Lithia Motors, Inc. (NYSE:LAD) today announced that second quarter
2006 sales increased 13% to $846.5 million as compared to $750.8
million in the same period last year. New vehicle sales increased
13%, used vehicle sales increased 15%, finance/insurance sales
increased 21% and parts/service sales increased 14%. Second quarter
2006 net income from continuing operations was $11.7 million, as
compared to $13.1 million in the second quarter of 2005. Diluted
earnings per share from continuing operations, including the $0.03
effect of accounting for equity compensation under FAS123(R), were
$0.55. Second quarter 2006 earnings per share from continuing
operations, excluding the effect of accounting for equity
compensation under FAS123(R), were $0.58, as compared to $0.62 in
the same period last year. Sid DeBoer, Lithia's Chairman and CEO,
commented, "In the second quarter we had strong increases in same
store sales in all business lines. Total same store sales increased
7.6% and total same store gross profits increased 6.8%. Earnings,
however, did not quite keep pace due to certain unusual expenses
and because we sacrificed new car margins in order to gain sales
volume and market share. It was a difficult sales environment
affected by both higher fuel prices and interest rates." "Our
strategy to aggressively pursue market share that began in the
first quarter of the year continued throughout the second quarter.
This resulted in an increase in new vehicle same store sales of
6.6% as compared to an industry that was down much more than 5%.
This was on top of strong increases in new same store sales in the
second quarter of last year that resulted from the introduction of
employee pricing programs at our GM stores. Our used vehicle
business and parts and service businesses also performed well, with
same store sales up 9.2% and 7.5%, respectively," concluded Mr.
DeBoer. For the six-month period ending June 30, 2006, total sales
increased 13% to $1.59 billion from $1.41 billion in the same
period last year. New vehicle sales increased 16%, used vehicle
sales increased 11%, finance/insurance sales increased 16%, and
parts/service sales increased 12%. For the first six months,
Lithia's net income from continuing operations was $22.3 million,
as compared to $23.6 million in the first six months of 2005.
Diluted earnings per share from continuing operations, including
the $0.06 effect of accounting for equity compensation under
FAS123(R), were $1.05. For the first half of 2006 earnings per
share from continuing operations, excluding the effect of
accounting for equity compensation under FAS123(R), were $1.11, as
compared to $1.13 in the same period last year. Jeffrey B. DeBoer,
Senior Vice President and CFO, added, "In the second quarter, we
completed four acquisitions: a Dodge store in Fresno, California,
and three Chrysler Dodge and Jeep stores located in Twin Falls,
Idaho, Bryan, Texas, and La Crosse Wisconsin. Year to date we have
completed acquisitions with approximately $160 million in
annualized revenues, and we are still on track to hit our annual
acquisition targets." "While Lithia posted strong sales and gross
profit performance in what was an anemic sales environment, not all
the benefits accrued to the bottom line. A number of items impacted
our second quarter earnings: hailstorm damage at stores in three of
our markets; a higher tax rate affecting our second quarter due to
a change in accounting estimates; stock option expense as a result
of FAS123(R); a deferral of certain manufacturer incentives to
future months due to changes in the incentive; higher interest
expense corresponding to increased inventories and higher interest
rates. We also now have duplication of some costs related to
various long-term operational initiatives that should benefit the
company's long-term performance. While many of these items will not
carry through to the third quarter, we expect the higher SG&A,
option and interest expenses to be factors that impact earnings
throughout the rest of the year." "As a result of these items, we
are lowering our guidance for the full-year 2006, which is included
in the table below. In particular we have noticed that analyst
projections for the third quarter are overly optimistic. Last
year's third quarter was very strong with high operating margins
and strong same store sales growth concurrent with a very strong
incentive environment. Therefore, it will be very difficult to
exceed last year's third quarter earnings. The full-year 2006
guidance is on a continuing operations basis. It assumes a steady
pace of acquisitions and dispositions and includes the effect of
FAS123(R), expensing for stock options and our employee stock
purchase plan, that took effect starting in the first quarter of
this year," concluded Jeffrey B. DeBoer. -0- *T Earnings Per Share
Guidance FY 2005 FY 2006 -------------- -------------- EPS w/o
FAS123(R) adoption: $2.37 $2.32 - $2.40 (non-GAAP) Effect of
FAS123(R): N/A ($0.12) -------------- -------------- EPS --
Reportable 2006: N/A $2.20 - $2.28 *T The inclusion of the non-GAAP
"EPS without FAS123(R) amounts" is included in the above guidance
because management believes that the absence of a comparable
expense in 2005 would obscure the earnings estimate on a comparable
basis. As noted above, the EPS guidance is also given for
reportable EPS and reconciles to the non-GAAP number. In December
2004, the Financial Accounting Standards Board ("FASB") issued
Financial Accounting Standards Statement 123 (revised 2004)
("FAS123(R)") that required that the value of all equity-based
compensation arrangements, including stock options and employee
stock purchase plans, be accounted for using a "fair value" method.
Prior to 2006, the Company had accounted for such arrangements
under the "intrinsic method" permitted by APB 25 and the amounts
under the fair value method were presented in the footnotes to the
company's financials filed on Form 10-K. The new rules became
effective for the Company commencing with the first quarter of
2006. Adoption of this accounting change does not affect the cash
flow of the Company. Conference Call Information Lithia Motors will
be providing more detailed information on the results for the
second quarter 2006 in its conference call scheduled for 11 a.m. PT
today. The call can be accessed live by calling 973-633-1010. To
listen to a live webcast or hear a replay, log-on to:
www.lithia.com -- go to Investor Relations -- and click on the Live
Webcast icon. About Lithia Lithia Motors, Inc. is a Fortune 700 and
Russell 2000 Company with 96 stores located in 38 markets in 13
states, selling 25 brands of new vehicles and over the Internet at
"Lithia.com-America's Car & Truck Store." Lithia also sells
used vehicles, arranges finance, warranty, and credit insurance
contracts, and provides vehicle parts, maintenance, and repair
services at all of its locations. Lithia retailed 103,333 new and
used vehicles and had $2.9 billion in total revenue in 2005.
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,
which management believes are a benefit to shareholders. These
statements are necessarily subject to risk and uncertainty and
actual results could differ materially due to certain risk factors,
including without limitation economic conditions, acquisition risk
factors and others set forth from time to time in the company's
filings with the SEC. Specific risks in this press release include
items which impacted earnings, anticipated revenues of recently
acquired and projected new store acquisitions and projected
full-year 2006 earnings per share guidance. Additional Information
For additional information on Lithia Motors, contact the Investor
Relations Department, 541-776-6591, or log-on to www.lithia.com --
go to Investor Relations. -0- *T LITHIA MOTORS, INC. (In Thousands
except per share and unit data) Unaudited Three Months Ended
--------- June 30, $ Increase % Increase 2006 2005 (Decrease)
(Decrease) -------- -------- -------- -------- New Vehicle Sales
$496,121 $438,375 $ 57,746 13.2% Used Vehicle Sales 230,909 200,769
30,140 15.0 Finance & Insurance 32,776 27,204 5,572 20.5
Service, Body & Parts Sales 85,736 75,417 10,319 13.7 Fleet
& Other Revenues 939 9,064 (8,125) (89.6) -------- --------
-------- -------- Total Revenues 846,481 750,829 95,652 12.7 Cost
of Sales 702,256 623,584 78,672 12.6 -------- -------- --------
-------- Gross Profit 144,225 127,245 16,980 13.3 SG&A Expense
107,536 93,323 14,213 15.2 Depreciation/Amortization 4,212 3,406
806 23.7 -------- -------- -------- -------- Income from Operations
32,477 30,516 1,961 6.4 Flooring Interest Expense (8,931) (6,000)
2,931 48.9 Other Interest Expense (3,641) (3,036) 605 19.9 Other
Income, net 315 247 68 27.5 -------- -------- -------- --------
Income from continuing operations before income taxes 20,220 21,727
(1,507) (6.9) Income Tax Expense 8,503 8,622 (119) (1.4) Income Tax
Rate 42.1% 39.7% -------- -------- Income from continuing ops.
11,717 13,105 (1,388) (10.6) Loss from discontinued operations, net
of income taxes (50) (430) (380) (88.4) Net Income $ 11,667 $
12,675 ($1,008) (8.0)% Diluted Net Income per ======== ========
======== ======== share: Continuing Operations $ 0.58 $ 0.62 $
(0.04) (6.5)% Effects of FAS123(R) (0.03) - Diluted Net Income per
share after effect of FAS123(R): $ 0.55 $ 0.62 (0.07) (11.3)%
Discontinued Operations - (0.02) -------- -------- Net Income per
share $ 0.55 $ 0.60 (0.05) (8.3)% ======== ======== ========
======== Diluted Shares Outstanding 22,150 21,749 401 1.8% Increase
Increase Unit Sales: 2006 2005 (Decrease) (Decrease) -----------
-------- -------- -------- -------- New Vehicle 18,276 15,601 2,675
17.1% Used -- Retail Vehicle 11,861 10,601 1,260 11.9 Used --
Wholesale 6,317 5,703 614 10.8 Total Units Sold 36,454 31,905 4,549
14.3 LITHIA MOTORS, INC. Three Months Ended June 30, $ Increase %
Increase Average Selling Price: 2006 2005 (Decrease) (Decrease)
---------------------- -------- -------- -------- -------- New
Vehicle $27,146 $28,099 ($953) (3.4)% Used -- Retail Vehicle 16,270
15,686 584 3.7 Used -- Wholesale 6,004 6,047 (43) (0.7) Key
Financial Data: ------------------- Gross Profit Margin 17.0% 16.9%
SG&A as a % of Gross Profit 74.6% 73.3% Operating Margin 3.8%
4.1% Pre-Tax Margin 2.4% 2.9% Gross Margin/Profit Data 2006 2005
------------------------ -------- -------- New Vehicle Retail 7.3%
7.9% Used Vehicle Retail 15.8% 15.9% Used Vehicle Wholesale 2.8%
3.9% Service, Body & Parts 50.3% 49.3% New Retail Gross
Profit/Unit $ 1,984 $ 2,220 Used Retail Gross Profit/Unit $ 2,575 $
2,494 Used Wholesale Gross Profit/Unit $ 168 $ 234 Finance &
Insurance/Retail Unit $ 1,088 $ 1,038 Same Store Data 2006 2005
--------------- -------- -------- New Vehicle Retail Sales 6.6%
4.8% Used Vehicle Sales (includes Wholesale) 9.2% 4.2% Total
Vehicle Sales (excludes fleet) 7.4% 4.6% Finance & Insurance
Sales 14.3% 2.9% Service, Body & Parts Sales 7.5% 1.4% Total
Sales (Excluding Fleet) 7.6% 4.2% Total Gross Profit (Excluding
Fleet) 6.8% 3.1% LITHIA MOTORS, INC. (In Thousands except per share
and unit data) Unaudited Six Months Ended --------- June 30, $
Increase % Increase 2006 2005 (Decrease) (Decrease) ---------
--------- --------- --------- New Vehicle Sales $ 923,871 $ 797,994
$ 125,877 15.8% Used Vehicle Sales 439,987 398,091 41,896 10.5
Finance & Insurance 60,330 51,820 8,510 16.4 Service, Body
& Parts Sales 168,209 149,682 18,527 12.4 Fleet & Other
Revenues 2,269 12,168 (9,899) (81.4) --------- --------- ---------
--------- Total Revenues 1,594,666 1,409,755 184,911 13.1 Cost of
Sales 1,319,660 1,165,278 154,382 13.2 --------- ---------
--------- --------- Gross Profit 275,006 244,477 30,529 12.5
SG&A Expense 208,253 182,455 25,798 14.1
Depreciation/Amortization 8,258 6,794 1,464 21.5 ---------
--------- --------- --------- Income from Operations 58,495 55,228
3,267 5.9 Flooring Interest Expense (15,546) (11,102) 4,444 40.0
Other Interest Expense (6,972) (5,841) 1,131 19.4 Other Expense,
net 742 532 210 39.5 --------- --------- --------- --------- Income
from continuing operations before income taxes 36,719 38,817
(2,098) (5.4) Income Tax Expense 14,373 15,236 (863) (5.7) Income
Tax Rate 39.1% 39.3% --------- --------- Net Income from continuing
ops. 22,346 23,581 (1,235) (5.2)% Income (Loss) from discontinued
operations, net of income taxes (1,371) (916) 455 49.7 Net Income $
20,975 $ 22,665 ($1,690) (7.5)% ========= ========= =========
========= Diluted Net Income per share: Continuing Operations $
1.11 $ 1.13 $ (0.02) (1.8)% Effects of FAS123(R) (0.06) - Diluted
Net Income per share after effect of FAS123(R): $ 1.05 $ 1.13
(0.08) (7.1)% Discontinued Operations (0.06) (0.04) ---------
--------- Net Income per share $ 0.99 $ 1.09 (0.10) (9.2)%
========= ========= ========= ========= Diluted Shares Outstanding
22,109 21,710 399 1.8% Increase Increase Unit Sales: 2006 2005
(Decrease) (Decrease) ----------- --------- --------- ---------
--------- New Vehicle 33,517 28,465 5,052 17.7% Used -- Retail
Vehicle 22,618 21,421 1,197 5.6 Used -- Wholesale 11,851 11,247 604
5.4 Total Units Sold 67,986 61,133 6,853 11.2 LITHIA MOTORS, INC.
Six Months Ended June 30, $ Increase % Increase Average Selling
Price: 2006 2005 (Decrease) (Decrease) ----------------------
-------- -------- -------- -------- New Vehicle $27,564 $28,034
($470) (1.7)% Used -- Retail Vehicle 16,219 15,450 769 5.0 Used --
Wholesale 6,172 5,970 202 3.4 Key Financial Data:
------------------- Gross Profit Margin 17.2% 17.3% SG&A as a %
of Gross Profit 75.7% 74.6% Operating Margin 3.7% 3.9% Pre-Tax
Margin 2.3% 2.8% Gross Margin/Profit Data 2006 2005
------------------------ -------- -------- New Vehicle Retail 7.6%
8.0% Used Vehicle Retail 15.6% 15.7% Used Vehicle Wholesale 3.9%
4.1% Service, Body & Parts 49.6% 49.0% New Retail Gross
Profit/Unit $ 2,096 $ 2,246 Used Retail Gross Profit/Unit $ 2,532 $
2,420 Used Wholesale Gross Profit/Unit $ 241 $ 247 Finance &
Insurance/Retail Unit $ 1,075 $ 1,039 Same Store Data 2006 2005
--------------- -------- -------- New Vehicle Retail Sales 8.8%
(0.2)% Used Vehicle Sales (includes Wholesale) 4.7% 1.0% Total
Vehicle Sales (excludes fleet) 7.4% 0.2% Finance & Insurance
Sales 9.5% 0.8% Service, Body & Parts Sales 6.3% 0.8% Total
Sales (Excluding Fleet) 7.4% 0.3% Total Gross Profit (Excluding
Fleet) 5.9% 2.4% LITHIA MOTORS, INC. Balance Sheet Highlights
(Dollars in Thousands) June 30, 2006 December 31, 2005
------------- ----------------- Unaudited --------- Cash & Cash
Equivalents $ 23,435 $ 48,566 Trade Receivables (a) 113,912 106,443
Inventory 881,990 606,047 Assets Held for Sale - 27,411 Other
Current Assets 13,057 15,781 --------- --------- Total Current
Assets 1,032,394 804,248 Real Estate, net 282,032 255,372 Equipment
& Leases, net 84,008 77,805 Goodwill, net 276,731 260,899 Other
Assets 64,824 54,390 --------- --------- Total Assets $1,739,989
$1,452,714 ========= ========= Floorplan Notes Payable $ 763,081 $
530,452 Liabilities held for sale - 22,388 Other Current
Liabilities 107,397 95,560 --------- --------- Total Current
Liabilities 870,478 648,400 Used Vehicle Flooring 18,000 - Real
Estate Debt 168,508 154,046 Other Long-Term Debt 142,609 136,505
Other Liabilities 57,743 54,130 --------- --------- Total
Liabilities 1,257,338 993,081 --------- --------- Shareholders'
Equity 482,651 459,633 --------- --------- Total Liabilities &
Shareholders' Equity $1,739,989 $1,452,714 ========= =========
-------------- (a) Includes contracts-in-transit of $52,599 and
$52,453 at June 30, 2006, and December 31, 2005, respectively.
Other Balance Sheet Data (Dollars in Thousands except per share
data) Current Ratio 1.2x 1.2x LT Debt/Total Cap. (Excludes Used
Vehicle Flooring and Real Estate) 23% 23% Working Capital $ 161,916
$ 155,848 Book Value per Basic Share $ 24.80 $ 23.97 *T
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