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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


 

FORM 10-Q

 


 

(Mark One)

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2014

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from       to      

 

Commission file number: 001-14733

 


 

LITHIA MOTORS, INC.

(Exact name of registrant as specified in its charter)

Oregon

 

93-0572810

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

     

150 N. Bartlett Street, Medford, Oregon

 

97501

(Address of principal executive offices)

 

(Zip Code)

 

Registrant's telephone number, including area code: 541-776-6401

 


 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer [X] Accelerated filer [ ] Non-accelerated filer [ ] (Do not check if a smaller reporting company)     Smaller reporting company [ ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class A common stock without par value

 

23,545,648

Class B common stock without par value

 

2,562,231

(Class)

 

(Outstanding at August 8, 2014)

 

 

 

 



 
 

 

 

LITHIA MOTORS, INC.

FORM 10-Q

INDEX 

 

PART I - FINANCIAL INFORMATION

Page

     

Item 1.

Financial Statements

 
     
 

Consolidated Balance Sheets (Unaudited) – June 30, 2014 and December 31, 2013

2

     
 

Consolidated Statements of Operations (Unaudited) – Three and Six Months Ended June 30, 2014 and 2013

3

     
 

Consolidated Statements of Comprehensive Income (Unaudited) – Three and Six Months Ended June 30, 2014 and 2013

4

     
 

Consolidated Statements of Cash Flows (Unaudited) – Six Months Ended June 30, 2014 and 2013

5

     
 

Condensed Notes to Consolidated Financial Statements (Unaudited)

6

     

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

19

     

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

40

     

Item 4.

Controls and Procedures

40

     

PART II - OTHER INFORMATION

 
     

Item 1.

Legal Proceedings

40

     

Item 1A.

Risk Factors

41

     

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

41

     

Item 6.

Exhibits

41

     

Signatures

42

  

 
1

 

 

LITHIA MOTORS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(In thousands)

(Unaudited)

 

 

   

June 30,

   

December 31,

 
   

2014

   

2013

 

Assets

               

Current Assets:

               

Cash and cash equivalents

  $ 28,203     $ 23,686  

Accounts receivable, net

    191,228       170,519  

Inventories, net

    981,223       859,019  

Deferred income taxes

    222       1,548  

Other current assets

    12,028       15,251  

Assets held for sale

    -       11,526  

Total Current Assets

    1,212,904       1,081,549  
                 

Property and equipment, net of accumulated depreciation of $113,594 and $106,871

    528,254       481,212  

Goodwill

    65,004       49,511  

Franchise value

    77,728       71,199  

Deferred income taxes

    14,624       10,256  

Other non-current assets

    41,613       31,394  

Total Assets

  $ 1,940,127     $ 1,725,121  
                 
                 

Liabilities and Stockholders' Equity

               

Current Liabilities:

               

Floor plan notes payable

  $ 20,598     $ 18,789  

Floor plan notes payable: non-trade

    806,684       695,066  

Current maturities of long-term debt

    7,578       7,083  

Trade payables

    56,384       51,159  

Accrued liabilities

    112,742       94,143  

Liabilities related to assets held for sale

    -       6,271  

Total Current Liabilities

    1,003,986       872,511  
                 

Long-term debt, less current maturities

    260,835       245,471  

Deferred revenue

    48,918       44,005  

Other long-term liabilities

    34,537       28,412  

Total Liabilities

    1,348,276       1,190,399  
                 

Stockholders' Equity:

               

Preferred stock - no par value; authorized 15,000 shares; none outstanding

    -       -  

Class A common stock - no par value; authorized 100,000 shares; issued and outstanding 23,544 and 23,329

    266,172       268,255  

Class B common stock - no par value; authorized 25,000 shares; issued and outstanding 2,562 and 2,562

    319       319  

Additional paid-in capital

    26,045       22,598  

Accumulated other comprehensive loss

    (1,259 )     (1,538 )

Retained earnings

    300,574       245,088  

Total Stockholders' Equity

    591,851       534,722  

Total Liabilities and Stockholders' Equity

  $ 1,940,127     $ 1,725,121  

 

See accompanying condensed notes to consolidated financial statements.

 

 
2

 

 

LITHIA MOTORS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

 

 

   

Three Months Ended June 30,

   

Six Months Ended June 30,

 
   

2014

   

2013

   

2014

   

2013

 

Revenues:

                               

New vehicle

  $ 694,484     $ 569,487     $ 1,274,006     $ 1,062,928  

Used vehicle retail

    310,475       258,465       612,368       497,693  

Used vehicle wholesale

    44,286       37,691       86,979       77,197  

Finance and insurance

    43,838       34,218       83,469       65,881  

Service, body and parts

    114,337       94,462       218,954       184,902  

Fleet and other

    14,382       14,182       24,132       22,984  

Total revenues

    1,221,802       1,008,505       2,299,908       1,911,585  

Cost of sales:

                               

New vehicle

    648,490       530,699       1,188,988       989,493  

Used vehicle retail

    266,408       219,572       527,505       423,827  

Used vehicle wholesale

    42,782       36,996       84,144       75,528  

Service, body and parts

    58,155       47,769       111,940       94,430  

Fleet and other

    13,667       13,636       22,970       22,036  

Total cost of sales

    1,029,502       848,672       1,935,547       1,605,314  

Gross profit

    192,300       159,833       364,361       306,271  

Selling, general and administrative

    125,463       109,283       247,292       210,414  

Depreciation and amortization

    5,825       4,899       11,332       9,620  

Operating income

    61,012       45,651       105,737       86,237  

Floor plan interest expense

    (3,215 )     (3,036 )     (6,199 )     (6,485 )

Other interest expense

    (1,869 )     (1,941 )     (3,843 )     (4,302 )

Other income, net

    1,146       584       2,083       1,385  

Income from continuing operations before income taxes

    57,074       41,258       97,778       76,835  

Income tax provision

    (21,904 )     (15,977 )     (37,914 )     (29,672 )

Income from continuing operations, net of income tax

    35,170       25,281       59,864       47,163  

Income from discontinued operations, net of income tax

    3,139       274       3,179       447  

Net income

  $ 38,309     $ 25,555     $ 63,043     $ 47,610  
                                 

Basic income per share from continuing operations

  $ 1.35     $ 0.98     $ 2.30     $ 1.83  

Basic income per share from discontinued operations

    0.12       0.01       0.12       0.02  

Basic net income per share

  $ 1.47     $ 0.99     $ 2.42     $ 1.85  
                                 

Shares used in basic per share calculations

    26,119       25,782       26,047       25,730  
                                 

Diluted income per share from continuing operations

  $ 1.34     $ 0.97     $ 2.27     $ 1.81  

Diluted income per share from discontinued operations

    0.11       0.01       0.12       0.01  

Diluted net income per share

  $ 1.45     $ 0.98     $ 2.39     $ 1.82  
                                 

Shares used in diluted per share calculations

    26,331       26,134       26,326       26,120  

 

See accompanying condensed notes to consolidated financial statements.

 

 
3

 

 

LITHIA MOTORS, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited) 

 

   

Three Months Ended June 30,

   

Six Months Ended June 30,

 
   

2014

   

2013

   

2014

   

2013

 

Net income

  $ 38,309     $ 25,555     $ 63,043     $ 47,610  

Other comprehensive income, net of tax:

                               

Gain on cash flow hedges, net of tax expense of $81, $209, $174, and $524 respectively

    130       338       279       844  

Comprehensive income

  $ 38,439     $ 25,893     $ 63,322     $ 48,454  

 

See accompanying condensed notes to consolidated financial statements.

 

 
4

 

 

LITHIA MOTORS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

   

Six Months Ended June 30,

 
   

2014

   

2013

 

Cash flows from operating activities:

               

Net income

  $ 63,043     $ 47,610  

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

               

Depreciation and amortization

    11,332       9,620  

Stock-based compensation

    3,259       2,603  

Loss on disposal of other assets

    62       33  

Gain on sale of franchise

    (5,744 )     -  

Deferred income taxes

    2,840       825  

Excess tax benefit from share-based payment arrangements

    (6,058 )     (5,408 )

(Increase) decrease (net of acquisitions and dispositions):

               

Trade receivables, net

    (20,709 )     (10,684 )

Inventories

    (77,300 )     (48,899 )

Other current assets

    1,360       5,980  

Other non-current assets

    (7,311 )     (3,394 )

Increase (decrease) (net of acquisitions and dispositions):

               

Floor plan notes payable, net

    368       3,384  

Trade payables

    1,411       2,078  

Accrued liabilities

    17,594       8,812  

Other long-term liabilities and deferred revenue

    11,659       11,889  

Net cash provided by (used in) operating activities

    (4,194 )     24,449  
                 

Cash flows from investing activities:

               

Principal payments received on notes receivable

    -       61  

Capital expenditures

    (35,230 )     (22,107 )

Proceeds from sales of assets

    103       420  

Payments for life insurance policies

    (3,454 )     (2,566 )

Cash paid for acquisitions

    (79,482 )     (31,786 )

Cash from dispositions

    10,617       -  

Net cash used in investing activities

    (107,446 )     (55,978 )
                 

Cash flows from financing activities:

               

Borrowings on floor plan notes payable: non-trade, net

    112,910       5,989  

Borrowings on lines of credit

    578,000       358,000  

Repayments on lines of credit

    (567,000 )     (327,318 )

Principal payments on long-term debt, scheduled

    (3,693 )     (3,667 )

Principal payments on long-term debt and capital leases, other

    -       (25,770 )

Proceeds from issuance of long-term debt

    5,392       4,721  

Proceeds from issuance of common stock

    2,253       2,843  

Repurchase of common stock

    (10,206 )     (7,903 )

Excess tax benefit from share-based payment arrangements

    6,058       5,408  

Dividends paid

    (7,557 )     (3,356 )

Net cash provided by financing activities

    116,157       8,947  
                 

Decrease in cash and cash equivalents

    4,517       (22,582 )
                 

Cash and cash equivalents at beginning of period

    23,686       42,839  

Cash and cash equivalents at end of period

  $ 28,203     $ 20,257  
                 
                 

Supplemental disclosure of cash flow information:

               

Cash paid during the period for interest

  $ 10,218     $ 10,989  

Cash paid during the period for income taxes, net

    23,444       16,111  
                 

Supplemental schedule of non-cash activities:

               

Debt issued in connection with acquisitions

    3,161       -  

Floorplan debt paid in connection with dealership disposals

    3,311       -  

 

See accompanying condensed notes to consolidated financial statements.

 

 
5

 

 

LITHIA MOTORS, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 1. Interim Financial Statements

 

Basis of Presentation

These condensed Consolidated Financial Statements contain unaudited information as of June 30, 2014 and for the three- and six-month periods ended June 30, 2014 and 2013. The unaudited interim financial statements have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain disclosures required by accounting principles generally accepted in the United States of America for annual financial statements are not included herein. In management’s opinion, these unaudited financial statements reflect all adjustments (which include only normal recurring adjustments) necessary for a fair presentation of the information when read in conjunction with our 2013 audited Consolidated Financial Statements and the related notes thereto. The financial information as of December 31, 2013 is derived from our 2013 Annual Report on Form 10-K. The interim condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and the notes thereto included in our 2013 Annual Report on Form 10-K. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full year.

 

Reclassifications

Certain reclassifications of amounts previously reported have been made to the accompanying consolidated financial statements to maintain consistency and comparability between periods presented.

 

These reclassifications had no impact on previously reported net income.

 

Note 2. Accounts Receivable

Accounts receivable consisted of the following (in thousands):

 

   

June 30,
2014

   

December 31,

2013

 

Contracts in transit

  $ 99,390     $ 85,272  

Trade receivables

    24,960       23,154  

Vehicle receivables

    25,728       23,606  

Manufacturer receivables

    33,852       31,662  

Auto loan receivables

    17,828     $ 11,438  

Other receivables

    5,573       5,622  
      207,331       180,754  

Less: Allowance

    (805 )     (546 )

Less: Long-term portion of accounts receivable, net

    (15,298 )     (9,689 )

Total accounts receivable, net

  $ 191,228     $ 170,519  

 

Accounts receivable classifications include the following:

 

Contracts in transit are receivables from various lenders for the financing of vehicles that we have arranged on behalf of the customer and are typically received within five to ten days of selling a vehicle.

 

Trade receivables are comprised of amounts due from customers, lenders for the commissions earned on financing and third parties for commissions earned on service contracts and insurance products.

 

Vehicle receivables represent receivables for the portion of the vehicle sales price paid directly by the customer.

 

Manufacturer receivables represent amounts due from manufacturers including holdbacks, rebates, incentives and warranty claims.

 

Auto loan receivables include amounts due from customers related to retail sales of vehicles and certain finance and insurance products.

  

 
6

 

 

Interest income on auto loan receivables is recognized based on the contractual terms of each loan and is accrued until repayment, charge-off or repossession. Direct costs associated with loan originations are capitalized and expensed as interest income is recognized on the loans. All other receivables are recorded at invoice and do not bear interest until they are 60 days past due.

 

The allowance for doubtful accounts is estimated based on our historical write-off experience and is reviewed monthly. Consideration is given to recent delinquency trends and recovery rates. Account balances are charged against the allowance after all appropriate means of collection have been exhausted and the potential for recovery is considered remote. The annual activity for charges and subsequent recoveries is immaterial.

 

The long-term portion of accounts receivable was included as a component of other non-current assets in the Consolidated Balance Sheets.

 

Note 3. Inventories

The components of inventory consisted of the following (in thousands):

 

   

June 30,
2014

   

December 31,

2013

 

New vehicles

  $ 741,220     $ 657,043  

Used vehicles

    203,645       167,814  

Parts and accessories

    36,358       34,162  

Total inventories

  $ 981,223     $ 859,019  

 

Note 4. Goodwill

The changes in the carrying amounts of goodwill are as follows (in thousands):

 

   

Goodwill

 

Balance as of December, 31, 2012, gross

  $ 331,313  

Accumulated impairment loss

    (299,266 )

Balance as of December 31, 2012, net

    32,047  

Additions through acquisitions

    17,464  

Balance as of December 31, 2013, net

    49,511  

Additions through acquisition

    15,493  

Balance as of June 30, 2014, net

  $ 65,004  

 

Note 5. Commitments and Contingencies

 

Litigation

We are party to numerous legal proceedings arising in the normal course of our business. Although we do not anticipate that the resolution of legal proceedings arising in the normal course of business or the proceedings described below will have a material adverse effect on our business, results of operations, financial condition, or cash flows, we cannot predict this with certainty.

 

 
7

 

 

Alaska Consumer Protection Act Claims

In December 2006, a class action suit was filed against us (Jackie Neese, et al vs. Lithia Chrysler Jeep of Anchorage, Inc., et al, Case No. 3AN-06-13341 CI), and in April 2007, a second class action suit (Jackie Neese, et al vs. Lithia Chrysler Jeep of Anchorage, Inc, et al, Case No. 3AN-06-4815 CI) was filed against us, in the Superior Court for the State of Alaska, Third Judicial District at Anchorage. These suits were subsequently consolidated. In the consolidated suit, plaintiffs alleged that we, through our Alaska dealerships, engaged in three practices that purportedly violate Alaska consumer protection laws: (i) charging customers dealer fees and costs (including document preparation fees) not disclosed in the advertised price, (ii) failing to disclose the acquisition, mechanical and accident history of used vehicles or whether the vehicles were originally manufactured for sale in a foreign country, and (iii) engaging in deception, misrepresentation and fraud by providing to customers financing from third parties without disclosing that we receive a fee or discount for placing that loan. The suit sought statutory damages of $500 for each violation or three times plaintiff’s actual damages, whichever was greater, and attorney fees and costs.

 

In June 2013, the parties agreed to mediate the claims. The mediation resulted in a settlement agreement that received the final approval of the Court on December 11, 2013.  Under the settlement agreement, we agreed to reimburse plaintiffs’ legal fees and to pay (i) $450 in the form of cash and vouchers to valid claimants and (ii) $3,000 for each claim representative. The majority of cash and vouchers have been mailed.

 

We have recorded expenses of $6.7 million to settle all claims against us and to pay plaintiffs’ legal fees. Of this amount, $0.7 million in expense was recorded in the six months ended June 30, 2014, as a component of selling, general and administrative expense in our Consolidated Statements of Operations. As of June 30, 2014, the liability for unused vouchers, assuming an expected redemption rate, was $1.3 million and is recorded as a component of accrued liabilities on the Consolidated Balance Sheet. We believe that these estimates are reasonable; however, actual cost could differ materially.

 

Note 6. Stockholders’ Equity

 

Reclassification From Accumulated Other Comprehensive Loss

The reclassification from accumulated other comprehensive loss was as follows (in thousands):

 

   

Three Months

Ended
June 30, 2014

   

Six Months

Ended
June 30, 2014

 

Affected Line Item in the

Consolidated Statements

of Operations

Loss on cash flow hedges

  $ (118 )   $ (252 )

Floor plan interest expense

Taxes

    45       96  

Income tax provision

Loss on cash flow hedges, net

  $ (73 )   $ (156 )  

 

See Note 9 for more details regarding our derivative contracts.

 

Share Repurchases

In 2011 and 2012, our Board of Directors authorized the repurchase of up to a total of 3,000,000 shares of our Class A common stock. In the six months ended June 30, 2014, we repurchased 45,000 shares at an average price of $71.73 per share, for a total of $3.2 million. Through June 30, 2014, we have repurchased 1,318,047 shares and 1,681,953 shares remained available for repurchase. This authority to repurchase shares does not have an expiration date and we may continue to repurchase shares from time to time as conditions warrant.

 

In addition, we repurchased 106,772 shares during the first six months of 2014 at an average price of $65.36, for a total of $7.0 million, related to tax withholdings associated with the vesting of restricted stock units. 

 

 
8

 

 

Dividends

Dividends paid on our Class A and Class B common stock in the six months ended June 30, 2014 were as follows:

 

Quarter paid:

 

Dividend

amount per

share

   

Total amount of

dividend (in

thousands)

 

First quarter

  $ 0.13     $ 3,378  

Second quarter

    0.16       4,179  

 

See Note 14 for a discussion of a dividend related to our second quarter 2014 financial results.

 

Note 7. Deferred Compensation and Long-Term Incentive Plan

We offer a deferred compensation and long-term incentive plan (the “LTIP”) to provide certain employees the ability to accumulate assets for retirement on a tax deferred basis. We may make discretionary contributions to the LTIP. Discretionary contributions vest between one and seven years based on the employee’s age and position. Additionally, a participant may defer a portion of his or her compensation and receive the deferred amount upon certain events, including termination or retirement.

 

In 2014, we made discretionary contributions of $2.1 million to the LTIP. Participants will receive a guaranteed return of 5.25% in 2014. We recognized compensation expense related to the LTIP as follows (in thousands):

 

   

Three Months Ended

June 30,

   

Six Months Ended

June 30,

 
   

2014

   

2013

   

2014

   

2013

 

Compensation expense

  $ 377     $ 352     $ 1,077     $ 686  

 

As of June 30, 2014 and December 31, 2013, the balance due to participants was $9.4 million and $7.1 million, respectively, and was included as a component of other long-term liabilities in the Consolidated Balance Sheets.

 

Note 8. Fair Value Measurements

Factors used in determining the fair value of our financial assets and liabilities are summarized into three broad categories:

 

Level 1 – quoted prices in active markets for identical securities;

 

Level 2 – other significant observable inputs, including quoted prices for similar securities, interest rates, prepayment spreads and credit risk; and

 

Level 3 – significant unobservable inputs, including our own assumptions in determining fair value.

 

The inputs or methodology used for valuing financial assets and liabilities are not necessarily an indication of the risk associated with investing in them.

 

We use the income approach to determine the fair value of our interest rate swap using observable Level 2 market expectations at each measurement date and an income approach to convert estimated future cash flows to a single present value amount (discounted) assuming that participants are motivated, but not compelled, to transact. Level 2 inputs for the swap valuation are limited to quoted prices for similar assets or liabilities in active markets (specifically futures contracts on LIBOR for the first two years) and inputs other than quoted prices that are observable for the asset or liability (specifically LIBOR cash and swap rates and credit risk at commonly quoted intervals). Mid-market pricing is used as a practical expedient for fair value measurements. Key inputs, including the cash rates for very short-term borrowings, futures rates for up to two years and LIBOR swap rates beyond the derivative maturity are used to predict future reset rates to discount those future cash flows to present value at the measurement date.

 

 
9

 

 

Inputs are collected from Bloomberg on the last market day of the period and used to determine the rate used to discount the future cash flows. The valuation of the interest rate swap also takes into consideration our own, as well as the counterparty’s, risk of non-performance under the contract.

 

There were no changes to our valuation techniques during the six-month period ended June 30, 2014.

 

Assets and Liabilities Measured at Fair Value

Following are the disclosures related to our assets and (liabilities) that are measured at fair value (in thousands):

 

Fair Value at June 30, 2014

 

Level 1

   

Level 2

   

Level 3

 

Measured on a recurring basis:

                       

Derivative contract, net

  $ -     $ (2,375 )   $ -  

 

Fair Value at December 31, 2013

 

Level 1

   

Level 2

   

Level 3

 

Measured on a recurring basis:

                       

Derivative contract, net

  $ -     $ (2,900 )   $ -  

 

See Note 9 for more details regarding our derivative contracts.

 

Fair Value Disclosures for Financial Assets and Liabilities

We determined the carrying value of cash equivalents, accounts receivable, trade payables, accrued liabilities and short-term borrowings approximate their fair values because of the nature of their terms and current market rates of these instruments. We believe the carrying value of our variable rate debt approximates fair value.

 

We have fixed-rate debt and calculate the estimated fair value of our fixed-rate debt using a discounted cash flow methodology. Using estimated current interest rates based on a similar risk profile and duration (Level 2), the fixed cash flows are discounted and summed to compute the fair value of the debt. As of June 30, 2014, this debt had maturity dates between November 2016 and May 2031. A summary of the aggregate carrying values and fair values of our long-term fixed-interest rate debt is as follows (in thousands):

 

   

June 30,
2014

   

December 31,

2013

 

Carrying value

  $ 138,283     $ 132,616  

Fair value

    135,762       126,786  

 

Note 9. Derivative Financial Instrument

From time to time, we enter into interest rate swaps to fix a portion of our interest expense. We do not enter into derivative instruments for any purpose other than to manage interest rate exposure to fluctuations in the one-month LIBOR benchmark. That is, we do not engage in interest rate speculation using derivative instruments.

 

As of June 30, 2014, we had a $25 million interest rate swap outstanding with U.S. Bank Dealer Commercial Services. This interest rate swap matures on June 15, 2016 and has a fixed rate of 5.587% per annum. The variable rate on the interest rate swap is the one-month LIBOR rate. At June 30, 2014, the one-month LIBOR rate was 0.15% per annum, as reported in the Wall Street Journal.

 

Typically, we designate all interest rate swaps as cash flow hedges and, accordingly, we record the change in fair value for the effective portion of these interest rate swaps in comprehensive income rather than net income until the underlying hedged transaction affects net income. If a swap is no longer designated as a cash flow hedge and the forecasted transaction remains probable or reasonably possible of occurring, the gain or loss recorded in accumulated other comprehensive loss is recognized in income as the forecasted transaction occurs. If the forecasted transaction is probable of not occurring, the gain or loss recorded in accumulated other comprehensive loss is recognized in income immediately. The estimated amount that we expect to reclassify from accumulated other comprehensive loss to net income within the next twelve months is $1.2 million at June 30, 2014.

 

 
10

 

 

At June 30, 2014 and December 31, 2013, the fair value of our derivative instrument was included in our Consolidated Balance Sheets as follows (in thousands):

 

Balance Sheet Information   Fair Value of Liability Derivatives  

Derivatives Designated as Hedging

Instruments

 

Location in Balance

Sheet

 

June 30,

2014

 
             

Interest Rate Swap Contract

 

Accrued liabilities

  $ 1,228  
   

Other long-term liabilities

    1,147  
        $ 2,375  

 

Balance Sheet Information   Fair Value of Liability Derivatives  

Derivatives Designated as Hedging

Instruments

 

Location in Balance

Sheet

 

December 31,

2013

 
             

Interest Rate Swap Contract

 

Accrued liabilities

  $ 1,215  
   

Other long-term liabilities

    1,685  
        $ 2,900  

 

The effect of derivative instruments on our Consolidated Statements of Operations for the three- and six-month periods ended June 30, 2014 and 2013 was as follows (in thousands):

 

Derivatives in Cash

Flow Hedging

Relationships

 

Amount of

Gain

Recognized

in

Accumulated

OCI (Effective

Portion)

 

Location of

Loss

Reclassified

from

Accumulated

OCI into

Income

(Effective

Portion)

 

Amount of Loss

Reclassified

from

Accumulated

OCI into Income

(Effective

Portion)

 

Location of

Loss

Recognized in

Income on

Derivative

(Ineffective

Portion and

Amount

Excluded from

Effectiveness

Testing)

 

Amount of

Loss

Recognized in

Income on

Derivative

(Ineffective

Portion and

Amount

Excluded from

Effectiveness

Testing)

 
                             

Three Months Ended

June 30, 2014

       

 

       

 

       
Interest Rate Swap Contract    93   Floor plan
interest
expense
  (118

Floor plan
interest
expense

  (188 )
                             

Three Months Ended

June 30, 2013

       

 

       

 

       
Interest Rate Swap Contracts   $ 381  

Floor plan
interest
expense

  $ (166 ) Floor plan
 interest
expense
  $ (296 )

   

 
11

 

 

Derivatives in Cash

Flow Hedging

Relationships

 

Amount of

Gain

Recognized

in

Accumulated

OCI (Effective

Portion)

 

Location of

Loss

Reclassified

from

Accumulated

OCI into

Income

(Effective

Portion)

 

Amount of Loss

Reclassified

from

Accumulated

OCI into Income

(Effective

Portion)

 

Location of

Loss

Recognized in

Income on

Derivative

(Ineffective

Portion and

Amount

Excluded from

Effectiveness

Testing)

 

Amount of

Loss

Recognized in

Income on

Derivative

(Ineffective

Portion and

Amount

Excluded from

Effectiveness

Testing)

 
                             

Six Months Ended

June 30, 2014

       

 

       

 

       
Interest Rate Swap Contract   $ 201   Floor plan
 interest
expense
  $ (252 ) Floor plan
 interest
expense
  $ (359 )
                             

Six Months Ended

June 30, 2013

       

 

       

 

       
Interest Rate Swap Contracts   $ 896   Floor plan
 interest
expense
  $ (472 ) Floor plan
interest
expense
  $ (890 )

 

 

See also Note 8.

 

Note 10. Acquisitions

In the first six months of 2014, we completed the following acquisitions, which contributed revenues of $53.3 million for the six months ended June 30, 2014:

 

On January 31, 2014, we acquired Island Honda in Kahului, Hawaii.

 

On February 3, 2014, we acquired Stockton Volkswagen in Stockton, California.

 

On March 5, 2014, we acquired Honolulu Buick GMC Cadillac and Honolulu Volkswagen in Honolulu, Hawaii.

 

On April 1, 2014, we acquired Corpus Christi Ford in Corpus Christi, Texas.

 

On June 11, 2014, we acquired Portland GMC Buick and Portland Cadillac in Portland, Oregon.

 

All acquisitions were accounted for as business combinations under the acquisition method of accounting. The results of operations of the acquired stores are included in our Consolidated Financial Statements from the date of acquisition.

 

No portion of the purchase price was paid with our equity securities. The following table summarizes the consideration paid for the acquisitions and the amount of identified assets acquired and liabilities assumed as of the acquisition date (in thousands):

   

Consideration

 

Cash paid, net of cash acquired

  $ 79,482  

Debt issued

    3,161  
    $ 82,643  

 

   

Assets Acquired and Liabilities Assumed

 

Inventories

  $ 42,997  

Franchise value

    6,529  

Property, plant and equipment

    17,302  

Other assets

    430  

Other liabilities

    (108 )
      67,150  

Goodwill

    15,493  
    $ 82,643  

 

 
12

 

 

In the first quarter of 2014, we assumed a contract associated with an acquisition and determined the remaining term would not provide economic benefit. As a result, we recorded costs of $1.4 million associated with the contract. For the three and six month periods ended June 30, 2014, we recorded acquisition expense of $0.2 million. This amount is included as a component of selling, general and administrative expense in our Consolidated Statements of Operations. We did not have any material acquisition-related expenses in 2013.

 

We account for franchise value as an indefinite-lived intangible asset. We expect the full amount of the goodwill recognized to be deductible for tax purposes.

 

The following unaudited pro forma summary presents consolidated information as if all acquisitions in the three- and six-month periods ended June 30, 2013 and 2014 had occurred on January 1, 2013 (in thousands, except for per share amounts):

 

Three Months Ended June 30,

 

2014

   

2013

 

Revenue

  $ 1,232,950     $ 1,113,612  

Income from continuing operations, net of tax

    35,504       26,447  

Basic income per share from continuing operations, net of tax

    1.36       1.03  

Diluted income per share from continuing operations, net of tax

    1.35       1.01  

 

Six Months Ended June 30,

 

2014

   

2013

 

Revenue

  $ 2,353,299     $ 2,115,438  

Income from continuing operations, net of tax

    60,732       49,405  

Basic income per share from continuing operations, net of tax

    2.33       1.92  

Diluted income per share from continuing operations, net of tax

    2.31       1.89  

 

These amounts have been calculated by applying our accounting policies and estimates. The results of the acquired stores have been adjusted to reflect the following: depreciation on a straight-line basis over the expected lives for property, plant and equipment; accounting for inventory on a specific identification method; and recognition of interest expense for real estate financing related to stores where we purchased the facility. No nonrecurring pro forma adjustments directly attributable to the acquisitions are included in the reported pro forma revenues and earnings.

 

Note 11. Discontinued Operations

We classify a store as discontinued operations if the location has been sold, we have ceased operations at that location or the store meets the criteria required by U.S. generally accepted accounting standards:

 

our management team, possessing the necessary authority, commits to a plan to sell the store;

 

the store is available for immediate sale in its present condition;

 

an active program to locate buyers and other actions that are required to sell the store are initiated;

 

a market for the store exists and we believe its sale is likely within one year;

 

active marketing of the store commences at a price that is reasonable in relation to the estimated fair market value; and

 

our management team believes it is unlikely changes will be made to the plan or the plan to dispose of the store will be withdrawn.

 

We reclassify the store’s operations to discontinued operations in our Consolidated Statements of Operations, on a comparable basis for all periods presented, provided we do not expect to have any significant continuing involvement in the store’s operations after its disposal.

 

 
13

 

 

On May 1, 2014, we completed the sale of our one store which had been classified as held for sale since October 2012. As of June 30, 2014, we have no stores or properties classified as held for sale.

 

Actual floor plan interest expense for the store classified as discontinued operations is directly related to the store’s new vehicles. Interest expense related to our used vehicle inventory financing and revolving line of credit is allocated based on the working capital level of the store. For the six months ended June 30, 2014 and 2013, interest expense included as a component of discontinued operations was immaterial.

 

Certain financial information related to discontinued operations was as follows (in thousands):

 

   

Three Months Ended

June 30,

   

Six Months Ended

June 30,

 
   

2014

   

2013

   

2014

   

2013

 

Revenue

  $ 3,920     $ 10,078     $ 12,569     $ 18,878  
                                 

Pre-tax income (loss) from discontinued operations

  $ (532 )   $ 409     $ (467 )   $ 693  

Net gain on disposal activities

    5,744       -       5,744       -  
      5,212       409       5,277       693  

Income tax expense

    (2,073 )     (135 )     (2,098 )     (246 )

Income from discontinued operations, net of income tax expense

  $ 3,139     $ 274     $ 3,179     $ 447  

Goodwill and other intangible assets disposed of

    221       -       221       -  

Cash generated from disposal activities

    10,617       -       10,617       -  

Floor plan debt paid in connection with disposal activities

    3,311       -       3,311       -  

 

Note 12. Net Income Per Share of Class A and Class B Common Stock

We compute net income per share of Class A and Class B common stock using the two-class method. Under this method, basic net income per share is computed using the weighted average number of common shares outstanding during the period excluding unvested common shares subject to repurchase or cancellation. Diluted net income per share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the exercise of stock options and unvested restricted shares subject to repurchase or cancellation. The dilutive effect of outstanding stock options and other grants is reflected in diluted earnings per share by application of the treasury stock method. The computation of the diluted net income per share of Class A common stock assumes the conversion of Class B common stock, while the diluted net income per share of Class B common stock does not assume the conversion of those shares.

 

Except with respect to voting and transfer rights, the rights of the holders of our Class A and Class B common stock are identical. Our Restated Articles of Incorporation require that the Class A and Class B common stock share equally in any dividends, liquidation proceeds or other distribution with respect to our common stock and the Articles of Incorporation can only be amended by a vote of the shareholders. Additionally, Oregon law provides that amendments to our Articles of Incorporation, which would have the effect of adversely altering the rights, powers or preferences of a given class of stock, must be approved by the class of stock adversely affected by the proposed amendment. As a result, the undistributed earnings for each year are allocated based on the participation rights of the Class A and Class B common shares as if the earnings for the year had been distributed. Because the liquidation and dividend rights are identical, the undistributed earnings are allocated on a proportionate basis.

 

 
14

 

 

Following is a reconciliation of the income from continuing operations and weighted average shares used for our basic earnings per share (“EPS”) and diluted EPS for the three-month periods ended June 30, 2014 and 2013 (in thousands, except per share amounts):

 

Three Months Ended June 30,

 

2014

   

2013

 

Basic EPS from Continuing Operations

 

Class A

   

Class B

   

Class A

   

Class B

 

Numerator:

                               

Income from continuing operations applicable to common stockholders

  $ 31,720     $ 3,450     $ 22,734     $ 2,547  

Distributed income applicable to common stockholders

    (3,769 )     (410 )     (3,018 )     (338 )

Basic undistributed income from continuing operations applicable to common stockholders

  $ 27,951     $ 3,040     $ 19,716     $ 2,209  
                                 

Denominator:

                               

Weighted average number of shares outstanding used to calculate basic income per share

    23,557       2,562       23,185       2,597  
                                 

Basic income per share from continuing operations applicable to common stockholders

  $ 1.35     $ 1.35     $ 0.98     $ 0.98  

Basic distributed income per share from continuing operations applicable to common stockholders

    (0.16 )     (0.16 )     (0.13 )     (0.13 )

Basic undistributed income per share from continuing operations applicable to common stockholders

  $ 1.19     $ 1.19     $ 0.85     $ 0.85  

  

 
15

 

 

 

Three Months Ended June 30,

 

2014

   

2013

 

Diluted EPS from Continuing Operations

 

Class A

   

Class B

   

Class A

   

Class B

 

Numerator:

                               

Distributed income applicable to common stockholders

  $ 3,769     $ 410     $ 3,018     $ 338  

Reallocation of distributed income as a result of conversion of dilutive stock options

    3       (3 )     5       (5 )

Reallocation of distributed income due to conversion of Class B to Class A common shares outstanding

    407       -       333       -  

Diluted distributed income applicable to common stockholders

  $ 4,179     $ 407     $ 3,356     $ 333  

Undistributed income from continuing operations applicable to common stockholders

  $ 27,951     $ 3,040     $ 19,716     $ 2,209  

Reallocation of undistributed income as a result of conversion of dilutive stock options

    25       (25 )     30       (30 )

Reallocation of undistributed income due to conversion of Class B to Class A

    3,015       -       2,179       -  

Diluted undistributed income from continuing operations applicable to common stockholders

  $ 30,991     $ 3,015     $ 21,925     $ 2,179  
                                 

Denominator:

                               

Weighted average number of shares outstanding used to calculate basic income per share from continuing operations

    23,557       2,562       23,185       2,597  

Weighted average number of shares from stock options

    212       -       352       -  

Conversion of Class B to Class A common shares outstanding

    2,562       -       2,597       -  

Weighted average number of shares outstanding used to calculate diluted income per share from continuing operations

    26,331       2,562       26,134       2,597  
                                 

Diluted income per share from continuing operations applicable to common stockholders

  $ 1.34     $ 1.34     $ 0.97     $ 0.97  

Diluted distributed income per share from continuing operations applicable to common stockholders

    (0.16 )     (0.16 )     (0.13 )     (0.13 )

Diluted undistributed income per share from continuing operations applicable to common stockholders

  $ 1.18     $ 1.18     $ 0.84     $ 0.84  

 

 

 
16

 

 

Three Months Ended June 30,

 

2014

   

2013

 

Diluted EPS

 

Class A

   

Class B

   

Class A

   

Class B

 

Antidilutive Securities

                             

Shares issuable pursuant to stock options not included since they were antidilutive

    12       -       18       -  

 

Six Months Ended June 30,

 

2014

   

2013

 

Basic EPS from Continuing Operations

 

Class A

   

Class B

   

Class A

   

Class B

 

Numerator:

                               

Income from continuing operations applicable to common stockholders

  $ 53,976     $ 5,888     $ 42,254     $ 4,909  

Distributed income applicable to common stockholders

    (6,814 )     (743 )     (3,007 )     (349 )

Basic undistributed income from continuing operations applicable to common stockholders

  $ 47,162     $ 5,145     $ 39,247     $ 4,560  
                                 

Denominator:

                               

Weighted average number of shares outstanding used to calculate basic income per share

    23,485       2,562       23,052       2,678  
                                 

Basic income per share from continuing operations applicable to common stockholders

  $ 2.30     $ 2.30     $ 1.83     $ 1.83  

Basic distributed income per share from continuing operations applicable to common stockholders

    (0.29 )     (0.29 )     (0.13 )     (0.13 )

Basic undistributed income per share from continuing operations applicable to common stockholders

  $ 2.01     $ 2.01     $ 1.70     $ 1.70  

  

 
17

 

 

Six Months Ended June 30,

 

2014

   

2013

 

Diluted EPS from Continuing Operations

 

Class A

   

Class B

   

Class A

   

Class B

 

Numerator:

                               

Distributed income applicable to common stockholders

  $ 6,814     $ 743     $ 3,007     $ 349  

Reallocation of distributed income as a result of conversion of dilutive stock options

    8       (8 )     5       (5 )

Reallocation of distributed income due to conversion of Class B to Class A common shares outstanding

    735       -       344       -  

Diluted distributed income applicable to common stockholders

  $ 7,557     $ 735     $ 3,356     $ 344  

Undistributed income from continuing operations applicable to common stockholders

  $ 47,162     $ 5,145     $ 39,247     $ 4,560  

Reallocation of undistributed income as a result of conversion of dilutive stock options

    55       (55 )     69       (69 )

Reallocation of undistributed income due to conversion of Class B to Class A

    5,090       -       4,491       -  

Diluted undistributed income from continuing operations applicable to common stockholders

  $ 52,307     $ 5,090     $ 43,807     $ 4,491  
                                 

Denominator:

                               

Weighted average number of shares outstanding used to calculate basic income per share from continuing operations

    23,485       2,562       23,052       2,678  

Weighted average number of shares from stock options

    279       -       390       -  

Conversion of Class B to Class A common shares outstanding

    2,562       -       2,678       -  

Weighted average number of shares outstanding used to calculate diluted income per share from continuing operations

    26,326       2,562       26,120       2,678  
                                 

Diluted income per share from continuing operations applicable to common stockholders

  $ 2.27     $ 2.27     $ 1.81     $ 1.81  

Diluted distributed income per share from continuing operations applicable to common stockholders

    (0.29 )     (0.29 )     (0.13 )     (0.13 )

Diluted undistributed income per share from continuing operations applicable to common stockholders

  $ 1.98     $ 1.98     $ 1.68     $ 1.68  

 

Six Months Ended June 30,

 

2014

   

2013

 

Diluted EPS

 

Class A

   

Class B

   

Class A

   

Class B

 

Antidilutive Securities

                               

Shares issuable pursuant to stock options not included since they were antidilutive

    14       -       19       -  

  

 
18

 

 

Note 13. Recent Accounting Pronouncements

In April 2014, the Financial Accounting Standards Board (FASB) issued an accounting standard update that amends the accounting guidance related to discontinued operations. This amendment defines discontinued operations as a component or group of components that is disposed of or is classified as held for sale and represents a strategic shift that has or will have a major effect on an entity’s operations and financial results. This amendment also introduces new disclosures for disposals. The amendments in this accounting standard update are effective for fiscal years beginning after December 15, 2014 and applies to new disposals and new classifications of disposal groups as held for sale after the effective date. The accounting standard update is expected to result in fewer disposals being presented as discontinued operations and, because the guidance relates to presentation and disclosure requirements, will not affect our consolidated financial position, results of operations, or cash flows.

 

On May 28, 2014, the FASB issued an accounting standard update which amends the accounting guidance related to revenues. This amendment will replace most of the existing revenue recognition guidance when it becomes effective. The new standard is effective for fiscal years beginning after December 15, 2016. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect this amendment will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.

 

Note 14. Subsequent Events

 

Acquisition

On July 28, 2014, we acquired the inventory, equipment and intangible assets of Bellingham Buick GMC in Bellingham, Washington. We paid $1.7 million in cash for this acquisition.

 

Common Stock Dividend

On July 21, 2014, our Board of Directors approved a dividend of $0.16 per share on our Class A and Class B common stock related to our second quarter 2014 financial results. The dividend will total approximately $4.2 million and will be paid on August 22, 2014 to shareholders of record on August 8, 2014.

 

Item 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Forward-Looking Statements and Risk Factors

Certain statements under the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” and elsewhere in this Form 10-Q constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Generally, you can identify forward-looking statements by terms such as “project,” “outlook,” “target,” “may,” “will,” “would,” “should,” “seek,” “expect,” “plan,” “intend,” “forecast,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “likely,” “goal,” “strategy,” “future,” “maintain,” and “continue” or the negative of these terms or other comparable terminology. Examples of forward-looking statements in this Form 10-Q include, among others, statements we make regarding:

 

Future market conditions.

 

Expected operating results, such as maintaining SG&A as a percentage of gross profit in the mid to upper 60% range and targeting incremental throughput of 50% on a same store basis.

 

The increase in our annual revenues and earnings per share that we estimate will result from the dealerships that we acquired and from the DCH Auto Group transaction.

 

 
19

 

 

 

Our belief that the DCH Auto Group transaction will close early in the fourth quarter.

 

Anticipated availability of liquidity from our unfinanced operating real estate.

 

Anticipated levels of capital expenditures in the future.

 

Our strategies for customer retention, growth, market position, financial results and risk management.

 

The forward-looking statements contained in this Form 10-Q involve known and unknown risks, uncertainties and situations that may cause our actual results, level of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these statements. Certain important factors that could cause actual results to differ from our expectations are discussed in Part II - Other Information, Item 1A in this Form 10-Q and in the Risk Factors section of our Annual Report on Form 10-K, as supplemented and amended from time to time in Quarterly Reports on Form 10-Q and our other filings with the Securities and Exchange Commission.

 

By their nature, forward-looking statements involve risks and uncertainties because they relate to events that depend on circumstances that may or may not occur in the future. While we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements, and our actual results of operations, financial condition and liquidity and development of the industries in which we operate may differ materially from those made in or suggested by the forward-looking statements in this Form 10-Q. You should not place undue reliance on these forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made. We assume no obligation to update or revise any forward-looking statement.

 

Overview

We are a leading operator of automotive franchises and a retailer of new and used vehicles and related services. As of August 8, 2014, we offer 29 brands of new vehicles and all brands of used vehicles in 101 stores in the United States and online at Lithia.com. We sell new and used cars and replacement parts; provide vehicle maintenance, warranty, paint and repair services; arrange related financing; and sell service contracts, vehicle protection products and credit insurance.

 

Our mission statement is: “Driven by our employees and preferred by our customers, Lithia is the leading automotive retailer in each of our markets.” We offer our customers convenient, flexible, personalized service combined with the large company advantages of selection, competitive pricing, broad access to financing, and warranties. We strive for diversification in our products, services, brands and geographic locations to insulate us from market risk and to maintain profitability. We have developed a centralized support structure to reduce store level administrative functions. This allows store personnel to focus on providing a positive customer experience. With our management information systems and centrally-performed administrative functions in Medford, Oregon, we seek to gain economies of scale from our dealership network.

 

Results of Continuing Operations

For the three months ended June 30, 2014 and 2013, we reported income from continuing operations, net of tax, of $35.2 million, or $1.34 per diluted share, and $25.3 million, or $0.97 per diluted share, respectively.

 

For the six months ended June 30, 2014 and 2013, we reported income from continuing operations, net of tax, of $59.9 million, or $2.27 per diluted share, and $47.2 million, or $1.81 per diluted share, respectively. 

 

 
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Discontinued Operations

The results of operations for stores sold, closed or held for sale are presented as discontinued operations for all periods in our Consolidated Statements of Operations if they qualify for reclassification under the applicable accounting guidance. As a result, our results from continuing operations are presented on a comparable basis for all periods.

 

We realized income from discontinued operations, net of tax, for the three months ended June 30, 2014 and 2013, of $3.1 million and $274,000, respectively. Income from discontinued operations, net of tax, for the six months ended June 30, 2014 and 2013 totaled $3.2 million and $447,000, respectively. See Note 11 of the Condensed Notes to Consolidated Financial Statements for additional information.

 

Key Revenue and Gross Profit Metrics

Key performance metrics for revenue and gross profit were as follows for the three and six months ended June 30, 2014 and 2013 (dollars in thousands):

 

Three months ended
June 30, 2014

 

Revenues

   

Percent of

Total

Revenues

   

Gross

Profit

   

Gross

Profit

Margin

   

Percent of

Total

Gross Profit

 

New vehicle

  $ 694,484       56.8 %   $ 45,994       6.6 %     23.9 %

Used vehicle retail

    310,475       25.4       44,067       14.2       22.9  

Used vehicle wholesale

    44,286       3.6       1,504       3.4       0.8  

Finance and insurance(1)

    43,838       3.6       43,838       100.0       22.8  

Service, body and parts

    114,337       9.4       56,182       49.1       29.2  

Fleet and other

    14,382       1.2       715       5.0       0.4  
    $ 1,221,802       100.0 %   $ 192,300       15.7 %     100.0 %

 

Three months ended
June 30, 2013

 

Revenues

   

Percent of

Total

Revenues

   

Gross

Profit

   

Gross

Profit

Margin

   

Percent of

Total

Gross Profit

 

New vehicle

  $ 569,487       56.5 %   $ 38,788       6.8 %