Lithia Motors Reports Adjusted EPS of $1.05 for Second

MEDFORD, OR--(Marketwired - Jul 24, 2013) - Lithia Motors, Inc. ( NYSE : LAD ) today reported the highest quarterly adjusted net income in Company history, and a 42% increase in adjusted net income per share from continuing operations for the second quarter 2013 over the prior year period.

2013 second quarter adjusted income from continuing operations was $27.4 million, or $1.05 per diluted share. This compares to 2012 second quarter adjusted income from continuing operations of $19.4 million, or $0.74 per diluted share.

Unadjusted net income from continuing operations for the second quarter of 2013 was $25.3 million, or $0.97 per diluted share, compared to $20.0 million, or $0.76 per diluted share for 2012. As shown in the attached non-GAAP reconciliation tables, the 2013 second quarter adjusted results from continuing operations exclude an $0.08 per share expense due to a non-core legal reserve related to a case filed in 2006, partially offset by a tax attribute. The 2012 second quarter adjusted results from continuing operations exclude a benefit of $0.02 per share related to a non-core tax attribute.

Second Quarter-over-Quarter Operating Highlights:

• New vehicle same store sales increased 19%
• Used vehicle retail same store sales increased 19%
• Service, body and parts same store sales increased 7%
• Adjusted SG&A expense as a percentage of gross profit decreased 330 basis points to 66%

Second quarter 2013 revenue from continuing operations increased $186.2 million, or 23%, to $1.0 billion from $822.3 million in the second quarter of 2012.

"We exceeded $1.0 billion in quarterly revenue for the first time in our history," said Bryan DeBoer, President and CEO. "The combination of acquisitions and same store sales growth increased revenue by 23% over the prior year. Our adjusted net income from continuing operations increased 41% from the prior year, significantly above the growth in revenue, as we increase our operating leverage. Based on our results through the first six months of the year, we are well on our way towards the first milestone for growth we established late in 2012, where total revenue increases by 25% from full year 2012 results."

For the first six months of 2013, adjusted net income per share from continuing operations increased 42% to $1.89 compared to $1.33 for the first six months of 2012. Unadjusted, for the first six months of 2013, net income from continuing operations was $1.81 per diluted share, compared to $1.39 per diluted share for the first six months of 2012.

Chris Holzshu, SVP and CFO said, "Adjusted SG&A as a percentage of gross profit was 66.0% in the second quarter, and 67.5% for the first six months of 2013. This is a record result and is primarily a result of our stores' continued focus on maintaining incremental throughput, or the percentage of additional same store gross profit dollars that we retain after deducting selling costs, above 50%. On a same store basis and adjusted for certain non-core items, incremental throughput was 56.5% in the second quarter and 52.9% for the first six month of 2013."

Corporate Development On June 10, 2013, we purchased BMW, Honda and Volkswagen stores in Salem, Oregon, with estimated annualized revenues of $110 million. In April 2013, we opened a MINI store in Anchorage, Alaska with estimated annualized revenues of $13 million.

Bryan DeBoer, President and CEO, stated, "We continue to seek exclusive franchises in the markets we serve and view acquisitions as one of the long term drivers of growth for Lithia. We believe that additional acquisition opportunities meeting both our strategic and return requirements remain available in the marketplace."

Balance Sheet Update We ended the second quarter with $20 million in cash and $91 million in available credit on our credit facilities. Additionally, approximately $164 million of operating real estate is currently unfinanced, which we estimate could provide up to an additional $123 million in available liquidity, for total liquidity of $234 million.

Dividend Payment Lithia announced that the Board of Directors has approved a dividend of $0.13 per share for the second quarter 2013. Lithia will pay the dividend August 23, 2013 to shareholders of record on August 9, 2013.

Increased Outlook for 2013 We project 2013 third quarter earnings of $1.06 to $1.08 per diluted share and full year 2013 earnings of $3.80 to $3.85 per diluted share. Both projections are based on the following annual assumptions:

• Total revenues of $3.9 to $4.0 billion
• New vehicle same store sales increasing 17.0%
• New vehicle gross margin of 6.6% to 6.8%
• Used vehicle same store sales increasing 16.5%
• Used vehicle gross margin of 14.7% to 14.9%
• Service body and parts same store sales increasing 7.0%
• Service body and parts gross margin of 48.8% to 49.0%
• Finance and insurance gross profit of $1,100 per unit
• Tax rate of 39.5%
• Average diluted shares outstanding of 26.2 million
• Capital expenditures of $55 million
• Guidance excludes the impact of future acquisitions, dispositions, and any potential non-core items

Second Quarter Earnings Conference Call and Updated Presentation The second quarter conference call may be accessed at 10:00 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. A playback of the conference call will be available on July 24, 2013 through August 8, 2013 by calling 877-660-6853 (Conference ID: 417561).

About Lithia Lithia Motors, Inc. is the ninth largest automotive retailer in the United States. Lithia sells 27 brands of new vehicles and all brands of used vehicles at 91 stores in 11 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 www.assuredservice.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," or "will" and similar references to future periods. Examples of forward-looking statements in this press release include our outlook of earnings per share results and the assumptions that underlie them.

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 industries 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 from time to time in our 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												%
		June 30,								Increase				Increase
		2013				2012				(Decrease)				(Decrease)
Revenues:
New vehicle retail		$	569,487			$	455,939			$	113,548			24.9	%
Used vehicle retail			258,465				207,341				51,124			24.7
Used vehicle wholesale			37,691				35,106				2,585			7.4
Finance and insurance			34,218				27,184				7,034			25.9
Service, body and parts			94,462				85,456				9,006			10.5
Fleet and other			14,182				11,316				2,866			25.3
	Total revenues		1,008,505				822,342				186,163			22.6
Cost of sales:
New vehicle retail			530,699				422,373				108,326			25.6
Used vehicle retail			219,572				176,350				43,222			24.5
Used vehicle wholesale			36,996				34,810				2,186			6.3
Service, body and parts			47,769				43,782				3,987			9.1
Fleet and other			13,636				10,931				2,705			24.7
	Total cost of sales		848,672				688,246				160,426			23.3
Gross profit			159,833				134,096				25,737			19.2
SG&A expense			109,283				92,990				16,293			17.5
Depreciation and amortization			4,899				4,198				701			16.7
Income from operations			45,651				36,908				8,743			23.7
Floor plan interest expense			(3,036	)			(3,054	)			(18	)		(0.6	)
Other interest expense			(1,941	)			(2,530	)			(589	)		(23.3	)
Other income, net			584				819				(235	)		(28.7	)
Income from continuing operations before income taxes			41,258				32,143				9,115			28.4
Income tax expense			(15,977	)			(12,138	)			3,839			31.6
Income tax rate			38.7	%			37.8	%
Income from continuing operations		$	25,281			$	20,005			$	5,276			26.4	%
Income from discontinued operations, net of tax			274				486				(212	)		(43.6	)
Net income		$	25,555			$	20,491			$	5,064			24.7	%
Diluted net income per share:
Continuing operations		$	0.97			$	0.76			$	0.21			27.6	%
Discontinued operations			0.01				0.02				(0.01	)		(50.0	)
Net income per share		$	0.98			$	0.78			$	0.20			25.6	%
Diluted shares outstanding			26,134				26,185				(51	)		(0.2	)%

Lithia Motors, Inc.
Key Performance Metrics (Unaudited)
	Three months ended												%
	June 30,								Increase				Increase
	2013				2012				(Decrease)				(Decrease)
Gross margin
New vehicle retail		6.8	%			7.4	%			(60) bps
Used vehicle retail		15.0				14.9				10 bps
Used vehicle wholesale		1.8				0.8				100 bps
Finance and insurance		100.0				100.0				- bps
Service, body and parts		49.4				48.8				60 bps
Fleet and Other		3.8				3.4				40 bps
Gross profit margin		15.8				16.3				(50) bps
Unit sales
New vehicle retail		17,024				13,974				3,050			21.8	%
Used vehicle retail		14,074				11,604				2,470			21.3
Used vehicle wholesale		5,241				4,512				729			16.2
Total units sold		36,339				30,090				6,249			20.8
Average selling price
New vehicle retail	$	33,452			$	32,628			$	824			2.5	%
Used vehicle retail		18,365				17,868				497			2.8
Used vehicle wholesale		7,192				7,781				(589	)		(7.6	)
Average gross profit per unit
New vehicle retail	$	2,278			$	2,402			$	(124	)		(5.2	)%
Used vehicle retail		2,763				2,671				92			3.4
Used vehicle wholesale		133				66				67			101.5
Finance and insurance		1,100				1,063				37			3.5
Revenue mix
New vehicle retail		56.5	%			55.4	%
Used vehicle retail		25.6				25.2
Used vehicle wholesale		3.7				4.3
Finance and insurance, net		3.4				3.3
Service, body and parts		9.4				10.4
Fleet and other		1.4				1.4
	Adjusted								As reported
	Three months ended								Three months ended
	June 30,								June 30,
Other metrics	2013				2012				2013				2012
SG&A as a % of revenue		10.5	%			11.3	%			10.8	%		11.3	%
SG&A as a % of gross profit		66.0				69.3				68.4			69.3
Operating profit as a % of revenue		4.9				4.5				4.5			4.5
Operating profit as a % of gross profit		30.9				27.5				28.6			27.5
Pretax margin		4.5				3.9				4.1			3.9
Net profit margin		2.7				2.4				2.5			2.4
NM - not meaningful

Lithia Motors, Inc.
Same Store Operating Highlights (Unaudited)
	Three months ended										%
	June 30,						Increase				Increase
	2013			2012			(Decrease)				(Decrease)
Revenues
New vehicle retail	$	541,740		$	455,658		$	86,082			18.9	%
Used vehicle retail		246,004			207,269			38,735			18.7
Used vehicle wholesale		35,609			35,065			544			1.6
Finance and insurance		32,582			27,011			5,571			20.6
Service, body and parts		91,445			85,427			6,018			7.0
Fleet and other		14,051			11,179			2,872			25.7
Total revenues	$	961,431		$	821,609		$	139,822			17.0
Gross profit
New vehicle retail	$	36,597		$	33,556		$	3,041			9.1	%
Used vehicle retail		37,102			30,971			6,131			19.8
Used vehicle wholesale		861			298			563			188.9
Finance and insurance		32,582			27,011			5,571			20.6
Service, body and parts		44,100			40,775			3,325			8.2
Fleet and other		407			246			161			65.4
Total gross profit	$	151,649		$	132,857		$	18,792			14.1
Unit sales
New vehicle retail		16,212			13,966			2,246			16.1	%
Used vehicle retail		13,457			11,603			1,854			16.0
Used vehicle wholesale		4,979			4,511			468			10.4
Total units sold		34,648			30,080			4,568			15.2
Average selling price
New vehicle retail	$	33,416		$	32,626		$	790			2.4	%
Used vehicle retail		18,281			17,863			418			2.3
Used vehicle wholesale		7,152			7,773			(621	)		(8.0	)
Average gross profit per unit
New vehicle retail	$	2,257		$	2,403		$	(146	)		(6.1	)%
Used vehicle retail		2,757			2,669			88			3.3
Used vehicle wholesale		173			66			107			162.1
Finance and insurance		1,098			1,056			42			4.0

Lithia Motors, Inc.
Consolidated Statements of Operations (Unaudited)
(In thousands except per share data)
		Six months ended												%
		June 30,								Increase				Increase
		2013				2012				(Decrease)				(Decrease)
Revenues:
New vehicle retail		$	1,062,928			$	848,885			$	214,043			25.2	%
Used vehicle retail			497,693				397,960				99,733			25.1
Used vehicle wholesale			77,197				68,463				8,734			12.8
Finance and insurance			65,881				52,060				13,821			26.5
Service, body and parts			184,902				169,000				15,902			9.4
Fleet and other			22,984				24,220				(1,236	)		(5.1	)
	Total revenues		1,911,585				1,560,588				350,997			22.5
Cost of sales:
New vehicle retail			989,493				785,067				204,426			26.0
Used vehicle retail			423,827				338,692				85,135			25.1
Used vehicle wholesale			75,528				67,770				7,758			11.4
Service, body and parts			94,430				87,191				7,239			8.3
Fleet and other			22,036				23,438				(1,402	)		(6.0	)
	Total cost of sales		1,605,314				1,302,158				303,156			23.3
Gross profit			306,271				258,430				47,841			18.5
Asset impairments			-				115				(115	)		(100.0	)
SG&A expense			210,414				181,429				28,985			16.0
Depreciation and amortization			9,620				8,336				1,284			15.4
Income from operations			86,237				68,550				17,687			25.8
Floor plan interest expense			(6,485	)			(5,956	)			529			8.9
Other interest expense			(4,302	)			(5,257	)			(955	)		(18.2	)
Other income, net			1,385				1,317				68			5.2
Income from continuing operations before income taxes			76,835				58,654				18,181			31.0
Income tax expense			(29,672	)			(22,015	)			7,657			34.8
Income tax rate			38.6	%			37.5	%
Income from continuing operations		$	47,163			$	36,639			$	10,524			28.7	%
Income from discontinued operations, net of tax			447				648				(201	)		(31.0	)
Net income		$	47,610			$	37,287			$	10,323			27.7	%
Diluted net income per share:
Continuing operations		$	1.81			$	1.39			$	0.42			30.2	%
Discontinued operations			0.01				0.03				(0.02	)		(66.7	)
Net income per share		$	1.82			$	1.42			$	0.40			28.2	%
Diluted shares outstanding			26,120				26,331				(211	)		(0.8	)%

Lithia Motors, Inc.
Key Performance Metrics (Unaudited)
	Six months ended												%
	June 30,								Increase				Increase
	2013				2012				(Decrease)				(Decrease)
Gross margin
New vehicle retail		6.9	%			7.5	%			(60) bps
Used vehicle retail		14.8				14.9				(10) bps
Used vehicle wholesale		2.2				1.0				120 bps
Finance and insurance		100.0				100.0				- bps
Service, body and parts		48.9				48.4				50 bps
Fleet and Other		4.1				3.2				90 bps
Gross profit margin		16.0				16.6				(60) bps
Unit sales
New vehicle retail		31,744				26,112				5,632			21.6	%
Used vehicle retail		27,735				22,811				4,924			21.6
Used vehicle wholesale		10,565				8,993				1,572			17.5
Total units sold		70,044				57,916				12,128			20.9
Average selling price
New vehicle retail	$	33,484			$	32,509			$	975			3.0	%
Used vehicle retail		17,945				17,446				499			2.9
Used vehicle wholesale		7,307				7,613				(306	)		(4.0	)
Average gross profit per unit
New vehicle retail	$	2,313			$	2,444			$	(131	)		(5.4	)%
Used vehicle retail		2,663				2,598				65			2.5
Used vehicle wholesale		158				77				81			105.2
Finance and insurance		1,108				1,064				44			4.1
Revenue mix
New vehicle retail		55.6	%			54.4	%
Used vehicle retail		26.0				25.5
Used vehicle wholesale		4.0				4.4
Finance and insurance, net		3.5				3.3
Service, body and parts		9.7				10.8
Fleet and other		1.2				1.6
	Adjusted								As reported
	Six months ended								Six months ended
	June 30,								June 30,
Other metrics	2013				2012				2013				2012
SG&A as a % of revenue		10.8	%			11.7	%			11.0	%		11.6	%
SG&A as a % of gross profit		67.5				70.5				68.7			70.2
Operating profit as a % of revenue		4.7				4.4				4.5			4.4
Operating profit as a % of gross profit		29.4				26.3				28.2			26.5
Pretax margin		4.2				3.7				4.0			3.8
Net profit margin		2.6				2.2				2.5			2.3

Lithia Motors, Inc.
Same Store Operating Highlights (Unaudited)
	Six months ended										%
	June 30,						Increase				Increase
	2013			2012			(Decrease)				(Decrease)
Revenues
New vehicle retail	$	1,015,760		$	844,125		$	171,635			20.3	%
Used vehicle retail		473,753			394,769			78,984			20.0
Used vehicle wholesale		72,045			67,808			4,237			6.2
Finance and insurance		62,560			50,980			11,580			22.7
Service, body and parts		179,192			167,793			11,399			6.8
Fleet and Other		22,688			23,915			(1,227	)		(5.1	)
Total revenues	$	1,825,998		$	1,549,390		$	276,608			17.9
Gross profit
New vehicle retail	$	69,503		$	63,351		$	6,152			9.7	%
Used vehicle retail		70,850			58,939			11,911			20.2
Used vehicle wholesale		1,760			744			1,016			136.6
Finance and insurance		62,560			50,980			11,580			22.7
Service, body and parts		85,926			79,503			6,423			8.1
Fleet and Other		675			516			159			30.8
Total gross profit	$	291,274		$	254,033		$	37,241			14.7
Unit sales
New vehicle retail		30,363			25,970			4,393			16.9	%
Used vehicle retail		26,507			22,618			3,889			17.2
Used vehicle wholesale		9,969			8,898			1,071			12.0
Total units sold		66,839			57,486			9,353			16.3
Average selling price
New vehicle retail	$	33,454		$	32,504		$	950			2.9	%
Used vehicle retail		17,873			17,454			419			2.4
Used vehicle wholesale		7,227			7,621			(394	)		(5.2	)
Average gross profit per unit
New vehicle retail	$	2,289		$	2,439		$	(150	)		(6.2	)%
Used vehicle retail		2,673			2,606			67			2.6
Used vehicle wholesale		177			84			93			110.7
Finance and insurance		1,100			1,049			51			4.9

Lithia Motors, Inc.
Other Highlights (Unaudited)
	As of
	June 30,		December 31,		June 30,
	2013		2012		2012
Days Supply (1)
New vehicle inventory	76		76		74
Used vehicle inventory	51		56		52

(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, 2013
Current ratio	Not less than 1.20 to 1		1.43 to 1
Fixed charge coverage ratio	Not less than 1.20 to 1		3.23 to 1
Leverage ratio	Not more than 5.00 to 1		1.83 to 1
Funded debt restriction	Not more than $375 million		$171.0 million

Lithia Motors, Inc.
Other Highlights (Unaudited)
	Three months ended June 30,						Six months ended June 30,
	2013			2012			2013			2012
New vehicle unit sales brand mix
Chrysler	29.9	%		32.3	%		30.5	%		32.1	%
General Motors	16.2			16.3			16.1			15.5
Toyota	14.6			13.8			14.7			13.4
Subaru	7.6			6.9			7.6			7.2
Honda, Acura	7.2			7.3			7.0			7.0
BMW, MINI	6.4			6.5			6.4			6.7
Ford	6.0			5.1			6.0			5.4
Nissan	2.9			2.6			2.8			2.9
Mercedes	2.7			1.8			2.5			1.9
Hyundai	2.7			3.9			2.8			4.0
Volkswagen, Audi	2.3			1.8			2.1			2.0
Kia	0.5			0.9			0.6			1.0
Mazda	0.5			0.5			0.5			0.6
Other	0.5			0.3			0.4			0.3
	Three months ended June 30,						Six months ended June 30,
	2013			2012			2013			2012
Revenue geographic mix
Texas	25.0	%		25.9	%		25.3	%		25.5	%
Oregon	20.5			19.5			20.7			20.2
California	10.5			10.5			10.6			10.5
Montana	8.8			9.0			8.9			8.8
Alaska	8.2			8.7			7.7			8.8
Washington	8.1			8.1			8.1			7.9
Iowa	5.0			4.9			4.8			4.8
Idaho	5.0			5.3			5.1			5.4
Nevada	4.7			4.5			4.7			4.8
North Dakota	2.6			2.5			2.5			2.3
New Mexico	1.6			1.1			1.6			1.0
	As of July 24, 2013
Current store count mix	# of stores			% of total
Chrysler	23			25.2	%
General Motors	13			14.3
Honda, Acura	10			11.0
Toyota	9			9.9
BMW, MINI	9			9.9
Hyundai	5			5.5
Ford	5			5.5
Mercedes	4			4.4
Subaru	4			4.4
Nissan	3			3.3
Volkswagen, Audi	3			3.3
Other	3			3.3

Lithia Motors, Inc.
Consolidated Balance Sheets (Unaudited)
(In thousands)
	June 30, 2013				December 31, 2012
Cash and cash equivalents	$	20,257			$	42,839
Trade receivables, net		143,833				133,149
Inventories, net		783,840				723,326
Deferred income taxes		2,824				3,832
Other current assets		9,856				17,484
Assets held for sale		10,733				12,579
Total current assets	$	971,343			$	933,209
Property and equipment, net		443,516				425,086
Goodwill		40,313				32,047
Franchise value		66,465				62,429
Deferred income taxes		22,190				17,123
Other non-current assets		28,689				22,808
Total assets	$	1,572,516			$	1,492,702
Floor plan notes payable	$	16,912			$	13,454
Floor plan notes payable: non trade		570,025				568,130
Current maturities of long-term debt		6,951				8,182
Trade payables		44,121				41,589
Accrued liabilities		90,290				81,602
Liabilities related to assets held for sale		6,378				8,347
Total current liabilities	$	734,677			$	721,304
Long-term debt		294,073				286,876
Deferred revenue		38,557				33,589
Other long-term liabilities		29,058				22,832
Total liabilities	$	1,096,365			$	1,064,601
Class A common stock		265,599				268,801
Class B common stock		319				343
Additional paid-in capital		18,577				12,399
Accumulated other comprehensive loss		(1,771	)			(2,615	)
Retained earnings		193,427				149,173
Total liabilities & stockholders' equity	$	1,572,516			$	1,492,702

Lithia Motors, Inc.
Summarized Cash Flow from Operations (Unaudited)
(In thousands)
		Six months ended
		June 30,
		2013				2012
Net income		$	47,610			$	37,287
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Asset impairments			-				115
Depreciation and amortization			9,620				8,336
Depreciation and amortization within discontinued operations			-				124
Stock-based compensation			2,603				1,512
Gain on disposal of assets			33				(983	)
Deferred income taxes			825				302
Excess tax benefit from share-based payment arrangements			(5,408	)			(1,026	)
(Increase) decrease:
	Trade receivables, net		(10,684	)			(18,305	)
	Inventories		(48,899	)			(109,592	)
	Other current assets		5,980				4,680
	Other non-current assets		(3,394	)			(1,847	)
Increase (decrease):
	Floor plan notes payable		3,384				(94,305	)
	Trade payables		2,078				7,289
	Accrued liabilities		10,256				7,670
	Other long-term liabilities and deferred revenue		10,445				6,700
Net cash provided by (used in) operating activities		$	24,449			$	(152,043	)

Lithia Motors, Inc.
Reconciliation of Non-GAAP Cash Flow from Operations (Unaudited)
(In thousands)
		Six months ended
		June 30,
Net cash provided by (used in) operating activities		2013			2012
As reported		$	24,449		$	(152,043	)
	Floor plan notes payable, non-trade		5,989			251,844
Adjusted		$	30,438		$	99,801

Lithia Motors, Inc.
Reconciliation of Certain Non-GAAP Financial Measures (Unaudited)
(In thousands, except for per share data)
	Three months ended June 30, 2013
	As reported				Legal accrual adjustment				Tax attribute				Adjusted
Selling, general and administrative	$	109,283			$	(3,813	)		$	-			$	105,470
Income from operations	$	45,651			$	3,813			$	-			$	49,464
Income from continuing operations before income taxes	$	41,258			$	3,813			$	-			$	45,071
Income tax expense		(15,977	)			(1,484	)			(228	)			(17,689	)
Net income from continuing operations	$	25,281			$	2,329			$	(228	)		$	27,382
Diluted earnings per share from continuing operations	$	0.97			$	0.09			$	(0.01	)		$	1.05
Diluted share count		26,134

	Three months ended June 30, 2012
	As reported				Tax attribute				Adjusted
Income from continuing operations before income taxes	$	32,143			$	-			$	32,143
Income tax expense		(12,138	)			(573	)			(12,711	)
Net income from continuing operations	$	20,005			$	(573	)		$	19,432
Diluted earnings per share from continuing operations	$	0.76			$	(0.02	)		$	0.74
Diluted share count		26,185

Lithia Motors, Inc.
Reconciliation of Certain Non-GAAP Financial Measures (Unaudited)
(In thousands, except for per share data)
	Six months ended June 30, 2013
	As reported				Legal accrual adjustment				Tax attribute				Adjusted
Selling, general and administrative	$	210,414			$	(3,813	)		$	-			$	206,601
Income from operations	$	86,237			$	3,813			$	-			$	90,050
Income from continuing operations before income taxes	$	76,835			$	3,813			$	-			$	80,648
Income tax expense		(29,672	)			(1,484	)			(228	)			(31,384	)
Net income from continuing operations	$	47,163			$	2,329			$	(228	)		$	49,264
Diluted earnings per share from continuing operations	$	1.81			$	0.09			$	(0.01	)		$	1.89
Diluted share count		26,120

	Six months ended June 30, 2012
	As reported				Asset impairment and disposal gain				Equity investment				Tax attribute				Adjusted
Asset impairments	$	115			$	(115	)		$	-			$	-			$	-
Selling, general and administrative		181,429				739				-				-				182,168
Income from operations		68,550				(624	)			-				-				67,926
Other income, net		1,317				-				(244	)			-				1,073
Income from continuing operations before income taxes	$	58,654			$	(624	)		$	(244	)		$	-			$	57,786
Income tax expense		(22,015	)			244				95				(1,066	)			(22,742	)
Net income from continuing operations	$	36,639			$	(380	)		$	(149	)		$	(1,066	)		$	35,044
Diluted earnings per share from continuing operations	$	1.39			$	(0.01	)		$	(0.01	)		$	(0.04	)		$	1.33
Diluted share count		26,331