LAD Lithia Motors Inc

Lithia Motors, Inc. (NYSE:LAD) today announced that second quarter 2007 sales increased 11% to $885.1 million as compared to $801.2 million in the same period last year. New vehicle sales increased 10%, used vehicle sales increased 9%, finance/insurance sales increased 5%, and parts/service sales increased 19%. Second quarter 2007 net income from continuing operations was $10.7 million as compared to $12.1 million in the second quarter of 2006. Diluted earnings per share from continuing operations were $0.50 as compared to $0.57 in the second quarter of 2006. For a more accurate comparison of earnings, last year�s fair market value adjustment to our swaps needs to be considered. Our interest rate swaps did not qualify for hedge accounting in 2006, which had the effect of increasing second quarter 2006 earnings per share by 3 cents. Our swaps do qualify for hedge accounting in 2007 and there was no comparable effect on earnings per share in the second quarter. Sid DeBoer, Lithia�s Chairman and CEO, commented, �The highlight of the quarter was Lithia�s parts and service business which continued its strong performance with same-store sales growth of 4.6% on top of 8.0% growth in the second quarter of last year.� �Total sales grew 11% in the second quarter driven by strong parts and service sales and revenues from acquisitions made in the past 12 months. Second quarter total same-store sales declined 2.0%; however, we had a difficult comparison against 9.3% growth in the second quarter of 2006. Regardless of the difficult year over year comparisons, retail sales have been lackluster in the first half of the year. We believe that we are seeing a challenging retail environment for automotive sales in our markets that will continue for the rest of the year. This is related to the ripple affects from the slowdown in residential construction, high gas prices and customer concerns over personal debt.� �Vehicle inventories are at low levels going into the third quarter of the year. New vehicle inventories at the end of June were 9 days below our historical average levels. Finally, earnings per share from continuing operations in the second quarter were down 12% from last year as a result of the retail sales environment, continuing costs related to L2 Auto and our future operating initiatives and higher year over year interest expense,� concluded Mr. DeBoer. For the six-month period ending June 30, 2007, total sales increased 10% to $1.66 billion as compared to $1.51 billion in the same period last year. New vehicle sales increased 9%, used vehicle sales increased 9%, finance/insurance sales increased 8%, and parts/service sales increased 20%. For the first six-months, Lithia�s net income from continuing operations was $17.9 million as compared to $22.9 million in 2006. Diluted earnings per share from continuing operations were $0.85 as compared to $1.08 in the first six-months of 2006. Last year�s fair market value adjustment to our swaps had the effect of increasing first half 2006 earnings per share by 7 cents. There was no comparable effect on earnings per share in the first half of this year. Jeffrey B. DeBoer, Senior Vice President and CFO added, �We are lowering our guidance for the full-year 2007. Our initial 2007 guidance was in-line with what we had earned for the full-year 2006. We are adjusting guidance lower to take into account the slower than expected retail environment in the first half of the year and the costs associated with the investments, for the future, we are making in our company this year. We do not foresee an impact to the company�s dividend or current operating initiatives as a result of our updated projections for the year.� �In the second quarter, we had five stores and one body shop classified as discontinued operations as we continue to dispose of our lowest performing operations. Of the 12 cents in discontinued operations, 1 cent is related to operating losses and 11 cents are due to a one-time non-cash write-off of intangibles related to the discontinued stores.� �The full-year 2007 guidance is on a continuing operations basis and assumes a steady pace of acquisitions and dispositions," concluded Jeffrey B. DeBoer. Guidance Earnings per ShareFrom Continuing Operations: FY 2007 $1.60 - $1.80 Conference Call Information Lithia Motors will be providing more detailed information on the results for the second quarter 2007 in its conference call scheduled for today at 2 p.m. PDT and 5 p.m. EDT. The call can be accessed live by calling 973-582-2750; Conference ID #: 9010604. To listen LIVE on our website or for REPLAY: Log-on to www.Lithia.com � Go to Investor Relations � and click on the Conference Call Icon. About Lithia Lithia Motors, Inc. is a Fortune 700 and Russell 2000 Company. Lithia sells 30 brands of new vehicles at 108 stores which are located in 46 markets within 15 states. Internet sales are centralized at www.Lithia.com. 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 109,648 new and used vehicles and had $3.17 billion in total revenue in 2006. 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 the accuracy of the company�s internal forecasts, comments and predictions related to the retail sales environment, anticipated costs related to new initiatives and projected full-year 2007 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. LITHIA MOTORS, INC. (In Thousands except per share data) � Unaudited Three Months Ended June 30, $ Increase % Increase 2007 � 2006 � (Decrease) (Decrease) New Vehicle Sales $ 515,234 $ 468,710 $ 46,524 9.9 % Used Vehicle Sales 238,936 219,149 19,787 9.0 Finance & Insurance 33,143 31,487 1,656 5.3 Service, Body & Parts Sales 96,490 81,062 15,428 19.0 Fleet & Other Revenues 1,306 � 796 � 510 � 64.1 � Total Revenues 885,109 801,204 83,905 10.5 Cost of Sales 736,797 � 664,909 � 71,888 � 10.8 � Gross Profit 148,312 136,295 12,017 8.8 SG&A Expense 112,135 100,482 11,653 11.6 Depreciation/Amortization 5,097 � 4,007 � 1,090 � 27.2 � Income from Operations 31,080 31,806 (726 ) (2.3 ) Flooring Interest Expense (8,480 ) (7,800 ) 680 8.7 Other Interest Expense (5,039 ) (3,312 ) 1,727 52.1 Other Income, net 113 � 261 � (148 ) (56.7 ) Income from continuing operations before income taxes � 17,674 20,955 (3,281 ) (15.7 ) Income Tax Expense 7,022 8,834 (1,812 ) (20.5 ) Income Tax Rate 39.7 % 42.2 % Income from continuing ops. 10,652 12,121 (1,469 ) (12.1 )% Discontinued Operations: Loss from operations, net of tax (228 ) (230 ) Loss from impairment, net of tax (2,481 ) � 0 � Loss from discontinued operations, net of income tax (2,709 ) (230 ) 2,479 1,077.8 Net Income $ 7,943 � $ 11,891 � $ (3,185 ) (26.8 )% Diluted Net Income per share: Continuing Operations $ 0.50 $ 0.57 $ (0.07 ) (12.3 )% Discontinued Operations: Loss from operations (0.01 ) (0.01 ) Loss from impairment (0.11 ) � 0 Total Discontinued Operations (0.12 ) (0.01 ) Net Income per share $ 0.38 � $ 0.56 � (0.18 ) (32.1 )% Diluted Shares Outstanding 22,109 22,150 (41 ) (0.2 )% LITHIA MOTORS, INC. Three Months Ended (Continuing Operations) June 30, Increase % Increase Unit Sales: 2007 � 2006 � (Decrease) (Decrease) New Vehicle 17,882 17,326 556 3.2 % Used - Retail Vehicle 11,814 11,328 486 4.3 Used - Wholesale 6,625 5,999 626 10.4 Total Units Sold 36,321 34,653 1,668 4.8 � Average Selling Price: New Vehicle $ 28,813 $ 27,052 $ 1,761 6.5 % Used - Retail Vehicle 16,676 16,161 515 3.2 Used - Wholesale 6,329 6,013 316 5.3 � Key Financial Data: Gross Profit Margin 16.8 % 17.0 % -20 bps SG&A as a % of Gross Profit 75.6 % 73.7 % +190 bps Operating Margin 3.5 % 4.0 % -50 bps Pre-Tax Margin 2.0 % 2.6 % -60 bps � Gross Margin/Profit Data New Vehicle Retail 7.3 % 7.3 % - Used Vehicle Retail 15.0 % 15.8 % -80 bps Used Vehicle Wholesale 2.7 % 2.8 % -10 bps Service, Body & Parts 48.2 % 49.3 % -110 bps Finance & Insurance 100.0 % 100.0 % - New Retail Gross Profit/Unit $ 2,101 $ 1,988 +$113 Used Retail Gross Profit/Unit $ 2,497 $ 2,560 -$63 Used Wholesale Gross Profit/Unit $ 173 $ 170 +$3 Finance & Insurance/Retail Unit $ 1,116 $ 1,099 +$17 � Revenue Mix: New Vehicles 58.2 % 58.5 % Used Retail Vehicles 22.3 % 22.9 % Used Wholesale Vehicles 4.7 % 4.5 % Finance and Insurance, Net 3.7 % 3.9 % Service and Parts 10.9 % 10.1 % Fleet and other 0.2 % 0.1 % � New Vehicle Unit Sales Brand Mix: Chrysler Brands 38.9 % 39.5 % General Motors & Saturn 15.7 % 17.2 % Toyota 14.2 % 13.0 % Honda 6.6 % 5.4 % Ford 5.7 % 7.4 % Hyundai 4.1 % 4.8 % BMW 3.8 % 2.3 % Nissan 3.2 % 3.4 % Subaru 2.0 % 2.8 % Volkswagen 2.0 % 1.5 % Mercedes-Benz 1.1 % 0.7 % Other 2.7 % 2.0 % 100 % 100 % Lithia Motors Selected Same Store Data � Three Months Ended June 30, Increase % Increase Same Store Unit Sales: 2007 � 2006 � (Decrease) (Decrease) New Vehicle 15,956 17,204 (1,248 ) (7.3 )% Used - Retail Vehicle 10,624 11,297 (673 ) (6.0 ) Used - Wholesale 5,902 5,999 (97 ) (1.6 ) Total Units Sold 32,482 34,500 (2,018 ) (5.8 ) � Same Store Average Selling Price: New Vehicle $ 28,353 $ 27,041 $ 1,312 4.9 % Used - Retail Vehicle 16,452 16,160 292 1.8 Used - Wholesale 6,363 6,013 350 5.8 � Same Store Retail Revenue New Vehicle Retail Sales (2.8 )% 8.1 % Used Vehicle Retail Sales (4.3 )% 12.0 % Used Vehicle Wholesale Sales 4.1 % 10.1 % Total Vehicle Sales (excluding fleet) (2.8 )% 9.2 % Finance & Insurance Sales (1.4 )% 15.8 % Service, Body & Parts Sales 4.6 % 8.0 % Total Sales (excluding Fleet) (2.0 )% 9.3 % Total Gross Profit (excluding Fleet) (3.0 )% 7.5 % � Same Store Average Gross Profit Data New Retail Gross Profit/Unit $ 2,058 $ 1,989 +$69 Used Retail Gross Profit/Unit $ 2,450 $ 2,537 -$87 Used Wholesale Gross Profit/Unit $ 166 $ 170 -$4 � Same Store Total Sales Geographic Mix: Texas 21.9 % 19.0 % Oregon 16.2 % 17.3 % California 12.1 % 13.5 % Washington 11.8 % 11.7 % Alaska 7.4 % 7.6 % Montana 7.0 % 5.9 % Colorado 6.9 % 7.3 % Idaho 6.0 % 6.4 % Nevada 4.4 % 5.0 % Nebraska 2.8 % 3.1 % South Dakota 2.3 % 2.1 % New Mexico 1.2 % 1.1 % 100 % 100 % LITHIA MOTORS, INC. (In Thousands except per share data) � Unaudited Six Months Ended June 30, $ Increase % Increase 2007 � 2006 � (Decrease) (Decrease) New Vehicle Sales $ 952,741 $ 872,799 $ 79,942 9.2 % Used Vehicle Sales 451,970 415,269 36,701 8.8 Finance & Insurance 62,787 57,905 4,882 8.4 Service, Body & Parts Sales 190,107 158,685 31,422 19.8 Fleet & Other Revenues 1,996 � 1,949 � 47 � 2.4 � Total Revenues 1,659,601 1,506,607 152,994 10.2 Cost of Sales 1,375,311 � 1,247,132 � 128,179 � 10.3 � Gross Profit 284,290 259,475 24,815 9.6 SG&A Expense 219,679 194,391 25,288 13.0 Depreciation/ Amortization 9,860 � 7,848 � 2,012 � 25.6 � Income from Operations 54,751 57,236 (2,485 ) (4.3 ) Flooring Interest Expense (15,834 ) (12,861 ) 2,973 23.1 Other Interest Expense (9,667 ) (6,335 ) 3,332 52.6 Other Income, net 325 � 637 � (312 ) (49.0 ) Income from continuing operations before income taxes 29,575 38,677 (9,102 ) (23.5 ) Income Tax Expense 11,698 15,737 (4,039 ) (25.7 ) Income Tax Rate 39.6 % 40.7 % Income from continuing ops. 17,877 22,940 (5,063 ) (22.1 )% Discontinued Operations: Loss from operations, net of tax (378 ) (1,681 ) Loss from impairment, net of tax (2,481 ) � 0 � Loss from discontinued operations, net of income tax (2,859 ) (1,681 ) 1,178 � 70.1 � Net Income $ 15,018 � $ 21,259 � $ (6,241 ) (29.4 )% Diluted Net Income per share: Continuing Operations $ 0.85 $ 1.08 $ (0.23 ) (21.3 )% Discontinued Operations: Loss from operations (0.02 ) (0.08 ) Loss from impairment (0.11 ) � 0 � Discontinued Operations (0.13 ) (0.08 ) Net Income per share $ 0.72 � $ 1.00 � (0.28 ) (28.0 )% Diluted Shares Outstanding 22,116 22,109 � 7 0.0 % LITHIA MOTORS, INC. Six Months Ended (Continuing Operations) June 30, Increase % Increase Unit Sales: 2007 � 2006 � (Decrease) (Decrease) New Vehicle 33,165 31,798 1,367 4.3 % Used - Retail Vehicle 22,447 21,544 903 4.2 Used - Wholesale 12,687 11,174 1,513 13.5 Total Units Sold 68,299 64,516 3,783 5.9 � Average Selling Price: New Vehicle $ 28,727 $ 27,448 $ 1,279 4.7 % Used - Retail Vehicle 16,456 16,098 358 2.2 Used - Wholesale 6,509 6,126 383 6.3 � Key Financial Data: Gross Profit Margin 17.1 % 17.2 % -10 bps SG&A as a % of Gross Profit 77.3 % 74.9 % +240 bps Operating Margin 3.3 % 3.8 % -50 bps Pre-Tax Margin 1.8 % 2.6 % -80 bps � Gross Margin/Profit Data New Vehicle Retail 7.5 % 7.6 % -10 bps Used Vehicle Retail 15.0 % 15.7 % -70 bps Used Vehicle Wholesale 3.4 % 4.0 % -60 bps Service, Body & Parts 47.8 % 48.5 % -70 bps Finance & Insurance 100.0 % 100.0 % - � New Retail Gross Profit/Unit $ 2,155 $ 2,096 +$59 Used Retail Gross Profit/Unit $ 2,476 $ 2,521 -$45 Used Wholesale Gross Profit/Unit $ 219 $ 244 -$25 Finance & Insurance/Retail Unit $ 1,129 $ 1,086 +$43 � Revenue Mix: New Vehicles 57.4 % 57.9 % Used Retail Vehicles 22.3 % 23.0 % Used Wholesale Vehicles 4.9 % 4.7 % Finance and Insurance, Net 3.8 % 3.8 % Service and Parts 11.5 % 10.5 % Fleet and other 0.1 % 0.1 % � New Vehicle Unit Sales Brand Mix: Chrysler Brands 39.9 % 41.1 % General Motors & Saturn 16.2 % 16.2 % Toyota 13.5 % 12.4 % Ford 6.1 % 7.4 % Honda 6.0 % 5.4 % BMW 3.8 % 2.3 % Hyundai 3.7 % 4.4 % Nissan 3.4 % 3.6 % Subaru 2.2 % 2.9 % Volkswagen 1.7 % 1.4 % Mercedes-Benz 1.1 % 0.6 % Other 2.4 % 2.3 % 100 % 100 % � Lithia Motors Selected Same Store Data � Six Months Ended June 30, Increase % Increase Same Store Unit Sales: 2007 � 2006 � (Decrease) (Decrease) New Vehicle 29,830 31,676 (1,846 ) (5.8 )% Used - Retail Vehicle 20,383 21,513 (1,130 ) (5.3 ) Used - Wholesale 11,488 11,173 315 2.8 Total Units Sold 61,701 64,362 (2,661 ) (4.1 ) � Same Store Average Selling Price: New Vehicle $ 28,254 $ 27,444 $ 810 3.0 % Used - Retail Vehicle 16,249 16,097 152 0.9 Used - Wholesale 6,528 6,123 405 6.6 � Same Store Retail Revenue New Vehicle Retail Sales (3.0 )% 9.4 % Used Vehicle Retail Sales (4.4 )% 4.4 % Used Vehicle Wholesale Sales 9.6 % 3.7 % Total Vehicle Sales (excluding fleet) (2.7 )% 7.7 % Finance & Insurance Sales 0.7 % 9.5 % Service, Body & Parts Sales 5.1 % 5.3 % Total Sales (excluding Fleet) (1.8 )% 7.5 % Total Gross Profit (excluding Fleet) (2.1 )% 5.3 % � Same Store Average Gross Profit Data New Retail Gross Profit/Unit $ 2,122 $ 2,097 +$25 Used Retail Gross Profit/Unit $ 2,428 $ 2,490 -$62 Used Wholesale Gross Profit/Unit $ 213 $ 254 -$41 � Same Store Total Sales Geographic Mix: Texas 21.3 % 18.3 % Oregon 16.5 % 17.9 % California 12.0 % 13.5 % Washington 11.9 % 11.5 % Alaska 7.2 % 7.3 % Colorado 7.2 % 7.4 % Montana 6.7 % 6.1 % Idaho 6.0 % 6.3 % Nevada 4.7 % 5.2 % Nebraska 2.9 % 3.2 % South Dakota 2.4 % 2.2 % New Mexico 1.2 % 1.1 % 100 % 100 % � LITHIA MOTORS, INC. � Balance Sheet Highlights (Dollars in Thousands) � June 30, 2007 December 31, 2006 Unaudited Cash & Cash Equivalents $ 32,903 $ 26,600 Trade Receivables (a) 131,278 118,528 Inventory 684,926 603,306 Assets Held for Sale 68,859 15,485 Other Current Assets 16,080 15,721 Total Current Assets 934,046 779,640 � Real Estate, net 333,540 327,890 Equipment & Leases, net 95,513 89,213 Goodwill, net 309,065 307,424 Other Assets 74,938 75,190 Total Assets $ 1,747,102 $ 1,579,357 � Floorplan Notes Payable $ 573,332 $ 499,679 Liabilities held for sale 48,513 11,610 Other Current Liabilities 121,060 118,650 Total Current Liabilities 742,905 629,939 � Used Vehicle Flooring 111,843 95,614 Real Estate Debt 161,629 155,890 Other Long-Term Debt 152,324 140,879 Other Liabilities 71,580 63,642 � Total Liabilities 1,240,281 1,085,964 � Shareholders' Equity 506,821 493,393 � Total Liabilities & Shareholders' Equity $ 1,747,102 $ 1,579,357 � (a) Includes contracts-in-transit of $60,281 and $56,211 for 2007 and 2006. � Other Balance Sheet Data (Dollars in Thousands except per share data) � Current Ratio � 1.3x 1.2x LT Debt/Total Cap. � (Excludes Real Estate) � 34% 32% Working Capital $ 191,141 $ 149,701 Book Value per Basic Share $ 26.01 $ 25.32