LAD Lithia Motors Inc

Lithia Motors, Inc. (NYSE:LAD), today reported 2009 third quarter income from continuing operations, net of income taxes, of $7.0 million, or $0.32 cents per diluted share, compared to year-ago income from continuing operations of $2.5 million, or $0.12 per diluted share. After adjusting for certain items disclosed in the attached financial tables, income from continuing operations for the 2009 third quarter was $0.33 cents per share, compared to $0.07 per share in the prior year.

Third quarter 2009 revenue from continuing operations totaled $458 million, compared to $507 million in the year-ago period, driven primarily by lower new vehicle sales. Same store new vehicle sales declined 14.3% while used vehicle retail sales increased 3.9% when compared to the prior year. Service, body and parts same store sales declined 2.8% compared to the prior year.

Other Third Quarter Operating Highlights:

• Gross profit margin improved 190 basis points over the prior year to 18.7%. New vehicle margin improved 110 basis points to 8.8%, used vehicle retail margin improved 490 basis points to 15.3%, and used vehicle wholesale margin improved 510 basis points to 0.4%.
• SG&A expense as a percentage of gross profit decreased by 730 basis points over the prior year to 75.1%. This was also a reduction of 360 basis points compared to the second quarter of 2009. This improvement was driven in part by the elimination of approximately $65 million in annualized fixed costs.
• Lithia improved same store used vehicle retail sales 3.9% while maintaining used vehicle inventory of $67 million, a 15% reduction from September 30, 2008.

Sid DeBoer, Lithia’s Chairman and CEO, commented, “We continue to produce solid gross margins and strong used vehicle retail sales. Our third quarter results also benefited from the CARS program. This incremental boost in revenue demonstrates our earnings potential as new vehicle sales levels recover and we leverage our lower cost structure. We continue to right-size to match industry sales volumes and our internal performance metrics.”

At the end of the third quarter and before the equity offering completed in October, Lithia had approximately $34 million in cash and credit availability and remained well within the limits of the financial covenants in its debt agreements.

Jeff DeBoer, Senior Vice President and CFO, said, “Adjusted cash flows from operations were $80.9 million for the year-to-date period. In October 2009, we completed a follow-on stock offering raising $43.5 million, net of underwriting commissions, and have executed an amendment to our revolving line of credit to provide $50 million in borrowing capacity. These sources of cash allow us to pursue acquisition opportunities and capitalize on current market conditions.”

For the nine-month period ending September 30, 2009, total sales declined 21% to $1.2 billion, as compared to $1.6 billion in the same period last year. Same store new vehicle sales decreased 30.3%, retail used vehicle sales decreased 1.6% and service, body and parts sales decreased 4.6%. For the first nine months, income from continuing operations was $0.53 per share, compared to a loss of $9.90 per share in 2008. After adjusting for certain items disclosed in the attached financial tables, including the non-cash impairment of goodwill, Lithia’s adjusted income from continuing operations was $0.53 per share, as compared to $0.19 per share in the prior year.

The third quarter conference call may be accessed at 2:00 p.m. Pacific Time today by phone at 800-254-5933, Conference ID: 35111411. A playback of the conference call will be available after 5 p.m. Pacific Time October 29, 2009, through November 5, 2009, by calling 800-642-1687, access code: 35111411.

About Lithia

Lithia Motors, Inc., is a Fortune 700 Company, selling 27 brands of new and all brands of used vehicles at 87 stores, which are located in 12 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 % September 30, Increase Increase 2009   2008 (Decrease) (Decrease) New vehicle sales $241,577 $282,669 $(41,092) (14.5) % Used vehicle sales 136,164 137,230 (1,066) (0.8) Finance and insurance 14,685 19,400 (4,715) (24.3) Service, body and parts 64,960 66,728 (1,768) (2.6) Fleet and other revenues 814 846 (32) (3.8) Total revenues 458,200 506,873 (48,673) (9.6)         Cost of sales 372,367 421,834 (49,467) (11.7) Gross profit 85,833 85,039 794 0.9 SG&A expense 64,492 70,079 (5,587) (8.0) Depreciation and amortization 3,923 4,073 (150) (3.7) Income from operations 17,418 10,887 6,531 60.0   Floorplan interest expense (2,886) (4,300)

1,414

32.9

Other interest expense (2,943) (4,070)

1,127

27.7

Other income, net 24 1,881 (1,857) (98.7) Income from continuing operations before income taxes 11,613 4,398 7,215 164.1   Income tax expense 4,631 1,911 2,720 142.3 Income tax rate 39.9% 43.5%     Income from continuing operations 6,982 2,487 4,495 180.7 %   Loss from discontinued operations,

net of income tax

(1,269) (4,850) 3,581 73.8

%

Net income (loss) $5,713 $(2,363)

$8,076

NM

 

  Diluted net income (loss) per share: Continuing operations 0.32 0.12 0.20 166.7 % Discontinued operations (0.06) (0.24) 0.18 75.0 Net income (loss) per share $0.26 $(0.12) $0.38

NM

Diluted shares outstanding 21,573 20,371 1,202 5.9 %    

NM – not meaningful

      LITHIA MOTORS, INC.

(Continuing operations)

Unaudited

Three Months Ended

September 30,

Increase

%

Increase

2009 2008 (Decrease) (Decrease)

Unit sales:

New vehicle 8,364 9,450 (1,086) (11.5) % Used - retail vehicle 7,156 7,059 97 1.4 Used - wholesale 3,817 3,884 (67) (1.7) Total units sold 19,337 20,393 (1,056) (5.2)   Average selling price: New vehicle $ 28,883 $ 29,912 $ (1,029) (3.4) % Used - retail vehicle 16,445 16,166 279 1.7 Used - wholesale 4,843 5,951 (1,108) (18.6)   Gross margin/profit data New vehicle retail 8.8 % 7.7 % 110 bps Used vehicle retail 15.3 % 10.4 % 490 bps Used vehicle wholesale 0.4 % (4.7) % 510 bps Service, body & parts 48.4 % 49.2 % (80) bps Finance & insurance 100.0 % 100.0 % - Gross profit margin 18.7 % 16.8 % 190 bps New retail gross profit/unit $2,550 $2,291 $259 Used retail gross profit/unit 2,519 1,678 841 Used wholesale gross profit/unit 18 (279) 297 Finance & insurance/retail unit 946 1,175 (229)   Revenue mix: New vehicles 52.7 % 55.8 % Used retail vehicles 25.7 % 22.5 % Used wholesale vehicles 4.0 % 4.6 % Finance and insurance, net 3.2 % 3.8 % Service and parts 14.2 % 13.2 % Fleet and other 0.2 % 0.1 %     LITHIA MOTORS, INC. (Continuing operations)

Unaudited

  Three Months Ended

September 30,

2009   2008 New vehicle unit sales brand mix: Chrysler Brands 27.3 % 30.3 % General Motors & Saturn 16.1 % 20.5 % Toyota 15.9 % 15.6 % Honda 9.3 % 8.7 % Ford 4.4 % 3.4 % BMW 4.8 % 5.9 % Hyundai 6.2 % 3.7 % Nissan 4.9 % 3.9 % Volkswagen, Audi 3.7 % 3.1 % Subaru 5.2 % 3.2 % Mercedes 0.6 % 0.6 % Other 1.6 % 1.1 %  

(Selected Same Store Data)

Unaudited

Three Months Ended September 30,

2009

vs.

2008

 

2008

vs.

2007

Same store revenue: New vehicle retail sales (14.3) % (24.9) % Chrysler Brands (21.3) % (37.2) % General Motors & Saturn (29.0) % (5.3) % Toyota (14.8) % (17.8) % All other brands 1.8 % (23.8) % Used vehicle retail sales 3.9 % (14.5) % Used wholesale sales (19.1) % (37.3) % Total vehicle sales (excluding fleet) (9.6) % (23.2) % Finance & insurance sales (23.3) % (21.5) % Service, body and parts sales (2.8) % (0.4) % Total sales (excluding fleet) (9.2) % (20.7) % Total gross profit (excluding fleet) 1.4 % (20.4) %        

LITHIA MOTORS, INC.

(In thousands except per share data)

Unaudited

Nine Months Ended % September 30, Increase Increase 2009   2008 (Decrease) (Decrease) New vehicle sales $612,138 $881,116 $(268,978) (30.5) % Used vehicle sales 382,242 413,163 (30,921) (7.5) Finance and insurance 41,255 59,735 (18,480) (30.9) Service, body and parts 190,051 199,349 (9,298) (4.7) Fleet and other revenues 1,947 3,188 (1,241) (38.9) Total revenues 1,227,633 1,556,551 (328,918) (21.1)         Cost of sales 992,708 1,293,755 (301,047) (23.3) Gross profit 234,925 262,796 (27,871) (10.6) Asset impairment charges - 294,075 (294,075) (100.0) SG&A expense 188,286 222,381 (34,095) (15.3) Depreciation and amortization 11,988 12,632 (644) (5.1) Income (loss) from operations 34,651 (266,292) 300,943 113.0   Floorplan interest expense (8,008) (13,758) 5,750 41.8 Other interest expense (9,545) (12,490) 2,945 23.6 Other income, net 1,447 3,004 (1,557) (51.8) Income (loss) from continuing operations before income taxes 18,545 (289,536) 308,081 NM   Income tax expense (benefit) 7,429 (90,720) 98,149 NM Income tax (benefit) rate 40.1% (31.3)%     Income (loss) from continuing operations 11,116 (198,816) 209,932 NM

 

  Loss from discontinued operations,

net of income tax

(411) (49,492) 49,081 NM   Net income (loss) $10,705 $(248,308)

$259,013

NM

 

  Diluted net income (loss) per share: Continuing operations 0.53 (9.90) 10.43 NM

 

Discontinued operations (0.02) (2.46) 2.44 NM Net income (loss) per share $0.51 $(12.36) $12.87 NM Diluted shares outstanding 21,595 20,086 1,509 7.5 %    

NM – not meaningful

        LITHIA MOTORS, INC.

(Continuing Operations)

Unaudited

Nine Months Ended

September 30,

Increase

%

Increase

2009   2008 (Decrease) (Decrease) Unit sales: New vehicle 20,746 30,167 (9,421) (31.2) % Used - retail vehicle 20,568 19,970 598 3.0 Used - wholesale 9,557 12,153 (2,596) (21.4) Total units sold 50,871 62,290 (11,419) (18.3)   Average selling price: New vehicle $ 29,506 $ 29,208 $ 298 1.0 % Used - retail vehicle 16,146 16,951 (805) (4.7) Used - wholesale 5,249 6,143 (894) (14.6)   Gross margin/profit data New vehicle retail 8.6 % 7.8 % 80 bps Used vehicle retail 14.3 % 11.5 % 280 bps Used vehicle wholesale 0.9 % (2.8) % 370 bps Service, body & parts 48.6 % 48.5 % 10 bps Finance & insurance 100.0 % 100.0 % - Gross profit margin 19.1 % 16.9 % 220 bps New retail gross profit/unit $2,523 $2,266 $257 Used retail gross profit/unit 2,310 1,949 361 Used wholesale gross profit/unit 48 (173) 221 Finance & insurance/retail unit 999 1,191 (192)   Revenue mix: New vehicles 49.9 % 56.6 % Used retail vehicles 27.0 % 21.7 % Used wholesale vehicles 4.1 % 4.8 % Finance and insurance, net 3.4 % 3.8 % Service and parts 15.5 % 12.8 % Fleet and other 0.1 % 0.3 %     LITHIA MOTORS, INC. (Continuing operations)

Unaudited

Nine Months Ended

September 30,

2009       2008 New vehicle unit sales brand mix: Chrysler Brands 29.5 % 31.1 % General Motors & Saturn 16.4 % 18.8 % Toyota 15.2 % 16.0 % Honda 9.4 % 9.1 % Ford 4.6 % 3.9 % BMW 5.2 % 5.1 % Hyundai 5.0 % 3.7 % Nissan 4.3 % 4.6 % Volkswagen, Audi 3.7 % 2.9 % Subaru 4.6 % 2.8 % Mercedes 0.7 % 0.6 % Other 1.4 % 1.4 %  

(Selected same store data)

Unaudited

Nine Months Ended September 30,

2009

vs.

2008

   

2008

vs.

2007

Same store revenue: New vehicle retail sales (30.3 ) %

 

(19.9

) % Chrysler Brands (34.4 ) %

 

(29.5

) % General Motors & Saturn (36.4 ) %

 

(6.8

) % Toyota (35.5 ) %

 

(9.3

) % All other brands (20.6 ) %

 

(20.3

) % Used vehicle retail sales (1.6 ) %

 

(15.5

) % Used wholesale sales (33.2 ) %

 

(23.0

) % Total vehicle sales (excluding fleet) (23.0 ) %

 

(19.0

) % Finance & insurance sales (30.2 ) %

 

(18.1

) % Service, body and parts sales (4.6 ) %

 

0.7

% Total sales (excluding fleet) (20.8 ) %

 

(16.9

) % Total gross profit (excluding fleet) (10.0 ) %

 

(18.2

) %    

LITHIA MOTORS, INC.

Balance sheet highlights (dollars in thousands) Unaudited September 30, 2009 December 31, 2008 Cash & cash equivalents $4,382 $10,874 Trade receivables* 49,687 69,615 Inventory 255,036 422,812 Assets held for sale 124,845 161,423 Other current assets 8,948 31,828 Total current assets 442,898 696,552   Real estate, net 274,435 284,088 Equipment & other, net 48,836 62,188 Other assets 91,052 90,631 Total assets $857,221 $1,133,459   Flooring notes payable $179,420 $337,700 Liabilities related to assets held for sale 74,723 108,172 Current maturities of senior subordinated convertible notes -

42,500

Other current liabilities 95,821 108,656 Total current liabilities 349,964 597,028   Real estate debt 181,718 163,708 Other long-term debt 32,196 101,476 Other liabilities 29,588 22,904 Total liabilities $593,466 $885,116   Shareholders' equity 263,755 248,343     Total liabilities & shareholders' equity $857,221 $1,133,459   *Note: Includes contracts-in-transit of $18,899 and $27,799 for 2009 and 2008, respectively   Other balance sheet data Lt debt/total cap (excludes real estate) 11% 29% Book value per basic share $12.56 $12.30   Debt covenant ratios Requirement   As of September 30, 2009 Minimum net worth Not less than $183 million $263.8 million Fixed charge coverage ratio Not less than 1.00 to 1 1.30 to 1 Cash flow leverage ratio Not more than 3.25 to 1 0.94 to 1 Minimum current ratio Not less than 1.05 to 1 1.27 to 1    

The following table reconciles reported GAAP income (loss) per the income statement to non-GAAP income (loss):

  Unaudited Three Months Ended September 30, Net Income / (Loss)  

Diluted earnings per

share

Continuing Operations 2009   2008 2009   2008 As reported $6,982 $2,487 $0.32 $0.12 Asset impairments 227 75 0.01 - Gain on extinguishment of debt - (1,111) - (0.05) Adjusted $7,209 $1,451 $0.33 $0.07   Discontinued Operations As reported $(1,269) $(4,850) $(0.06) $(0.24) Impairments and disposal loss 1,668 3,103 0.08 0.15 Adjusted $399 $(1,747) 0.02 $(0.09)   Consolidated Operations As reported $5,713 $(2,363) $0.26 $(0.12) Adjusted $7,608 $(296) $0.35 $(0.02)   Nine Months Ended September 30, Net Income / (Loss)  

Diluted earnings per

share

Continuing Operations 2009   2008   2009   2008 As reported $11,116 $(198,816) $0.53 $(9.90) Asset impairments 572 203,920 0.03 10.15 Gain on extinguishment of debt (700) (1,111) (0.03) (0.06) Adjusted $10,988 $3,993 $0.53 $0.19   Discontinued Operations As reported $(411) $(49,492) $(0.02) $(2.46) Impairments and disposal (gain) loss (715) 42,658 (0.03) 2.12 Adjusted $(1,126) $(6,834) $(0.05) $(0.34)   Consolidated Operations As reported $10,705 $(248,308) $0.51 $(12.36) Adjusted $9,862 $(2,841) $0.48 $(0.15)  

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

Nine Months Ended

September 30, 2009

 

As reported Cash flows from Operations $73,483 Flooring notes payable: non-trade 7,384 Adjusted $80,867