LAD Lithia Motors Inc

Lithia Motors, Inc. (NYSE: LAD) announced today that net income from continuing operations in the second quarter of 2009 was $4.1 million or nineteen cents per diluted share, compared to net loss from continuing operations of $201.2 million, or $10.02 per diluted share in the second quarter of 2008. As disclosed in the attached financial tables, excluding impairment charges and gains on extinguishment of debt, net income from continuing operations in the second quarter of 2009 was nineteen cents per share, compared to net income from continuing operations of ten cents per share in the second quarter of 2008.

Second quarter 2009 revenue from continuing operations totaled $402 million, compared to $532 million in the year-ago period, driven primarily by lower new vehicle sales. Same store retail new vehicle sales declined 36.8% while retail used vehicle sales increased 2.3% when compared to the same quarter last year. Service, body and parts same store sales declined 5.2% compared to the same quarter of last year.

Sid DeBoer, Lithia’s Chairman and CEO, commented: “The restructuring plan we initiated in the second quarter of 2008 is proving to be successful. Despite a new vehicle automotive market that is at historic lows, and the impact of the reorganization of both Chrysler and General Motors, Lithia is profitable. We have focused on improving gross margins and used vehicle retail sales throughout the year and are pleased with our results. We continue to right-size our organization to match industry sales volumes and performance objectives. SG&A as a percentage of gross profit declined by 730 basis points, from 86.8% in the first quarter of 2009 to 79.5% in the second quarter of 2009.”

For the six-month period ending June 30, 2009, total sales declined 27% to $769 million as compared to $1.05 billion in the same period last year. Same store new vehicle sales decreased 37.8%, retail used vehicle sales decreased 4.4% and service, body and parts sales decreased 5.5%. For the first six months, Lithia’s income from continuing operations, net of tax, and excluding asset impairment charges and gains on debt retirements was eighteen cents per share as compared to nine cents per share in 2008.

Jeff DeBoer, Senior Vice President and CFO, added: “We have generated $74.3 million in cash flows from operations in 2009. Including the effects of floorplan repayments classified as financing activities in the statement of cash flows, adjusted cash flows from operations were $48.8 million for the year to date period. We are using these proceeds and cash generated from financing and asset sales to pay down debt and strengthen the balance sheet. We remain in compliance with all debt covenants at the end of the quarter.”

The first quarter conference call may be accessed at 2:00 p.m. Pacific Time today by phone at (800) 254-5933 Conference ID: 19480043. A playback of the conference call will be available after 5 p.m. Pacific Time July 30, 2009 through August 6, 2009 by calling (800) 642-1687 access code: 19480043.

About Lithia

Lithia Motors, Inc. is a Fortune 700 Company, selling 27 brands of new and all brands of used vehicles at 88 stores, which are located in 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.

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

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.

Non-GAAP Financial Measures

The attached financial tables contain certain non-GAAP financial measures as defined under SEC rules, such as net income and diluted earnings per share from continuing operations, adjusted to exclude certain items disclosed in the attached financial tables. As required by SEC rules, the Company has provided reconciliations of these measures to the most directly comparable GAAP measures, which are set forth in the attachments to this release. The Company believes that each of the foregoing non-GAAP financial measures improves the transparency of the Company's disclosure, provides a meaningful presentation of the Company's results from its core business operations excluding the impact of items not related to the Company's ongoing core business operations, and improves the period-to-period comparability of the Company's results from its core business operations.

LITHIA MOTORS, INC.

(In thousands except per share data)

Unaudited       Three Months Ended       % June 30, Increase Increase 2009   2008 (Decrease) (Decrease) New vehicle sales $ 194,489 $ 308,830 $ (114,341 ) (37.0 ) % Used vehicle sales 130,281 135,504 (5,223 ) (3.9 ) Finance and insurance 13,917 20,263 (6,346 ) (31.3 ) Service, body and parts 62,544 65,624 (3,080 ) (4.7 ) Fleet and other revenues   597     1,432     (835 ) (58.3 ) Total revenues 401,828 531,653 (129,825 ) (24.4 )         Cost of sales   324,062     442,245     (118,183 ) (26.7 ) Gross profit 77,766 89,408 (11,642 ) (13.0 ) Asset impairment charges - 294,075 (294,075 ) (100.0 ) SG&A expense 61,858 76,892 (15,034 ) (19.6 ) Depreciation and amortization   3,991     4,261     (270 ) (6.3 ) Income (loss) from operations 11,917 (285,820 ) 297,737 104.2   Floorplan interest expense (2,416 ) (4,750 ) (2,334 ) (49.1 ) Other interest expense (2,991 ) (4,251 ) (1,260 ) (29.6 ) Other income, net   258     1,068     (810 ) (75.8 )

Income (loss) from continuingoperations before income taxes

6,768 (293,753 ) 300,521 NM   Income tax expense (benefit) 2,718 (92,545 ) 95,263 NM Income tax (benefit) rate   40.2 %   (31.5 )%    

Income (loss) from continuingoperations

4,050 (201,208 ) 205,258 NM %   Discontinued operations:

Loss from operations,net of income tax

(26 ) (3,068 ) (3,042 ) (99.2 )

Loss from disposal activities,net of income tax

  (361 )   (39,508 )   (39,147 ) (99.1 )   Net income (loss) $ 3,663   $ (243,784 )   247,447   NM   %   Diluted net income (loss) per share: Continuing operations 0.19 (10.02 ) 10.21 NM % Discontinued operations:

Loss from operations,net of income tax

- (0.15 ) Loss from disposal activities,net of income tax   (0.02 )   (1.97 )     Net income (loss) per share $ 0.17   $ (12.14 ) $ 12.31   NM   Diluted shares outstanding   21,231     20,073     1,158   5.8   %  

NM – not meaningful

 

LITHIA MOTORS, INC.

            (Continuing operations) Three Months Ended

 

% Unaudited June 30,

Increase

Increase 2009     2008 (Decrease) (Decrease)

Unit sales:

New vehicle 6,509 10,992 (4,483 ) (40.8 ) % Used - retail vehicle 6,937 6,527 410 6.3 Used - wholesale 2,855 4,082 (1,227 ) (30.1 ) Total units sold 16,301 21,601 (5,300 ) (24.5 )  

Average selling price:

New vehicle $ 29,880 $ 28,096 $ 1,784 6.4 % Used - retail vehicle 16,424 17,167 (743 ) (4.3 ) Used - wholesale 5,727 5,745 (18 ) (0.3 )  

Gross margin/profit data

New vehicle retail 8.2 % 7.8 % 40 bps Used vehicle retail 14.7 % 12.0 % 270 bps Used vehicle wholesale 0.2 % (2.8 ) % 300 bps Service, body & parts 49.4 % 48.8 % 60 bps Finance & insurance 100.0 % 100.0 % - Gross profit margin 19.4 % 16.8 % 260 bps New retail gross profit/unit $ 2,439 $ 2,179 $ 260 Used retail gross profit/unit 2,413 2,057 356 Used wholesale gross profit/unit 13 (158 ) 171 Finance & insurance/retail unit 1,035 1,157 (122 )  

Revenue mix:

New vehicles 48.4 % 58.1 % Used retail vehicles 28.3 % 21.1 % Used wholesale vehicles 4.1 % 4.4 % Finance and insurance, net 3.5 % 3.8 % Service and parts 15.6 % 12.3 % Fleet and other 0.1 % 0.3 %  

LITHIA MOTORS, INC.

            (Continuing operations) Three Months Ended Unaudited June 30, 2009 2008

New vehicle unit sales brand mix:

Chrysler Brands 28.8 %

 

29.4

% General Motors & Saturn 17.5 %

 

18.1

% Toyota 14.6 %

 

16.5

% Honda 10.6 %

 

10.4

% Ford 4.8 %

 

3.7

% BMW 5.6 %

 

4.8

% Hyundai 4.3 %

 

4.3

% Nissan 4.3 %

 

4.7

% Volkswagen, Audi 3.8 %

 

3.1

% Subaru 4.1 %

 

2.6

% Mercedes 0.7 %

 

0.6

% Other 0.9 %

 

1.8

%     (Selected Same Store Data)

 

Unaudited

Three Months Ended

June 30,

2009vs.2008

2008vs.2007

Same store revenue:

New vehicle retail sales

(36.8)

%

 

(21.0)

% Chrysler Brands

(41.4)

%

 

(32.8)

% General Motors & Saturn

(35.3)

%

 

(7.8)

% Toyota

(45.3)

%

 

(11.7)

% All other brands

(30.0)

%

 

(18.5)

% Used vehicle retail sales

2.3

%

 

(21.6)

% Used wholesale sales

(31.2)

%

 

(20.9)

% Total vehicle sales (excluding fleet)

(26.7)

%

 

(21.1)

% Finance & insurance sales

(34.8)

%

 

(20.5)

% Service, body and parts sales

(5.2)

%

 

(1.2)

% Total sales (excluding fleet)

(24.2)

%

 

(19.1)

% Total gross profit (excluding fleet)

(13.4)

%

 

(19.7)

%  

LITHIA MOTORS, INC.

            (In thousands except per share data) Unaudited Six Months Ended

%

June 30, Increase Increase 2009   2008 (Decrease) (Decrease) New vehicle sales $ 370,561 $ 598,447 $ (227,886 ) (38.1 ) % Used vehicle sales 246,078 275,933 (29,855 ) (10.8 ) Finance and insurance 26,570 40,335 (13,765 ) (34.1 ) Service, body and parts 125,091 132,621 (7,530 ) (5.7 ) Fleet and other revenues   1,133     2,342     (1,209 ) (51.6 ) Total revenues 769,433 1,049,678 (280,245 ) (26.7 )         Cost of sales   620,341     871,921     (251,580 ) (28.9 ) Gross profit 149,092 177,757 (28,665 ) (16.1 ) Asset impairment charges - 294,075 (294,075 ) (100.0 ) SG&A expense 123,794 152,302 (28,508 ) (18.7 ) Depreciation and amortization   8,065     8,559     (494 ) (5.8 ) Income (loss) from operations 17,233 (277,179 ) 294,412 106.2   Floorplan interest expense (5,122 ) (9,458 ) (4,336 ) (45.8 ) Other interest expense (6,602 ) (8,420 ) (1,818 ) (21.6 ) Other income, net   1,423     1,123     300   26.7  

Income (loss) from continuingoperations before income taxes

6,932 (293,934 ) 300,866 NM   Income tax expense (benefit) 2,798 (92,619 ) 95,417 NM Income tax (benefit) rate   40.3 %  

(31.5

)

%

   

Income (loss) from continuingoperations

4,134 (201,315 ) 205,449 NM %   Discontinued operations:

Loss from operations,net of income tax

(1,451 ) (5,122 ) (3,671 ) (60.0 )

Gain (Loss) from disposal activities,net of income tax

  2,309     (39,508 )   41,817   NM     Net income (loss) $ 4,992   $ (245,945 )   250,937   NM   %   Diluted net income (loss) per share: Continuing operations 0.20 (10.08 ) 10.28 NM % Discontinued operations:

Loss from operations,net of income tax

(0.07 ) (0.26 )

Gain (loss) from disposal activities,net of income tax

  0.11     (1.98 )     Net income (loss) per share $ 0.24   $ (12.31 ) $ 12.55   NM   Diluted shares outstanding   20,960     19,973     987   4.9   %  

NM – not meaningful

 

LITHIA MOTORS, INC.

            (Continuing Operations) Six Months Ended

 

% Unaudited June 30,

Increase

Increase 2009 2008 (Decrease) (Decrease)

Unit sales:

New vehicle 12,382 20,717 (8,335 ) (40.2 ) % Used - retail vehicle 13,412 12,911 501 3.9 Used - wholesale 5,740 8,269 (2,529 ) (30.6 ) Total units sold 31,534 41,897 (10,363 ) (24.7 )  

Average selling price:

New vehicle $ 29,927 $ 28,887 $ 1,040 3.6 % Used - retail vehicle 15,986 17,380 (1,394 ) (8.0 ) Used - wholesale 5,518 6,233 (715 ) (11.5 )  

Gross margin/profit data

New vehicle retail 8.4 % 7.8 % 60 bps Used vehicle retail 13.8 % 12.1 % 170 bps Used vehicle wholesale 1.2 % (2.0 ) % 320 bps Service, body & parts 48.7 % 48.2 % 50 bps Finance & insurance 100.0 % 100.0 % - Gross profit margin 19.4 % 16.9 % 250 bps New retail gross profit/unit $ 2,505 $ 2,254 $ 251 Used retail gross profit/unit 2,199 2,097 102 Used wholesale gross profit/unit 69 (123 ) 192 Finance & insurance/retail unit 1,030 1,199 (169 )  

Revenue mix:

New vehicles 48.2 % 57.0 % Used retail vehicles 27.9 % 21.4 % Used wholesale vehicles 4.1 % 4.9 % Finance and insurance, net 3.4 % 3.9 % Service and parts 16.3 % 12.6 % Fleet and other 0.1 % 0.2 %  

LITHIA MOTORS, INC.

        (Continuing operations) Six Months Ended Unaudited June 30, 2009 2008

New vehicle unit sales brand mix:

Chrysler Brands 31.0 %

 

31.4

% General Motors & Saturn 16.6 %

 

18.0

% Toyota 14.7 %

 

16.1

% Honda 9.5 %

 

9.3

% Ford 4.8 %

 

4.1

% BMW 5.4 %

 

4.8

% Hyundai 4.1 %

 

3.7

% Nissan 3.9 %

 

5.0

% Volkswagen, Audi 3.6 %

 

2.8

% Subaru 4.3 % 2.6 % Mercedes 0.7 % 0.5 % Other 1.4 %

 

1.7

%  

(Selected same store data)

 

Unaudited

Six Months Ended

June 30,

2009vs.2008

2008vs.2007

Same store revenue:

New vehicle retail sales (37.8 ) %

 

(17.4

)

% Chrysler Brands (40.4 ) %

 

(25.3

)

% General Motors & Saturn (40.3 ) %

 

(7.6

)

% Toyota (44.9 ) %

 

(4.9

)

% All other brands (31.0 ) %

 

(18.6

)

% Used vehicle retail sales (4.4 ) %

 

(16.0

)

% Used wholesale sales (39.4 ) %

 

(14.4

)

% Total vehicle sales (excluding fleet) (29.3 ) %

 

(16.8

)

% Finance & insurance sales (33.6 ) %

 

(16.4

)

% Service, body and parts sales (5.5 ) %

 

1.3

% Total sales (excluding fleet) (26.4 ) %

 

(14.9

)

% Total gross profit (excluding fleet) (15.5 ) %

 

(17.1

)

%  

LITHIA MOTORS, INC.

Balance sheet highlights (dollars in thousands)

Unaudited       June 30, 2009     December 31, 2008 Cash & cash equivalents $ 17,009 $ 10,874 Trade receivables* 55,975 69,615 Inventory 300,130 422,812 Assets held for sale 140,021 161,423 Other current assets   8,878   31,828 Total current assets 522,013 696,552   Real estate, net 276,449 284,088 Equipment & other, net 49,956 62,188 Other assets   89,794   90,631 Total assets $ 938,212 $ 1,133,459   Flooring notes payable $ 215,987 $ 337,700 Liabilities related to assets held for sale 81,917 108,172 Current maturities of senior subordinated convertible notes

42,500

Current maturity of line of credit 68,000 Other current liabilities   96,971   108,656 Total current liabilities 462,875 597,028   Real estate debt 174,976 163,708 Other long-term debt 12,226 101,476 Other liabilities   30,512   22,904 Total liabilities $ 680,589 $ 885,116   Shareholders' equity 257,623 248,343     Total liabilities & shareholders' equity $ 938,212 $ 1,133,459   *Note: Includes contracts-in-transit of $22,786 and $27,799 for 2009 and 2008  

Other balance sheet data

          Lt debt/total cap (excludes real estate) 5% 29% Book value per basic share $12.32 $12.30  

Debt covenant ratios

      Requirement     As of June 30, 2009 Minimum net worth Not less than $175 million $257.6 million Fixed charge coverage ratio Not less than 1.00 to 1 1.22 to 1 Cash flow leverage ratio Not more than 3.75 to 1 2.86 to 1 Minimum current ratio Not less than 1.05 to 1 1.12 to 1 The following table reconciles reported GAAP income (loss) per the income statement to non-GAAP income (loss):   Unaudited       Three Months Ended June 30, Net Income / (Loss)    

Diluted earnings pershare

Continuing Operations

2009   2008 2009   2008 As reported $ 4,050 $ (201,208 ) $ 0.19 $ (10.02 ) Goodwill impairment - 193,638 - 9.65 Franchise value impairment - 5,216 - 0.26 Other asset impairment 111 4,283 0.01 0.21 Gain on extinguishment of debt   (187 )   -     (0.01 )   -   Adjusted $ 3,974 $ 1,929 $ 0.19 $ 0.10  

Discontinued Operations

As reported $ (387 ) $ (42,576 ) $ (0.02 ) $ (2.12 ) Impairments and disposal loss   361     39,508     0.02     1.97   Adjusted $ (26 ) $ (3,068 ) - $ (0.15 )  

Consolidated Operations

As reported $ 3,663 $ (243,784 ) $ 0.17 $ (12.14 ) Adjusted $ 3,948 $ (1,139 ) $ 0.19 $ (0.05 )     Six Months Ended June 30, Net Income / (Loss)

Diluted earnings pershare

Continuing Operations

2009 2008   2009 2008 As reported $ 4,134 $ (201,315 ) $ 0.20 $ (10.08 ) Goodwill impairment - 193,638 - 9.70 Franchise value impairment - 5,216 - 0.26 Other asset impairment 336 4,283 0.02 0.21 Gain on extinguishment of debt   (785 )   -     (0.04 )   -   Adjusted $ 3,684 $ 1,822 $ 0.18 $ 0.09  

Discontinued Operations

As reported $ 858 $ (44,630 ) $ 0.04 $ (2.23 ) Impairments and disposal loss   (2,309 )   39,508     (0.11 )   1.98   Adjusted $ (1,451 ) $ (5,122 ) $ (0.07 ) $ (0.26 )  

Consolidated Operations

As reported $ 4,992 $ (245,945 ) $ 0.24 $ (12.31 ) Adjusted $ 2,233 $ (3,300 ) $ 0.11 $ (0.17 )  

The following table reconciles GAAP cash flows from operations per the statement of cash flows to non-GAAP cash flows from operations:

 

Consolidated Statement of Cash Flows

 

 

Six Months Ended June 30, 2009

As reported Cash flows from Operations $74,316 Flooring notes payable: non-trade

(25,502)

Adjusted $48,814