LAD Lithia Motors Inc

Lithia Motors, Inc. (NYSE: LAD) today announced that net income from continuing operations in the third quarter of 2008 was thirteen cents per diluted share. Consolidated net loss was twelve cents per share after inclusion of the twenty-five cents per share loss on discontinued operations, of which eighteen cents was asset impairment charges and seven cents was operating losses. On a non-GAAP basis, excluding these one-time asset impairment charges, consolidated net income was nine cents per share. Same store sales for new and used vehicles declined 25.1% and 14.3% respectively, when compared to the same quarter last year. Parts and service same store sales held relatively stable with a slight decline of 1.2% compared to the same quarter last year. Sid DeBoer, Lithia�s Chairman and CEO, commented, �The Lithia Motors team is continuing to execute our restructuring plan. Combined with the cost cutting measures we have spoken of in the past, Lithia is using every tool available to us to manage our way through this recessionary environment.� Mr. DeBoer continued, �Further restructuring actions are being taken. We have increased our right-sizing plan by adding fifteen stores into discontinued operations and have continued to take cost cutting measures for operational efficiency in 2009. With these further measures, we expect to reduce our store count by approximately 27%, to achieve our near-term expectations of approximately 50/50% domestic to import mix. Our continuing operations results for the third quarter should provide visibility of our earnings potential as we continue to execute our restructuring and divestiture plan.� �We have already completed $26 million of annualized cost reductions which is $4 million more than our initial $22 million target. By careful assessment of our staffing and expenses, we have identified additional cost reductions of $7 million in annualized savings, for a total of $33 million in planned annualized savings. We also have a team of talented people dedicated to further reduce our costs, and still maintain the high level of service our customers have come to expect,� concluded Mr. DeBoer. Inventories of new and used vehicles have been reduced substantially since the end of the second quarter. These actions combined with further inventory reductions in the current quarter will result in an estimated annualized flooring interest expense reduction of $2.5 million, despite an assumed flooring interest rate spread increase of fifty basis points. The Company raised over $100 million dollars this year through October 3rd, 2008 from the sale of several stores, financing of real estate, and the sale of several development properties. Proceeds from these activities went toward reducing the line of credit from $184 million at the start of the year to approximately $84 million at the end of the third quarter. Additionally, the Company repurchased and retired approximately $16 million of convertible debt in the third quarter and has subsequently repurchased another $22 million in the fourth quarter for a total of $38 million retired at a significant discount. The gain on retirement of debt is recorded in other income. Conference Call Information Lithia Motors will be providing more detailed information on the results for the third quarter 2008 in its conference call scheduled for today at 2 p.m. PT and 5 p.m. ET. The call can be accessed live by calling 973-409-9255; Conference ID #: 68743692. 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 Company, selling 27 brands of new and all brands of used vehicles at 101 stores, which are located in 44 markets within 13 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 105,108 new and used vehicles and had $3.2 billion in total revenue in 2007. Additional Information For additional information on Lithia Motors, contact the Investor Relations Department: (541) 618-5770 or log-on to: www.lithia.com � go to Investor Relations 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, future economic conditions and others set forth from time to time in the company�s filings with the SEC. We make forward-looking statements about (i) the execution of our cost cutting measures and our restructuring plan, (ii) our ability to reduce our store count and effect a balanced import/export new vehicle sales mix, (iii) anticipated reduction in vehicle inventories, (iv) projected annualized interest expense reduction and (v) expected future profitability. Specific risks in this press release include execution of the restructuring plan and expense reductions, future interest rates and macro-economic and market factors affecting the company�s sales levels and profitability. LITHIA MOTORS, INC. � � � (In Thousands except per share data) Unaudited Three Months Ended % September 30, Increase Increase 2008 � 2007 (Decrease) (Decrease) New vehicle sales $ 309,447 $ 408,084 $ (98,637 ) (24.2 ) % Used vehicle sales 154,129 184,257 (30,128 ) (16.4 ) Finance and insurance 21,130 27,435 (6,305 ) (23.0 ) Service, body and parts 77,586 77,990 (404 ) (0.5 ) Fleet and other revenues � 867 � � 2,326 � � (1,459 ) (62.7 ) Total revenues 563,159 700,092 (136,933 ) (19.6 ) � � � � Cost of sales � 468,844 � � 580,994 � � (112,150 ) (19.3 ) Gross Profit 94,315 119,098 (24,783 ) (20.8 ) SG&A expense 78,152 87,726 (9,574 ) (10.9 ) Depreciation and amortization � 4,358 � � 4,271 � � 87 � 2.0 � Income from operations 11,805 27,101 (15,296 ) (56.4 ) � Floorplan interest expense (4,637 ) (6,503 ) (1,866 ) (28.7 ) Other interest expense (4,318 ) (3,851 ) 467 12.1 Other income, net � 1,890 � � 108 � � 1,782 � 1,650.0 � Income from continuing operations before income taxes 4,740 16,855 (12,115 ) (71.9 ) � Income tax expense 2,038 6,827 (4,789 ) (70.1 ) Income Tax Rate � 43.0 % � 40.5 % � � Income from continuing operations 2,702 10,028 (7,326 ) (73.1 ) � Discontinued Operations: Gain (loss) from operations, net of income tax (1,520 ) 946 (2,466 ) NM Gain (loss) on disposal activities, net of income tax � (3,545 ) � 263 � � (3,808 ) NM � Net income (loss) $ (2,363 ) $ 11,237 � � (13,600 ) NM � � Diluted net income (loss) per share: Continuing Operations $ 0.13 $ 0.48 $ (0.35 ) (72.9 ) Discontinued Operations: Gain (loss) from operations, net of income tax (0.07 ) 0.04 Gain (loss) on disposal activities, net of income tax � (0.18 ) � 0.01 � � � Net income (loss) per share $ (0.12 ) $ 0.53 � $ (0.65 ) NM � Diluted shares outstanding � 20,234(A ) � 22,058 � � (1,824 ) (8.3 ) % � (A) Excludes shares issuable upon conversion of the convertible debt as their effect on EPS would be antidilutive. � NM � Not Meaningful � Lithia Motors, Inc. � � � (Continuing Operations) Three Months Ended � % Unaudited September 30, Increase Increase 2008 � 2007 (Decrease) (Decrease) Unit Sales: New Vehicle 10,415 13,951 (3,536 ) (25.3 ) % Used - Retail Vehicle 8,079 8,502 (423 ) (5.0 ) Used - Wholesale 4,374 5,964 (1,590 ) (26.7 ) Total Units Sold 22,868 28,417 (5,549 ) (19.5 ) � Average Selling Price: New Vehicle $ 29,712 $ 29,251 $ 461 1.6 % Used - Retail Vehicle 15,915 17,072 ($1,157 ) (6.8 ) Used - Wholesale 5,842 6,557 ($715 ) (10.9 ) � Gross Margin/Profit Data New Vehicle Retail 7.6 % 8.1 % -50 bps Used Vehicle Retail 9.9 % 14.2 % -430 bps Used Vehicle Wholesale (4.9 ) % 0.9 % -580 bps Service, Body & Parts 48.5 % 47.6 % 90 bps Finance & Insurance 100.0 % 100.0 % 0 bps Gross Profit Margin 16.7 % 17.0 % -30 bps New Retail Gross Profit/Unit $ 2,266 $ 2,377 -$111 Used Retail Gross Profit/Unit $ 1,583 $ 2,432 -$849 Used Wholesale Gross Profit/Unit $ (283 ) $ 59 -$342 Finance & Insurance/Retail Unit $ 1,143 $ 1,222 -$79 � Revenue Mix: New Vehicles 54.9 % 58.3 % Used Retail Vehicles 22.8 % 20.7 % Used Wholesale Vehicles 4.5 % 5.7 % Finance and Insurance, Net 3.8 % 3.9 % Service and Parts 13.8 % 11.1 % Fleet and other 0.2 % 0.3 % � New Vehicle Unit Sales Brand Mix: Chrysler Brands 29.2 % 35.0 % General Motors & Saturn 20.9 % 17.0 % Toyota 16.8 % 15.5 % Honda 9.0 % 8.2 % BMW 5.3 % 4.2 % Ford 3.6 % 5.6 % Nissan 3.6 % 4.2 % Volkswagen, Audi 3.4 % 2.5 % Hyundai 3.3 % 3.8 % Subaru 2.9 % 2.0 % Other 2.0 % 2.0 % � LITHIA MOTORS, INC. � � (Selected Same Store Data) Unaudited Three Months Ended September 30, 2008 2007 Same Store Total Sales Geographic Mix: Texas 27.6 % 26.1 % Oregon 14.1 % 16.2 % California 12.2 % 13.7 % Alaska 9.9 % 8.0 % Washington 8.9 % 8.2 % Iowa 8.0 % 6.7 % Montana 6.7 % 7.5 % Idaho 5.3 % 6.2 % Nevada 4.5 % 4.4 % Colorado 1.6 % 1.6 % Nebraska 1.2 % 1.4 % � � Same Store Revenue: New Vehicle Retail Sales � (25.1) % (6.7) % Used Vehicle Retail Sales � (14.3) % (11.1) % Used Wholesale Sales � (37.2) % 2.0 % Total Vehicle Sales (excluding Fleet) � (23.3) % (7.3) % Finance & Insurance Sales � (20.8) % (5.7) % Service, Body and Parts Sales � (1.2) % 3.5 % Total Sales (excluding Fleet) � (20.7) % (6.2) % Total Gross Profit (excluding Fleet) � (20.8) % (4.7) % � LITHIA MOTORS, INC. (In Thousands except per share data) Unaudited � Nine Months Ended � � % September 30, Increase Increase 2008 � 2007 (Decrease) (Decrease) New vehicle sales $ 967,476 $ 1,192,917 $ (225,441 ) (18.9 ) % Used vehicle sales 463,444 544,332 (80,888 ) (14.9 ) Finance and insurance 64,942 79,682 (14,740 ) (18.5 ) Service, body and parts 232,093 228,238 3,855 1.7 Fleet and other revenues � 3,256 � � 4,265 � � (1,009 ) (23.7 ) Total revenues 1,731,211 2,049,434 (318,223 ) (15.5 ) Cost of sales � 1,439,019 � � 1,698,430 � � (259,411 ) (15.3 ) Gross Profit 292,192 351,004 (58,812 ) (16.8 ) Asset impairment charges 295,905 - 295,905 NM SG&A expense 247,071 267,110 (20,039 ) (7.5 ) Depreciation and amortization � 13,453 � � 12,223 � � 1,230 � 10.1 � Income (loss) from operations (264,237 ) 71,671 (335,908 ) NM � Floorplan interest expense (14,871 ) (18,935 ) (4,064 ) (21.5 ) Other interest expense (13,303 ) (11,720 ) 1,583 13.5 Other income, net � 3,030 � � 362 � � 2,668 � 737.0 � Income (loss) from continuing operations before income taxes (289,381 ) 41,378 (330,759 ) NM � Income tax expense (benefit) (90,652 ) 16,527 (107,179 ) NM Income Tax Rate � 31.3 % � 39.9 % � � Income (loss) from continuing operations (198,729 ) 24,851 (223,580 ) NM � Discontinued Operations: Gain (loss) from operations, net of income tax (6,824 ) 3,622 (10,446 ) NM Loss on disposal activities, net of income tax � (42,755 ) � (2,218 ) � 40,537 � 1,827.6 � Net income (loss) $ (248,308 ) $ 26,255 � $ (274,563 ) NM � � Diluted net income (loss) per share: Continuing Operations $ (9.98 ) $ 1.19 Discontinued Operations: Gain (loss) from operations, net of income tax (0.34 ) 0.16 Loss on disposal activities, net of income tax � (2.16 ) � (0.10 ) � � Net income (loss) per share $ (12.48 ) $ 1.25 � $ (13.73 ) NM � Diluted shares outstanding � 19,904(A ) � 22,102 � � (2,198 ) (9.9 ) % � (A) Excludes shares issuable upon conversion of the convertible debt as well as common stock equivalents, as their effect on EPS would be antidilutive. � NM � Not Meaningful � Lithia Motors, Inc. � (Continuing Operations) Nine Months Ended � � � % Unaudited September 30, Increase Increase 2008 � 2007 (Decrease) (Decrease) Unit Sales: New Vehicle 33,409 41,258 (7,849) (19.0) % Used - Retail Vehicle 22,734 26,185 (3,451) (13.2) Used - Wholesale 13,690 15,902 (2,212) (13.9) Total Units Sold 69,833 83,345 (13,512) (16.2) � Average Selling Price: New Vehicle $ 28,959 $ 28,914 $ 45 0.2 % Used - Retail Vehicle 16,751 16,757 ($6) (0.0) Used - Wholesale 6,036 6,638 ($602) (9.1) � Gross Margin/Profit Data New Vehicle Retail 7.7 % 7.9 % -20 bps Used Vehicle Retail 11.3 % 14.5 % -320 bps Used Vehicle Wholesale (2.9) % 2.7 % -560 bps Service, Body & Parts 47.8 % 48.0 % -20 bps Finance & Insurance 100.0 % 100.0 % 0 bps Gross Profit Margin 16.9 % 17.1 % -20 bps New Retail Gross Profit/Unit $ 2,230 $ 2,289 -$59 Used Retail Gross Profit/Unit $ 1,888 $ 2,426 -$538 Used Wholesale Gross Profit/Unit $ (175) $ 180 -$355 Finance & Insurance/Retail Unit $ 1,157 $ 1,181 -$24 � Revenue Mix: New Vehicles 55.9 % 58.2 % Used Retail Vehicles 22.0 % 21.4 % Used Wholesale Vehicles 4.7 % 5.2 % Finance and Insurance, Net 3.8 % 3.9 % Service and Parts 13.4 % 11.1 % Fleet and other 0.2 % 0.2 % � New Vehicle Unit Sales Brand Mix: Chrysler Brands 30.1 % 34.9 % General Motors & Saturn 19.1 % 17.0 % Toyota 17.0 % 15.7 % Honda 9.3 % 7.9 % BMW 4.6 % 4.5 % Ford 4.2 % 5.6 % Nissan 4.2 % 4.3 % Hyundai 3.3 % 3.5 % Volkswagen, Audi 3.2 % 2.5 % Subaru 2.5 % 2.0 % Other 2.5 % 2.1 % � LITHIA MOTORS, INC. � � (Selected Same Store Data) Unaudited Nine Months Ended September 30, 2008 2007 Same Store Total Sales Geographic Mix: Texas 28.6 % 25.1 % Oregon 14.3 % 16.6 % California 12.7 % 14.2 % Alaska 8.9 % 7.9 % Washington 8.6 % 8.6 % Iowa 7.2 % 6.3 % Montana 6.6 % 7.1 % Idaho 5.6 % 6.2 % Nevada 4.5 % 4.9 % Colorado 1.7 % 1.7 % Nebraska 1.3 % 1.4 % � Same Store Revenue: New Vehicle Retail Sales (20.0) % (3.2) % Used Vehicle Retail Sales (15.3) % (7.4) % Used Wholesale Sales (23.6) % 7.0 % Total Vehicle Sales (excluding Fleet) (19.1) % (3.8) % Finance & Insurance Sales (17.9) % (1.0) % Service, Body and Parts Sales - % 4.2 % Total Sales (excluding Fleet) (16.9) % (2.9) % Total Gross Profit (excluding Fleet) (18.3) % (2.9) % � LITHIA MOTORS, INC. Balance Sheet Highlights (Dollars in Thousands) Unaudited � September 30, 2008 � � December 31, 2007 Cash & Cash Equivalents $17,621 $21,665 Trade Receivables(A) 79,779 109,387 Inventory 426,620 601,759 Assets held for sale 230,319 23,807 Other Current Assets 25,194 21,920 Total Current Assets 779,533 778,538 � Real Estate, net 263,815 363,391 Equipment & Other, net 58,180 98,355 Goodwill, net - 311,527 Other Assets 93,334 74,924 Total Assets $1,194,862 $1,626,735 � Flooring Notes Payable $335,439 $451,590 Liabilities held for sale 140,696 17,857 Current maturities of senior subordinated convertible notes 69,000 Other Current Liabilities 122,682 115,644 Total Current Liabilities 667,817 585,091 � Real Estate Debt 154,726 179,160 Other Long-Term Debt 99,500 276,335 Other Liabilities 16,832 77,937 Total Liabilities $938,875 $1,118,523 � Shareholders' Equity 255,987 508,212 � � Total Liabilities & Shareholders' Equity $1,194,862 $1,626,735 � � (A)Note: Includes contracts-in-transit of $30,288 and $48,474 for 2008 and 2007 � Other Balance Sheet Data (Dollars in Thousands) � Current Ratio 1.2x 1.3x LT Debt/Total Cap.(Excludes Real Estate) 28% 35% Working Capital $111,716 $193,447 Book Value per Basic Share 12.86 26.02 � The following table reconciles reported GAAP pretax income (loss) per the income statement to non-GAAP pretax income (loss): Unaudited � Three Months EndedSeptember 30, � Nine Months EndedSeptember 30 2008 � 2007 2008 � 2007 Income (loss) from continuing operations before income taxes - as reported 4,740 16,855 (289,381) 41,378 Goodwill and other asset impairment 150 - 301,000 - Pretax income from continuing operations - non-GAAP 4,890 16,855 11,619 41,378 � Income (loss) from discontinued operations before income taxes - as reported (8,437) 2,015 (80,214) 2,337 Goodwill and other asset impairment 5,256 (412) 67,129 3,693 Pretax income (loss) from discontinued operations - non-GAAP (3,181) 1,603 (13,085) 6,030 � Total Pretax income (loss) - as reported (3,697) 18,870 (369,595) 43,715 Goodwill and other asset impairment 5,406 (412) 368,129 3,693 Total Pretax income (loss) - non-GAAP 1,709 18,458 (1,466) 47,408 � The following table reconciles reported GAAP income (loss) per the income statement to non-GAAP income (loss): Unaudited � Three Months EndedSeptember 30, � Nine Months EndedSeptember 30 2008 � 2007 2008 � 2007 Income (loss) from continuing operations � as reported 2,702 10,028 (198,729) 24,851 Goodwill and other asset impairment 570 - 204,752 - Income from continuing operations � non GAAP 3,272 10,028 6,023 24,851 � Income (loss) from discontinued operations � as reported (5,065) 1,209 (49,579) 1,404 Goodwill and other asset impairment 3,545 (264) 42,755 2,217 Income (loss) from discontinued operations � non GAAP (1,520) 945 (6,824) 3,621 � Net income (loss) � as reported (2,363) 11,237 (248,308) 26,255 Goodwill and other asset impairment 4,115 (264) 247,507 2,217 Net income (loss) � non GAAP 1,752 10,973 (801) 28,472 � The following table reconciles reported GAAP diluted earnings (loss) per share (�EPS�) to non-GAAP diluted earnings (loss) per share: Unaudited Three Months EndedSeptember 30, Nine Months EndedSeptember 30 2008 2007 2008 2007 Net income per share from continuing operations � as reported 0.13 0.48 (9.98) 1.19 Goodwill and other asset impairment 0.03 - 10.28 - Net income per share from continuing operations � non GAAP 0.16 0.48 0.30 1.19 � Income (loss) per share from discontinued operations � as reported (0.25) 0.05 (2.50) 0.06 Goodwill and other asset impairment 0.18 (0.01) 2.16 0.10 Income (loss) per share from discontinued operations � non GAAP (0.07) 0.04 (0.34) 0.16 � Net income (loss) per share as reported (0.12) 0.53 (12.48) 1.25 Goodwill and other asset impairment 0.21 (0.01) 12.44 0.10 Net income (loss) per share - non GAAP 0.09 0.52 (0.04) 1.35