900 million   $ 425.9 million
           
   
Lithia Motors, Inc.  
Other Highlights (Unaudited)  
   
    Three months ended September 30,     Nine months ended September 30,  
    2016     2015     2016     2015  
New vehicle unit sales brand mix                        
Honda, Acura   22.3 %   22.5 %   23.1 %   22.6 %
Toyota, Lexus   19.8     19.8     19.8     20.0  
Chrysler   18.5     18.5     18.6     18.9  
General Motors   9.2     9.5     8.9     9.3  
Subaru   7.8     6.7     7.3     6.8  
BMW, Mini   4.9     5.5     5.2     5.6  
Ford   5.3     5.0     5.0     4.6  
Nissan   3.8     4.0     3.8     3.8  
Volkswagen, Audi   3.0     3.2     2.9     3.1  
Hyundai   2.1     2.2     2.0     2.1  
Kia   1.5     1.3     1.4     1.3  
Mercedes Benz   1.2     1.4     1.3     1.5  
Other   0.6     0.4     0.7     0.4  
                         
             
    Three months ended September 30,     Nine months ended September 30,  
    2016     2015     2016     2015  
Revenue geographic mix                        
California   22.6 %   21.4 %   22.7 %   21.4 %
Oregon   16.9     16.8     16.8     16.6  
New Jersey   13.9     14.4     14.0     14.4  
Texas   12.9     14.9     13.5     15.4  
Montana   6.3     6.3     6.3     6.0  
Washington   5.5     5.1     5.4     5.1  
Alaska   4.8     5.4     4.9     5.4  
New York   3.7     2.9     3.2     3.0  
Nevada   3.0     3.1     3.0     3.1  
Idaho   2.9     2.9     2.8     2.9  
Iowa   2.6     3.0     2.6     2.9  
Hawaii   1.9     1.5     2.0     1.4  
North Dakota   1.3     1.4     1.3     1.5  
New Mexico   0.8     0.9     0.9     0.9  
Massachusetts   0.6     --     0.5     --  
Vermont   0.3     --     0.1     --  
Wyoming   --     --     --     --  
                         
    October 20, 2016
Current store count mix   # of stores   % of total
Chrysler   28   18.4 %
Honda, Acura   22   14.5
Toyota, Lexus   21   13.8
General Motors   17   11.2
Ford   11   7.2
BMW, Mini   11   7.2
Volkswagen, Audi   10   6.6
Subaru   9   5.9
Nissan   7   4.6
Hyundai   5   3.3
Mercedes Benz   4   2.6
Other   7   4.7
         
 
Lithia Motors, Inc.
Consolidated Balance Sheets (Unaudited)
(In thousands)
    September 30, 2016   December 31, 2015
Cash and cash equivalents   $ 24,116   $ 45,008
Trade receivables, net     317,664     308,462
Inventories, net     1,657,693     1,470,987
Other current assets     33,225     54,408
Total current assets   $ 2,032,698   $ 1,878,865
             
Property and equipment, net     991,721     876,660
Goodwill     219,021     213,220
Franchise value     163,220     157,699
Other non-current assets     156,946     100,855
Total assets   $ 3,563,606   $ 3,227,299
             
Floor plan notes payable   $ 73,762   $ 48,083
Floor plan notes payable: non trade     1,351,940     1,265,872
Current maturities of long-term debt     26,674     38,891
Trade payables     78,442     70,871
Accrued liabilities     204,361     167,108
Total current liabilities   $ 1,735,179   $ 1,590,825
             
Long-term debt     727,191     606,463
Deferred revenue     77,577     66,734
Deferred income taxes     58,721     53,129
Other long-term liabilities     98,848     81,984
Total liabilities   $ 2,697,516   $ 2,399,135
             
Class A common stock     167,596     258,410
Class B common stock     219     316
Additional paid-in capital     39,359     38,822
Accumulated other comprehensive loss     --     (277)
Retained earnings     658,916     530,893
Total liabilities & stockholders' equity   $ 3,563,606   $ 3,227,299
             
 
Lithia Motors, Inc.
Summarized Cash Flow from Operations (Unaudited)
(In thousands)
    Nine Months Ended September 30,  
    2016     2015  
Net income   $ 145,739     $ 135,267  
Adjustments to reconcile net income to net cash provided by operating activities:                
Asset impairments     10,494       14,391  
Depreciation and amortization     36,372       30,544  
Stock-based compensation     8,665       8,579  
(Gain) loss on disposal of assets     (4,299 )     27  
Gain on sale of franchise     (1,102 )     (5,919 )
Deferred income taxes     9,782       (7,955 )
Excess tax benefit from share-based payment arrangements     (4,388 )     (4,923 )
(Increase) decrease:                
  Trade receivables, net     (5,911 )     9,685  
  Inventories     (85,564 )     (132,407 )
  Other assets     4,627       (5,339 )
Increase (decrease):                
  Floor plan notes payable, net     18,122       5,604  
  Trade payables     6,153       7,768  
  Accrued liabilities     32,874       16,949  
  Other long-term liabilities and deferred revenue     18,227       34,651  
Net cash provided by operating activities   $ 189,791     $ 106,922  
                 
 
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   2016     2015  
As reported   $ 189,791     $ 106,922  
Floor plan notes payable, non-trade, net     93,817       36,204  
Less: Borrowings on floor plan notes payable, non-trade associated with acquired new vehicle inventory     (88,147 )     (7,490 )
Adjusted   $ 195,461     $ 135,636  
                 
 
Lithia Motors, Inc.
Reconciliation of Certain Non-GAAP Financial Measures (Unaudited)
(In thousands, except for per share data)
    Three Months Ended September 30, 2016  
    As reported     Equity
investment
fair value
adjustment
    Adjusted  
Asset impairments   $ 3,498     $ (3,498 )   $ --  
Income from operations     93,423       3,498       96,921  
Other (expense) income, net     (1,513 )     2,066       553  
Income before income taxes   $ 80,077     $ 5,564     $ 85,641  
Income tax expense     (26,036 )     (7,592 )     (33,628 )
Net income   $ 54,041     $ (2,028 )   $ 52,013  
Diluted earnings per share   $ 2.14     $ (0.08 )   $ 2.06  
Diluted share count     25,290                  
                         
  Three Months Ended September 30, 2015  
  As reported   Transition
Agreement
  Equity
investment
fair value
adjustment
  Adjusted  
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 )   --   1,731     1,424  
Income before income taxes $ 62,639   $ 18,296   5,862   $ 86,797  
Income tax expense   (19,248 )   (6,507 ) (7,414 )   (33,169 )
Net income $ 43,391   $ 11,789   (1,552 ) $ 53,628  
                       
Diluted earnings per share $ 1.64   $ 0.44   (0.05 ) $ 2.03  
Diluted share count   26,480                  
 
Lithia Motors, Inc.
Reconciliation of Certain Non-GAAP Financial Measures (Unaudited)
(In thousands, except for per share data)
 
    Nine Months Ended September 30, 2016  
    As reported     Disposal
gain on sale
of store
    Equity
investment
fair value
adjustment
    Legal
reserve
adjustment
    Adjusted  
Asset impairments   $ 10,494     $ --     $ (10,494 )   $ --     $ --  
Selling, general and administrative     662,766       1,087       --       (1,906 )     661,947  
Income from operations     256,847       (1,087 )     10,494       1,906       268,160  
Other expense, net     (4,534 )     --       6,197       --       1,663  
Income before income taxes   $ 217,401     $ (1,087 )   $ 16,691     $ 1,906     $ 234,911  
Income tax expense     (71,662 )     426       (20,374 )     (747 )     (92,357 )
Net income   $ 145,739     $ (661 )   $ (3,683 )   $ 1,159     $ 142,554  
Diluted earnings per share   $ 5.69     $ (0.03 )   $ (0.14 )   $ 0.05     $ 5.57  
Diluted share count     25,598                                  
                                         
       
    Nine Months Ended September 30, 2015  
    As reported   Disposal
gain on
sale of
store
  Asset
impairment
  Equity
investment
fair value
adjustment
  Transition
Agreement
  Adjusted  
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     12,391     18,296   253,088  
Other expense, net     (1,031 )   --     --     5,196         4,165  
Income before income taxes   $ 196,334   $ (5,919 ) $ 2,000   $ 17,587   $ 18,296   228,298  
Income tax expense     (61,067 )   2,309     (780 )   (22,316 )   (6,507 ) (88,361 )
Net income   $ 135,267   $ (3,610 ) $ 1,220   $ (4,729 ) $ 11,789   139,937  
Diluted earnings per share   $ 5.10   $ (0.14 ) $ 0.05   $ (0.18 ) $ 0.45   5.28  
Diluted share count     26,500                              
                                     

Contact Information

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