Lithia Motors Reports Adjusted EPS of $1.39 for First

New Post Public Reply Private Reply Replies (0) Message Board

News Desk 2018

Apr 22, 2015 at 7:45 AM

Lithia Motors Reports Adjusted EPS of $1.39 for First Quarter 2015; Revenues Increase 66%

MEDFORD, OR--(Marketwired - Apr 22, 2015) - Lithia Motors, Inc. ( NYSE : LAD ) reported the highest first quarter adjusted net income in Company history and increased adjusted net income from continuing operations 36% for the first quarter of 2015 over the prior year period.

2015 first quarter adjusted net income from continuing operations was $36.9 million, or $1.39 per diluted share. This compares to 2014 first quarter adjusted net income from continuing operations of $27.1 million, or $1.03 per diluted share.

Unadjusted net income from continuing operations for the first quarter of 2015 was $40.7 million, or $1.53 per diluted share, compared to $24.7 million, or $0.94 per diluted share, for the first quarter of 2014. As shown in the attached non-GAAP reconciliation tables, the 2015 first quarter per share adjusted results from continuing operations exclude a $0.09 benefit related to the gain on the sale of a store and a $0.05 benefit related to an equity investment. The 2014 first quarter per share adjusted results from continuing operations exclude a $0.09 expense related to an adjustment to a reserve associated with a lawsuit filed in 2006 and settled in 2013, a loss for a hailstorm in Texas and a reserve for a contract assumed in an acquisition.

First quarter 2015 revenue from continuing operations increased $711 million, or 66%, to $1.8 billion from $1.1 billion for the first quarter of 2014.

First Quarter-over-Quarter Operating Highlights:

Total same store sales increased 11%
New vehicle same store sales increased 11%
Used vehicle retail same store sales increased 11%
Service, body and parts same store sales increased 11%
Same store F&I per unit increased $52 to $1,233
Adjusted SG&A expense as a percentage of gross profit was 71.3%

"We delivered the best first quarter earnings in our Company's history, and the second best quarterly earnings ever," said Bryan DeBoer, President and CEO. "For the fourth consecutive quarter, we achieved double digit growth in same store sales in all business lines. On a continuing operations basis, we grew revenue 66% and adjusted net income 36% over the first quarter of 2014. We remain focused on capturing additional market share, improving existing store results, the continued success, integration and growth of DCH and actively seeking accretive acquisitions."

Chris Holzshu, SVP and CFO, said, "SG&A as a percentage of gross profit was 71.3% in the first quarter of 2015, slightly higher than the prior year due to the effect of the DCH acquisition, but better than our projection. We target improving SG&A as a percentage of gross profit as we integrate the 36 stores added in 2014. In the first quarter, incremental throughput, or the percentage of additional same store gross profit dollars that we retain after deducting incremental selling costs, was 45.1%. Our stores remain focused on maintaining incremental throughput of 45% to 50%, which will continue to lever our SG&A expense going forward."

Corporate Development As previously announced, in January 2015, we opened Subaru of Clearlake, Texas. The store is a new franchise we were awarded from Subaru, which we estimate will contribute approximately $45 million in annual revenues.

Bryan DeBoer, President and CEO, stated, "The acquisition market is robust and we anticipate continued activity as independent dealers seek attractive exit strategies. We remain focused on pursuing accretive acquisitions and will continue to add locations to our portfolio in the future."

Balance Sheet Update We ended the first quarter with $21 million in cash and $50 million in available credit from our credit facilities. Additionally, approximately $155 million of our operating real estate is currently unfinanced, which could provide an estimated additional $116 million in available liquidity, for total potential liquidity of $187 million.

Dividend Payment Our Board of Directors has approved a 25% increase in our quarterly dividend to $0.20 per share related to first quarter 2015 financial results. We will pay the dividend May 29, 2015 to shareholders of record on May 15, 2015.

2015 Outlook We project 2015 second quarter earnings of $1.55 to $1.59 per diluted share and 2015 full year earnings of $6.20 to $6.30 per diluted share. Both projections are based on the following annual assumptions:

Continuing Operations Projections

Total revenues of $7.5 to $7.7 billion
New vehicle sales increasing 43.5%
New vehicle gross margin of 5.9% to 6.1%
Used vehicle sales increasing 36.5%
Used vehicle gross margin of 12.6% to 12.8%
Service body and parts sales increasing 40.5%
Service body and parts gross margin of 48.8% to 49.0%
Finance and insurance gross profit of $1,180 per unit
Tax rate of 40.0%
Average diluted shares outstanding of 26.5 million
Full year capital expenditures are $100 million

Same Store Projections

Total revenues of $5.2 to $5.4 billion
New vehicle same store sales increasing 7.0%
Used vehicle same store sales increasing 10.5%
Service body and parts same store sales increasing 8.5%
Finance and insurance gross profit of $1,200 per unit

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.

First Quarter Earnings Conference Call and Updated Presentation The first quarter conference call may be accessed at 10:00 a.m. ET today by telephone at 877-407-8029. An updated presentation highlighting the first quarter results has been added to www.lithiainvestorrelations.com .

To listen live on our website or for replay, visit www.lithiainvestorrelations.com and click on webcasts.

About Lithia Lithia Motors, Inc. is one of the largest automotive retailers in the United States. Lithia sells 30 brands of new vehicles and all brands of used vehicles at 130 stores in 14 states. Lithia also arranges finance, warranty, and credit insurance contracts; and provides vehicle parts, maintenance, and repair services at all of its locations.

Sites www.lithia.com www.lithiainvestorrelations.com www.lithiacareers.com

Lithia Motors on Facebook http://www.facebook.com/LithiaMotors

Lithia Motors on Twitter http://twitter.com/lithiamotors

Forward-Looking Statements This press release includes "forward-looking statements" within the meaning of the "Safe-Harbor" provisions of the Private Securities Litigation Reform Act of 1995. Forward looking statements include statements regarding our goals, plans, projections and guidance regarding our financial position, results of operations, market position, pending and potential future acquisitions and business strategy, and often contain words such as "project," "outlook," "expect," "anticipate," "intend," "plan," "believe," "estimate," "may," "seek," "would," "should," "likely," "goal," "strategy," "future," "maintain," "continue," "remain," "target" or "will" and similar references to future periods. Examples of forward-looking statements in this press release include, among others, statements regarding:

Future market conditions;
Expected operating results, such as improved store performance; maintaining incremental throughput between 45% and 50%; continued improvement of SG&A as a percentage of gross profit; generating second quarter earnings per share of $1.58 to 1.62 per diluted share and 2015 full year earnings of $6.20 to $6.30 per diluted share; and all projections set forth under the headings "2015 Outlook," "Continuing Operations Projections" and "Same Store Projections";
The increase in our annual revenues that we estimate will result from the dealership that we opened as set forth under the heading "Corporate Development";
Anticipated continued success, integration and growth of DCH;
Anticipated ability to capture additional market share; ability to find accretive acquisitions; and additions of dealership locations to the company's portfolio in the future;
Anticipated availability of liquidity from our unfinanced operating real estate; and
Anticipated levels of capital expenditures in the future.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events that depend on circumstances that may or may not occur in the future. Forward-looking statements are not guarantees of future performance, and our actual results of operations, financial condition and liquidity and development of the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements in this press release. The risks and uncertainties that could cause actual results to differ materially from estimated or projected results include, without limitation, future economic and financial conditions (both nationally and locally), changes in customer demand, our relationship with, and the financial and operational stability of, vehicle manufacturers and other suppliers, risks associated with our indebtedness (including available borrowing capacity, compliance with financial covenants and ability to refinance or repay indebtedness on favorable terms), government regulations, legislation and others set forth throughout Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations and in Part I, Item 1A. Risk Factors of our most recent Annual Report on Form 10-K, and from time to time in our other filings with the SEC. We urge you to carefully consider this information and not place undue reliance on forward-looking statements. We undertake no duty to update our forward-looking statements, including our earnings outlook, which are made as of the date of this release.

Non-GAAP Financial Measures This press release and the attached financial tables contain non-GAAP financial measures such as adjusted net income and diluted earnings per share from continuing operations, adjusted SG&A as a percentage of revenues and gross profit, adjusted operating margin, adjusted operating profit as a percentage of gross profit, and adjusted pre-tax margin. Non-GAAP measures do not have definitions under GAAP and may be defined differently by and not comparable to similarly titled measures used by other companies. As a result, we review any non-GAAP financial measures in connection with a review of the most directly comparable measures calculated in accordance with GAAP. We caution you not to place undue reliance on such non-GAAP measures, but also to consider them with the most directly comparable GAAP measures. We present cash flows from operations in the attached tables, adjusted to include the change in non-trade floor plan debt to improve the visibility of cash flows related to vehicle financing. As required by SEC rules, we have reconciled these measures to the most directly comparable GAAP measures in the attachments to this release. We believe the non-GAAP financial measures we present improve the transparency of our disclosures; provide a meaningful presentation of our results from core business operations, because they exclude items not related to core business operations and other non-cash items; and improve the period-to-period comparability of our results from core business operations. These presentations should not be considered an alternative to GAAP measures.



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

		Three months ended									%
		March 31,						Increase			Increase
		2015			2014			(Decrease)			(Decrease)
Revenues:
New vehicle retail		$	1,007,816		$	579,522		$	428,294		74.0	%
Used vehicle retail			462,931			301,893			161,038		53.3
Used vehicle wholesale			62,208			42,693			19,515		45.7
Finance and insurance			64,604			39,631			24,973		63.0
Service, body and parts			173,475			104,617			68,858		65.8
Fleet and other			18,144			9,750			8,394		86.1
	Total revenues		1,789,178			1,078,106			711,072		66.0
Cost of sales:
New vehicle retail			946,042			540,498			405,544		75.0
Used vehicle retail			403,489			261,097			142,392		54.5
Used vehicle wholesale			60,047			41,362			18,685		45.2
Service, body and parts			89,036			53,785			35,251		65.5
Fleet and other			17,189			9,303			7,886		84.8
	Total cost of sales		1,515,803			906,045			609,758		67.3
Gross profit			273,375			172,061			101,314		58.9
Asset impairments			4,130			-			-		NM
SG&A expense			191,618			121,829			69,789		57.3
Depreciation and amortization			9,726			5,507			4,219		76.6
Income from operations			67,901			44,725			23,176		51.8
Floor plan interest expense			(4,649	)		(2,984	)		1665		55.8
Other interest expense			(4,828	)		(1,974	)		(2,854	)	144.6
Other income (expense), net			(368	)		937			(1,305	)	NM
Income from continuing operations before income taxes			58,056			40,704			17,352		42.6
Income tax expense			(17,403	)		(16,010	)		1,393		8.7
Income tax rate			30.0	%		39.3	%
Income from continuing operations		$	40,653		$	24,694		$	15,959		64.6	%
Income from discontinued operations, net of tax			-			40			(40	)	NM
Net income		$	40,653		$	24,734		$	15,919		64.4	%

Diluted net income per share:
Continuing operations		$	1.53		$	0.94		$	0.59		62.8	%
Discontinued operations			-			-			-		-
Net income per share		$	1.53		$	0.94		$	0.59		62.8	%

Diluted shares outstanding			26,519			26,320			199		0.8	%

NM - Not meaningful


Lithia Motors, Inc.
Key Performance Metrics (Unaudited)

	Three months ended									%
	March 31,						Increase			Increase
	2015			2014			(Decrease)			(Decrease)
Gross margin
New vehicle retail		6.1	%		6.7	%		(60) bps
Used vehicle retail		12.8			13.5			(70) bps
Used vehicle wholesale		3.5			3.1			40 bps
Finance and insurance		100.0			100.0			- bps
Service, body and parts		48.7			48.6			10 bps
Fleet and other		5.3			4.6			70 bps
Gross profit margin		15.3			16.0			(70) bps

Unit sales
New vehicle retail		30,623			17,274			13,349		77.3	%
Used vehicle retail		24,204			16,316			7,888		48.3
Total retail units sold		54,827			33,590			21,237		63.2
Used vehicle wholesale		9,144			5,853			3,291		56.2

Average selling price
New vehicle retail		32,910			33,549			(639	)	(1.9)	%
Used vehicle retail		19,126			18,503			623		3.4
Used vehicle wholesale		6,803			7,294			(491	)	(6.7	)

Average gross profit per unit
New vehicle retail	$	2,017		$	2,259		$	(242	)	(10.7)	%
Used vehicle retail		2,456			2,500			(44	)	(1.8	)
Used vehicle wholesale		236			227			9		4.0
Finance and insurance		1,178			1,180			(2	)	(0.2	)
Total vehicle⁽¹⁾		3,429			3,596			(167	)	(4.6	)

Revenue mix
New vehicle retail		56.3	%		53.8	%
Used vehicle retail		25.9			28.0
Used vehicle wholesale		3.5			3.9
Finance and insurance, net		3.6			3.7
Service, body and parts		9.7			9.7
Fleet and other		1.0			0.9


	Adjusted				As reported
	Three months ended March 31,				Three months ended March 31,
Other metrics	2015		2014		2015		2014
SG&A as a % of revenue	10.9	%	10.9	%	10.7	%	11.3	%
SG&A as a % of gross profit	71.3		68.5		70.1		70.8
Operating profit as a % of revenue	3.8		4.5		3.8		4.1
Operating profit as a % of gross profit	25.1		28.3		24.8		26.0
Pretax margin	3.4		4.1		3.2		3.8
Net profit margin	2.1		2.5		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)

	Three months ended							%
	March 31,				Increase			Increase
	2015		2014		(Decrease)			(Decrease)
Revenues
New vehicle retail	$	639,501	$	574,540	$	64,961		11.3	%
Used vehicle retail		333,300		300,115		33,185		11.1
Used vehicle wholesale		45,055		42,649		2,406		5.6
Finance and insurance		44,136		39,355		4,781		12.1
Service, body and parts		115,325		104,000		11,325		10.9
Fleet and other		12,302		9,750		2,552		26.2
Total revenues	$	1,189,619	$	1,070,409	$	119,210		11.1

Gross profit
New vehicle retail	$	40,245	$	38,638	$	1,607		4.2	%
Used vehicle retail		44,847		40,583		4,264		10.5
Used vehicle wholesale		1,687		1,334		353		26.5
Finance and insurance		44,136		39,355		4,781		12.1
Service, body and parts		55,844		50,514		5,330		10.6
Fleet and other		777		447		330		73.8
Total gross profit	$	187,536	$	170,871	$	16,665		9.8

Gross margin
New vehicle retail		6.3		% 6.7		% (40) bps
Used vehicle retail		13.5		13.5		- bps
Used vehicle wholesale		3.7		3.1		60 bps
Finance and insurance		100.0		100.0		- bps
Service, body and parts		48.4		48.6		(20) bps
Fleet and other		6.3		4.6		170 bps
Gross profit margin		15.8		16.0		(20) bps

Unit sales
New vehicle retail		18,567		17,109		1,458		8.5	%
Used vehicle retail		17,237		16,204		1,033		6.4
Total retail units sold		35,804		33,313		2,491		7.5
Used vehicle wholesale		5,986		5,848		138		2.4

Average selling price
New vehicle retail	$	34,443	$	33,581	$	862		2.6	%
Used vehicle retail		19,336		18,521		815		4.4
Used vehicle wholesale		7,549		7,293		256		3.5

Average gross profit per unit
New vehicle retail	$	2,168	$	2,258	$	(90	)	(4.0)	%
Used vehicle retail		2,602		2,505		97		3.9
Used vehicle wholesale		283		228		55		24.1
Finance and insurance		1,233		1,181		52		4.4
Total vehicle⁽¹⁾		3,656		3,599		57		1.6

(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.
Segment Operating Highlights (Unaudited)

	Three months ended									%
	March 31,						Increase			Increase
	2015			2014			(Decrease)			(Decrease)
Revenues
Domestic	$	691,404		$	568,930		$	122,474		21.5	%
Import		758,638			351,061			407,577		116.1
Luxury		336,922			158,611			178,311		112.4
Total segment revenues	$	1,786,964		$	1,078,602		$	708,362		65.7
Corporate and other		2,214			(496	)		2,710		546.4
Total revenues	$	1,789,178		$	1,078,106		$	711,072		66.0

Segment Income ⁽¹⁾
Domestic	$	27,129		$	22,421		$	4,708		21.0	%
Import		16,100			9,265			6,835		73.8
Luxury		5,899			2,185			3,714		170.0
Total segment income	$	49,128			33,871			15,257		45.0
Corporate and other		8,928			6,833			2,095		30.7
Income from continuing operations before income taxes	$	58,056		$	40,704		$	17,352		42.6

⁽¹⁾ Segment income is defined as operating income less floor plan interest expense

Retail New Vehicle Unit Sales
Domestic		10,043			8,634			1,409		16.3	%
Import		16,774			7,139			9,635		135.0
Luxury		3,865			1,595			2,270		142.3
Total		30,682			17,368			13,314		76.7
Allocated to management		(59	)		(94	)		(35	)	(37.2	)
Total retail new vehicle unit sales		30,623			17,274			13,349		77.3


Lithia Motors, Inc.
Other Highlights (Unaudited)

	As of
	March 31,	December 31,	March 31,
	2015	2014	2014
Days Supply ⁽¹⁾
New vehicle inventory	62	62	69
Used vehicle inventory	49	53	46

⁽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 March 31, 2014
Current ratio	Not less than 1.10 to 1	1.21 to 1
Fixed charge coverage ratio	Not less than 1.20 to 1	3.15 to 1
Leverage ratio	Not more than 5.00 to 1	2.19 to 1
Funded debt restriction	Not more than $600 million	$417.4 million


Lithia Motors, Inc.
Other Highlights (Unaudited)

	Three months ended March 31,
	2015		2014
New vehicle unit sales brand mix
Honda, Acura	21.9	%	7.8	%
Chrysler	19.1		29.5
Toyota	18.9		13.7
General Motors	8.9		14.0
Subaru	7.2		9.8
BMW, MINI	5.8		6.0
Ford	4.6		6.0
Nissan	4.0		3.8
Volkswagen, Audi	2.8		2.3
Hyundai	2.1		3.1
Mercedes	1.6		2.3
Kia	1.3		0.9
Lexus	1.2		-
Other	0.6		0.8

	Three months ended March 31,
	2015		2014
Revenue geographic mix
California	22.2	%	13.3	%
Oregon	16.8		22.2
Texas	15.7		23.9
New Jersey	13.7		-
Montana	5.8		8.3
Washington	5.1		7.3
Alaska	5.1		6.7
Nevada	3.2		4.8
Idaho	3.1		4.7
Iowa	2.8		4.3
New York	2.7		-
North Dakota	1.5		2.2
Hawaii	1.4		0.7
New Mexico	0.9		1.6

	As of April 22, 2015
Current store count mix	# of stores		% of total
Chrysler, Fiat	25		19.2	%
Honda, Acura	21		16.2
Toyota, Lexus	19		14.6
General Motors	16		12.3
BMW, MINI	11		8.5
Volkswagen, Audi	8		6.2
Nissan	6		4.6
Ford	6		4.6
Subaru	6		4.6
Hyundai	5		3.8
Mercedes	3		2.3
Other	4		3.1


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

	March 31, 2015			December 31, 2014
Cash and cash equivalents	$	21,023		$	29,898
Trade receivables, net		290,638			295,379
Inventories, net		1,286,614			1,249,659
Other current assets		32,498			32,010
Assets held for sale		4,026			8,563
Total current assets	$	1,634,799		$	1,615,509

Property and equipment, net		828,707			816,745
Goodwill		199,286			199,375
Franchise value		150,856			150,892
Other non-current assets		110,737			98,411
Total assets	$	2,924,385		$	2,880,932

Floor plan notes payable	$	42,139		$	41,047
Floor plan notes payable: non trade		1,113,428			1,137,632
Current maturities of long-term debt		40,543			31,912
Trade payables		76,517			70,853
Accrued liabilities		154,786			153,661
Deferred income taxes		3,140			2,603
Liabilities related to assets held for sale		2,688			4,892
Total current liabilities	$	1,433,241		$	1,442,600

Long-term debt		621,890			609,066
Deferred revenue		56,849			54,403
Deferred income taxes		41,474			42,795
Other long-term liabilities		63,094			58,963
Total liabilities	$	2,216,548		$	2,207,827

Class A common stock		272,625			276,058
Class B common stock		319			319
Additional paid-in capital		31,364			29,775
Accumulated other comprehensive loss		(787	)		(926	)
Retained earnings		404,316			367,879
Total liabilities & stockholders' equity	$	2,924,385		$	2,880,932


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

		Three months ended
		March 31,
		2015			2014
Net income		$	40,653		$	24,734

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Asset impairment			4,130			-
Depreciation and amortization			9,726			5,507
Stock-based compensation			2,727			1,538
Loss on disposal of assets			8			20
Gain on sale of franchise			(3,349	)		-
Deferred income taxes			3,863			1,866
Excess tax benefit from share-based payment arrangements			(4,733	)		(5,846	)
(Increase) decrease:
	Trade receivables, net		7,569			(12,259	)
	Inventories		(39,460	)		(56,748	)
	Other assets		(2,078	)		(2,290	)
Increase (decrease):
	Floor plan notes payable, net		1,092			1,675
	Trade payables		6,799			1,774
	Accrued liabilities		4,444			12,521
	Other long-term liabilities and deferred revenue		6,838			5,121
Net cash provided by (used in) operating activities		$	38,229		$	(22,387	)


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

		Three months ended
		March 31,
Net cash provided by (used in) operating activities		2015			2014
As reported		$	38,229		$	(22,387	)
	Floor plan notes payable, non-trade, net		(21,984	)		51,783
	Borrowings on floor plan notes payable associated with acquired inventory		-			(19,525	)
Adjusted		$	16,245		$	9,871


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

	Three Months Ended March 31, 2015
	As reported			Gain on sale of stores			Equity Investment			Adjusted
Asset impairments	$	4,130		$	-		$	(4,130	)	$	-
Selling, general and administrative		191,618			3,349			-			194,967

Income from operations		67,901			(3,349	)		4,130			68,682

Other income (expense)		(368	)		-			1,732			1,364

Income from continuing operations before income taxes	$	58,056		$	(3,349	)	$	5,862		$	60,569
Income tax expense		(17,403	)		1,004			(7,250	)		(23,649	)
Net income from continuing operations	$	40,653		$	(2,345	)	$	(1,388	)	$	36,920

Diluted earnings per share from continuing operations	$	1.53		$	(0.09	)	$	(0.05	)	$	1.39
Diluted share count		26,519


	Three Months Ended March 31, 2014
	As reported			Reserve adjustments			Adjusted
Selling, general and administrative		121,829			(3,931	)		117,898

Income from operations		44,725			3,931			48,656

Income from continuing operations before income taxes	$	40,704		$	3,931		$	44,635
Income tax expense		(16,010	)		(1,546	)		(17,556	)
Net income from continuing operations	$	24,694		$	2,385		$	27,079

Diluted earnings per share from continuing operations	$	0.94		$	0.09		$	1.03
Diluted share count		26,320