Exhibit 99.1

 

 

 

LITHIA REPORTS RECORD THIRD QUARTER RESULTS

_____________________________________________________

 

DECLARES DIVIDEND OF $0.25 PER SHARE FOR THIRD QUARTER

 

Medford, Oregon, October 20, 2016 - Lithia Motors, Inc. (NYSE: LAD) today reported the highest third quarter revenue and earnings per share in company history.

 

2016 third quarter unadjusted net income was $54.0 million, or $2.14 per diluted share, compared to $43.4 million, or $1.64 per diluted share, for the third quarter of 2015. Adjusted net income for the third quarter of 2016 was $52.0 million, or $2.06 per diluted share, compared to 2015 third quarter adjusted net income of $53.6 million, or $2.03 per diluted share.

 

As shown in the attached non-GAAP reconciliation tables, the 2016 third quarter adjusted results exclude a non-core benefit of $0.08 related to an equity investment. The 2015 third quarter adjusted results exclude a $0.39 non-core net loss related to an employee transition agreement partially offset by an equity investment.

 

Third quarter 2016 revenue increased $185.1 million, or 9%, to $2.3 billion from $2.1 billion for the third quarter 2015.

 

Third Quarter-over-Quarter Operating Highlights:

•

Total same store sales increased 4%

•

New vehicle same store sales increased 1%

•

Used vehicle retail same store sales increased 11%

•

Service, body and parts same store sales increased 10%

•

Same store F&I per unit increased $98 to $1,302

•

SG&A expense as a percentage of gross profit was 67.6%

 

For the first nine months of 2016, revenues increased 8.8% to $6.4 billion, compared to $5.9 billion in the first nine months of 2015. Unadjusted net income for the first nine months of 2016 was $5.69 per diluted share, compared to $5.10 per diluted share for the similar period in 2015. Adjusted net income per diluted share for the first nine months of 2016 increased 5.5% to $5.57 from $5.28 for the first nine months of 2015.

 

"Though considerable opportunities remain, we delivered record results in the third quarter," said Bryan DeBoer, President and CEO. "Our store leadership increased revenue in all departments, though selling expense grew slightly. In the moderating new vehicle sales environment, sustaining sales volume and taking market share from our competitors is crucial to future incremental used vehicle and service transactions, and maintains high performance levels for our manufacturer partners to earn continued support for acquisitions. Our entrepreneurial leaders are adjusting to the dynamic marketplace and will seek continued earnings growth in the future."

 

Corporate Development

Through October of this year, we have completed the acquisition of 14 stores and opened one store: the Carbone Auto Group, a nine store platform based in New York and Vermont; a Subaru store in Riverside, California, a Toyota store in Milford, Massachusetts, a Ford store in Thousand Oaks, California; a Volkswagen store in Freehold, New Jersey, a Ford store in Casper, Wyoming and an Audi store in Calabasas, California.

 

Mr. DeBoer added, "As we have previously discussed, the benefit of a moderating new vehicle sales environment is the rationalization of acquisition price expectations. We have added over $1.0 billion in estimated annualized revenue so far this year, and are optimistic that a significant number of targets remain available. By seeking stores where opportunities to improve performance are plentiful, we position ourselves to purchase at attractive multiples and generate industry-leading return on investment. Additionally, our low leverage ratio should ensure borrowing capacity to remain acquisitive through the vehicle sales cycle."

 

 

Executive Officer Changes

Effective January 1, 2017, Chris Holzshu, Senior Vice President and Chief Financial Officer, will be promoted to Executive Vice President and Chief Human Resources Officer. John North, Vice President, Finance and Chief Accounting Officer, will be promoted to Senior Vice President and Chief Financial Officer.

 

Commenting on the changes, Mr. DeBoer stated, "Given our ambitious growth objectives, ensuring we maximize employee potential to further improve our performance-based culture is critical to our success. Chris' promotion emphasizes the importance of each and every team member and how accelerating employee development to earn customers for life is vital to our future. As Executive Vice President, Chris will lead our human resource, information technology and store administration teams. Additionally, I am pleased with the success of our leadership development as demonstrated by John's promotion to CFO. Both Chris and John exemplify our core values of continuous improvement and personal ownership. On behalf of the entire organization and our Board of Directors, congratulations."

 

Balance Sheet Update

We ended the third quarter with $24 million in cash and $122 million in availability under our credit facilities. Additionally, approximately $258 million of our operating real estate is currently unfinanced, which we estimate could provide $193 million in capital, for total potential liquidity of $339 million.

 

Dividend Payment and Share Repurchase

Our Board of Directors has approved a dividend of $0.25 per share related to third quarter 2016 financial results. We expect to pay the dividend on November 25, 2016 to shareholders of record on November 11, 2016.

 

In the third quarter 2016, we repurchased 44,250 shares at a weighted average price of $84.12 per share. In the first nine months of 2016, we have deployed $108 million to repurchase 5% of our outstanding float or 1.2 million shares at a weighted average price of $79.05. Approximately $197 million remains available under our existing repurchase authorization.

 

2016 Outlook

We project 2016 full year earnings of $7.40 to $7.45 per diluted share. This projection is based on the following annual assumptions:

 

•

Total revenues of $8.5 to $8.6 billion

•

New vehicle same store sales increasing 2.5%

•

New vehicle gross margin of 5.7% to 5.9%

•

Used vehicle same store sales increasing 9.5%

•

Used vehicle gross margin of 11.7% to 11.9%

•

Service body and parts same store sales increasing 8.5%

•

Service body and parts gross margin of 48.2% to 48.4%

•

Finance and insurance gross profit of $1,260 to $1,280 per unit

•

Tax rate of 39.5%

•

Average diluted shares outstanding of 25.5 million

 

2017 Earnings Guidance

We project 2017 full year earnings of $8.00 to $8.30 per diluted share. This projection is based on the following annual assumptions:

 

•

Total revenues of $9.2 to $9.4 billion

•

New vehicle same store sales increasing 1.5%

•

New vehicle gross margin of 5.5% to 5.7%

•

Used vehicle same store sales increasing 5.5%

•

Used vehicle gross margin of 11.5% to 11.7%

•

Service body and parts same store sales increasing 5.0%

•

Service body and parts gross margin of 48.2% to 48.4%

•

Finance and insurance gross profit of $1,270 to $1,295 per unit

•

Tax rate of 39.5%

•

Average diluted shares outstanding of 25.3 million

 

These projections exclude the impact of future acquisitions, dispositions and non-core items. Actual results may be affected by items described under Forward-Looking Statements below.

 

 

Third Quarter Earnings Conference Call and Updated Presentation

The third quarter conference call may be accessed at 10:00 a.m. ET today by telephone at 877-407-8029. An updated presentation highlighting the third quarter results has been added to our investor relations website.

 

To listen live on our website or for replay, visit www.lithiainvestorrelations.com and click on webcasts.

 

About Lithia

Lithia Motors, Inc. is one of the largest automotive retailers in the United States and is among the fastest growing companies in the Fortune 500. Lithia sells 30 brands of new vehicles and all brands of used vehicles at 152 stores in 17 states. Lithia also arranges finance, warranty, and credit insurance contracts. In addition, Lithia provides vehicle parts, maintenance and repair services at all of its locations.

 

Sites

www.lithiamotors.com

www.lithiainvestorrelations.com

www.lithiacareers.com

 

Lithia Motors on Facebook

www.facebook.com/LithiaMotors

 

Lithia Motors on Twitter

http://twitter.com/lithiamotors

 

Contact:

John North

VP Finance and Chief Accounting Officer

(541) 618-5748

 

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. Forward looking statements include statements regarding our goals, plans, projections and guidance regarding our financial position, results of operations, market position, pending and potential future acquisitions and business strategy, and often contain words such as "project," "outlook," "expect," "anticipate," "intend," "plan," "believe," "estimate," "may," "seek," "would," "should," "likely," "goal," "strategy," "future," "maintain," "continue," "remain," "target" or "will" and similar references to future periods. Examples of forward-looking statements in this press release include, among others, statements regarding:

 

•

Expected operating results, such as improved store efficiency and performance; generating 2016 full year earnings of $7.40 to $7.45 per diluted share; generating 2017 full year earnings of $8.00 to $8.30 per diluted share and all projections set forth under the headings "2016 Outlook" and "2017 Earnings Guidance";

•

Anticipated national new car sales levels;

•

Our ability to improve store performance;

•

Anticipated acquisition opportunities and additions of dealership locations to our portfolio in the future; and our ability to achieve returns on investment;

•

Anticipated revenues from acquired stores; and

•

Anticipated availability of liquidity from our credit facility and unfinanced operating real estate.

 

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. Forward-looking statements are not guarantees of future performance, and our actual results of operations, financial condition and liquidity and development of the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements in this press release. The risks and uncertainties that could cause actual results to differ materially from estimated or projected results include, without limitation, future economic and financial conditions (both nationally and locally), changes in customer demand, our relationship with, and the financial and operational stability of, vehicle manufacturers and other suppliers, risks associated with our indebtedness (including available borrowing capacity, compliance with financial covenants and ability to refinance or repay indebtedness on favorable terms), government regulations, legislation and others set forth throughout Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations and in Part I, Item 1A. Risk Factors of our most recent Annual Report on Form 10-K, and from time to time in our other filings with the SEC. We urge you to carefully consider this information and not place undue reliance on forward-looking statements. We undertake no duty to update our forward-looking statements, including our earnings outlook, which are made as of the date of this release.

 

 

Non-GAAP Financial Measures

This press release and the attached financial tables contain non-GAAP financial measures such as adjusted net income and diluted earnings per share, adjusted SG&A as a percentage of revenues and gross profit, adjusted operating margin, adjusted operating profit as a percentage of gross profit, and adjusted pre-tax margin. Non-GAAP measures do not have definitions under GAAP and may be defined differently by and not comparable to similarly titled measures used by other companies. As a result, we review any non-GAAP financial measures in connection with a review of the most directly comparable measures calculated in accordance with GAAP. We caution you not to place undue reliance on such non-GAAP measures, but also to consider them with the most directly comparable GAAP measures. We present cash flows from operations in the attached tables, adjusted to include the change in non-trade floor plan debt to improve the visibility of cash flows related to vehicle financing. As required by SEC rules, we have reconciled these measures to the most directly comparable GAAP measures in the attachments to this release. We believe the non-GAAP financial measures we present improve the transparency of our disclosures; provide a meaningful presentation of our results from core business operations, because they exclude items not related to core business operations and other non-cash items; and improve the period-to-period comparability of our results from core business operations. These presentations should not be considered an alternative to GAAP measures.

 

 

Lithia Motors, Inc.

Consolidated Statements of Operations (Unaudited)

(In thousands except per share data)

 

		Three months ended												%
		September 30,								Increase				Increase
		2016				2015				(Decrease)				(Decrease)
Revenues:
New vehicle retail		$	1,297,511			$	1,227,080			$	70,431				5.7	%
Used vehicle retail			580,885				505,885				75,000				14.8
Used vehicle wholesale			75,271				69,472				5,799				8.3
Finance and insurance			87,709				76,633				11,076				14.5
Service, body and parts			217,148				189,796				27,352				14.4
Fleet and other			11,443				15,979				(4,536	)			(28.4	)
Total revenues			2,269,967				2,084,845				185,122				8.9	%
Cost of sales:
New vehicle retail			1,221,668				1,149,923				71,745				6.2
Used vehicle retail			512,076				443,598				68,478				15.4
Used vehicle wholesale			74,353				68,892				5,461				7.9
Service, body and parts			112,806				95,846				16,960				17.7
Fleet and other			11,803				15,399				(3,596	)			(23.4	)
Total cost of sales			1,932,706				1,773,658				159,048				9.0
Gross profit			337,261				311,187				26,074				8.4	%
Asset impairments			3,498				4,131				(633	)			NM
SG&A expense			228,134				223,728				4,406				2.0
Depreciation and amortization			12,206				10,531				1,675				15.9
Income from operations			93,423				72,797				20,626				28.3	%
Floor plan interest expense			(6,186	)			(4,951	)			1,235				24.9
Other interest expense			(5,647	)			(4,900	)			747				15.2
Other expense, net			(1,513	)			(307	)			1,206				NM
Income before income taxes			80,077				62,639				17,438				27.8	%
Income tax expense			(26,036	)			(19,248	)			6,788				35.3
Income tax rate			32.5	%			30.7	%
Net income		$	54,041			$	43,391			$	10,650				24.5	%
Diluted net income per share:
Net income per share		$	2.14			$	1.64			$	0.50				30.5	%
Diluted shares outstanding			25,290				26,480				(1,190	)			(4.5	)%

NM - not meaningful

 

 

Lithia Motors, Inc.

Key Performance Metrics (Unaudited)

 

		Three months ended												%
		September 30,								Increase				Increase
		2016				2015				(Decrease)				(Decrease)
Gross margin
New vehicle retail			5.8	%			6.3	%			(50	)
Used vehicle retail			11.8				12.3				(50	)
Used vehicle wholesale			1.2				0.8				40
Finance and insurance			100.0				100.0				—
Service, body and parts			48.1				49.5				(140	)
Fleet and other			(3.1	)			3.6				(670	)
Gross profit margin			14.9				14.9				—
Unit sales
New vehicle retail			38,417				37,401				1,016				2.7	%
Used vehicle retail			29,636				26,206				3,430				13.1
Total retail units sold			68,053				63,607				4,446				7.0
Used vehicle wholesale			10,853				10,239				614				6.0
Average selling price
New vehicle retail		$	33,774			$	32,809			$	965				2.9	%
Used vehicle retail			19,601				19,304				297				1.5
Used vehicle wholesale			6,936				6,785				151				2.2
Average gross profit per unit
New vehicle retail		$	1,974			$	2,063			$	(89	)			(4.3	)%
Used vehicle retail			2,322				2,377				(55	)			(2.3	)
Used vehicle wholesale			85				57				28				49.1
Finance and insurance			1,289				1,205				84				7.0
Total vehicle(1)			3,428				3,406				22				0.6
Revenue mix
New vehicle retail			57.2	%			58.9	%
Used vehicle retail			25.6				24.3
Used vehicle wholesale			3.3				3.3
Finance and insurance, net			3.9				3.7
Service, body and parts			9.6				9.1
Fleet and other			0.4				0.7

 

		Adjusted								As reported
		Three months ended September 30,								Three months ended September 30,
Other metrics		2016				2015				2016				2015
SG&A as a % of revenue			10.1	%			9.9	%			10.1	%			10.7	%
SG&A as a % of gross profit			67.6				66.0				67.6				71.9
Operating profit as a % of revenue			4.3				4.6				4.1				3.5
Operating profit as a % of gross profit			28.7				30.6				27.7				23.4
Pretax margin			3.8				4.2				3.5				3.0
Net profit margin			2.3				2.6				2.4				2.1

(1) - includes the sales and gross profit related to new, used retail, used wholesale and finance and insurance and unit sales for new and used retail

 

 

Lithia Motors, Inc.

Same Store Operating Highlights (Unaudited)

 

		Three Months Ended												%
		September 30,								Increase				Increase
		2016				2015				(Decrease)				(Decrease)
Revenues
New vehicle retail		$	1,239,537			$	1,224,015			$	15,522				1.3	%
Used vehicle retail			557,302				503,913				53,389				10.6
Used vehicle wholesale			72,417				69,208				3,209				4.6
Finance and insurance			84,612				76,375				8,237				10.8
Service, body and parts			207,155				188,814				18,341				9.7
Fleet and other			10,629				15,982				(5,353	)			(33.5	)
Total revenues		$	2,171,652			$	2,078,307			$	93,345				4.5
Gross profit
New vehicle retail		$	72,329			$	76,919			$	(4,590	)			(6.0	)%
Used vehicle retail			66,386				62,100				4,286				6.9
Used vehicle wholesale			862				592				270				45.6
Finance and insurance			84,612				76,375				8,237				10.8
Service, body and parts			99,977				93,434				6,543				7.0
Fleet and other			(388	)			582				(970	)			(166.7	)
Total gross profit		$	323,778			$	310,002			$	13,776				4.4
Gross margin
New vehicle retail			5.8	%			6.3	%			(50	)
Used vehicle retail			11.9				12.3				(40	)
Used vehicle wholesale			1.2				0.9				30
Finance and insurance			100.0				100.0				—
Service, body and parts			48.3				49.5				(120	)
Fleet and other			(3.7	)			3.6				(730	)
Gross profit margin			14.9				14.9				—
Unit sales
New vehicle retail			36,681				37,326				(645	)			(1.7	)%
Used vehicle retail			28,322				26,108				2,214				8.5
Total retail units sold			65,003				63,434				1,569				2.5
Used vehicle wholesale			10,416				10,197				219				2.1
Average selling price
New vehicle retail		$	33,792			$	32,793			$	999				3.0	%
Used vehicle retail			19,677				19,301				376				1.9
Used vehicle wholesale			6,952				6,787				165				2.4
Average gross profit per unit
New vehicle retail		$	1,972			$	2,061			$	(89	)			(4.3	)%
Used vehicle retail			2,344				2,379				(35	)			(1.5	)
Used vehicle wholesale			83				58				25				43.1
Finance and insurance			1,302				1,204				98				8.1
Total vehicle(1)			3,449				3,405				44				1.3

(1) - includes the sales and gross profit related to new, used retail, used wholesale and finance and insurance and unit sales for new and used retail

 

 

Lithia Motors, Inc.

Consolidated Statements of Operations (Unaudited)

(In thousands except per share data)

 

		Nine months ended												%
		September 30,								Increase				Increase
		2016				2015				(Decrease)				(Decrease)
Revenues:
New vehicle retail		$	3,602,603			$	3,384,408			$	218,195				6.4	%
Used vehicle retail			1,667,258				1,457,617				209,641				14.4
Used vehicle wholesale			207,131				198,476				8,655				4.4
Finance and insurance			246,390				213,700				32,690				15.3
Service, body and parts			616,088				545,966				70,122				12.8
Fleet and other			46,697				70,803				(24,106	)			(34.0	)
Total revenues			6,386,167				5,870,970				515,197				8.8	%
Cost of sales:
New vehicle retail			3,387,132				3,176,135				210,997				6.6
Used vehicle retail			1,466,947				1,273,195				193,752				15.2
Used vehicle wholesale			202,897				194,329				8,568				4.4
Service, body and parts			317,028				276,828				40,200				14.5
Fleet and other			45,684				68,272				(22,588	)			(33.1	)
Total cost of sales			5,419,688				4,988,759				430,929				8.6
Gross profit			966,479				882,211				84,268				9.6
Asset impairments			10,494				14,391				(3,897	)			NM
SG&A expense			662,766				610,956				51,810				8.5
Depreciation and amortization			36,372				30,544				5,828				19.1
Income from operations			256,847				226,320				30,527				13.5
Floor plan interest expense			(18,304	)			(14,255	)			4,049				28.4
Other interest expense			(16,608	)			(14,700	)			1,908				13.0
Other expense, net			(4,534	)			(1,031	)			3,503				NM
Income before income taxes			217,401				196,334				21,067				10.7
Income tax expense			(71,662	)			(61,067	)			10,595				17.3
Income tax rate			33.0	%			31.1	%
Net income		$	145,739			$	135,267			$	10,472				7.7	%
Diluted net income per share:
Net income per share		$	5.69			$	5.10			$	0.59				11.6	%
Diluted shares outstanding			25,598				26,500				(902	)			(3.4	)%

NM - not meaningful

 

 

Lithia Motors, Inc.

Key Performance Metrics (Unaudited)

 

		Nine months ended												%
		September 30,								Increase				Increase
		2016				2015				(Decrease)				(Decrease)
Gross margin
New vehicle retail			6.0	%			6.2	%			(20	)
Used vehicle retail			12.0				12.7				(70	)
Used vehicle wholesale			2.0				2.1				(10	)
Finance and insurance			100.0				100.0				—
Service, body and parts			48.5				49.3				(80	)
Fleet and other			2.2				3.6				(140	)
Gross profit margin			15.1				15.0				10
Unit sales
New vehicle retail			107,225				103,136				4,089				4.0	%
Used vehicle retail			84,783				75,099				9,684				12.9
Total retail units sold			192,008				178,235				13,773				7.7
Used vehicle wholesale			30,140				28,822				1,318				4.6
Average selling price
New vehicle retail		$	33,599			$	32,815			$	784				2.4	%
Used vehicle retail			19,665				19,409				256				1.3
Used vehicle wholesale			6,872				6,886				(14	)			(0.2	)
Average gross profit per unit
New vehicle retail		$	2,010			$	2,019			$	(9	)			(0.4	)%
Used vehicle retail			2,363				2,456				(93	)			(3.8	)
Used vehicle wholesale			140				144				(4	)			(2.8	)
Finance and insurance			1,283				1,199				84				7.0
Total vehicle(1)			3,471				3,425				46				1.3
Revenue mix
New vehicle retail			56.4	%			57.6	%
Used vehicle retail			26.1				24.8
Used vehicle wholesale			3.2				3.4
Finance and insurance, net			3.9				3.6
Service, body and parts			9.6				9.3
Fleet and other			0.8				1.3

 

		Adjusted								As reported
		Nine Months Ended September 30,								Nine months ended September 30,
Other metrics		2016				2015				2016				2015
SG&A as a % of revenue			10.4	%			10.2	%			10.4				10.4	%
SG&A as a % of gross profit			68.5				67.8				68.6				69.3
Operating profit as a % of revenue			4.2				4.3				4.0				3.9
Operating profit as a % of gross profit			27.7				28.7				26.6				25.7
Pretax margin			3.7				3.9				3.4				3.3
Net profit margin			2.2				2.4				2.3				2.3

(1) - includes the sales and gross profit related to new, used retail, used wholesale and finance and insurance and unit sales for new and used retail

 

 

Lithia Motors, Inc.

Same Store Operating Highlights (Unaudited)

 

		Nine months ended September 30,								Increase				% Increase
		2016				2015				(Decrease)				(Decrease)
Revenues
New vehicle retail		$	3,474,121			$	3,370,693			$	103,428				3.1	%
Used vehicle retail			1,610,033				1,449,705				160,328				11.1
Used vehicle wholesale			201,122				197,513				3,609				1.8
Finance and insurance			238,611				212,865				25,746				12.1
Service, body and parts			592,287				542,650				49,637				9.1
Fleet and other			43,570				70,805				(27,235	)			(38.5	)
Total revenues		$	6,159,744			$	5,844,231			$	315,513				5.4
Gross profit
New vehicle retail		$	207,679			$	207,375			$	304				0.1	%
Used vehicle retail			193,853				183,710				10,143				5.5
Used vehicle wholesale			4,069				4,269				(200	)			(4.7	)
Finance and insurance			238,611				212,865				25,746				12.1
Service, body and parts			288,263				267,449				20,814				7.8
Fleet and other			967				2,497				(1,530	)			(61.3	)
Total gross profit		$	933,442			$	878,165			$	55,277				6.3
Gross margin
New vehicle retail			6.0	%			6.2	%			20
Used vehicle retail			12.0				12.7				(70	)
Used vehicle wholesale			2.0				2.2				(20	)
Finance and insurance			100.0				100.0				—
Service, body and parts			48.7				49.3				(60	)
Fleet and other			2.2				3.5				(130	)
Total gross profit			15.2				15.0				20
Unit sales
New vehicle retail			103,455				102,734				721				0.7	%
Used vehicle retail			81,631				74,648				6,983				9.4
Total retail units sold			185,086				177,382				7,704				4.3
Used vehicle wholesale			29,100				28,650				450				1.6
Average selling price
New vehicle retail		$	33,581			$	32,810			$	771				2.3	%
Used vehicle retail			19,723				19,421				302				1.6
Used vehicle wholesale			6,911				6,894				17				0.2
Average gross profit per unit
New vehicle retail		$	2,007			$	2,019			$	(12	)			(0.6	)%
Used vehicle retail			2,375				2,461				(86	)			(3.5	)
Used vehicle wholesale			140				149				(9	)			(6.0	)
Finance and insurance			1,289				1,200				89				7.4
Total vehicle(1)			3,481				3,429				52				1.5

(1) - includes the sales and gross profit related to new, used retail, used wholesale and finance and insurance and unit sales for new and used retail

 

 

Lithia Motors, Inc.

Segment Operating Highlights (Unaudited)

 

		Three months ended												%
		September 30,								Increase				Increase
		2016				2015				(Decrease)				(Decrease)
Revenues
Domestic		$	888,026			$	814,216			$	73,810				9.1	%
Import			989,077				894,371				94,706				10.6
Luxury			392,537				374,558				17,979				4.8
Total segment revenues			2,269,640				2,083,145				186,495				9.0
Corporate and other			327				1,700				(1,373	)			(80.8	)
Total revenues		$	2,269,967			$	2,084,845			$	185,122				8.9
Segment Income(1)
Domestic		$	32,394			$	33,240			$	(846	)			(2.5	)%
Import			32,832				31,453				1,379				4.4
Luxury			7,423				8,318				(895	)			(10.8	)
Total segment income			72,649				73,011				(362	)			(0.5	)
Corporate and other			26,794				5,366				21,428				399.3
Depreciation and amortization			(12,206	)			(10,531	)			1,675				15.9
Other interest expense			(5,647	)			(4,900	)			747				15.2
Other expense, net			(1,513	)			(307	)			1,206				NM
Income before income taxes		$	80,077			$	62,639			$	17,438				27.8

 ⁽¹⁾ Segment income for each of the segments is defined as Income before income taxes, less Depreciation and amortization, Other interest expense and Other income, net.

 

 

Retail New Vehicle Unit Sales
Domestic			12,634				12,361				273				2.2	%
Import			21,568				20,658				910				4.4
Luxury			4,287				4,455				(168	)			(3.8	)
Total			38,489				37,474				1,015				2.7
Allocated to management			(72	)			(73	)			1				NM
Total retail new vehicle unit sales			38,417				37,401				1,016				2.7

 

NM - not meaningful

 

 

Lithia Motors, Inc.

Segment Operating Highlights (Unaudited)

 

		Nine months ended												%
		September 30,								Increase				Increase
		2016				2015				(Decrease)				(Decrease)
Revenues
Domestic		$	2,483,637			$	2,273,068			$	210,569				9.3	%
Import			2,788,838				2,509,756				279,082				11.1
Luxury			1,111,215				1,084,051				27,164				2.5
Total segment revenues			6,383,690				5,866,875				516,815				8.8
Corporate and other			2,477				4,095				(1,618	)			(39.5	)
Total revenues		$	6,386,167			$	5,870,970			$	515,197				8.8
Segment Income(1)
Domestic		$	84,913			$	91,853			$	(6,940	)			(7.6	)%
Import			86,385				76,665				9,720				12.7
Luxury			21,736				25,764				(4,028	)			(15.6	)
Total segment income			193,034				194,282				(1,248	)			(0.6	)
Corporate and other			81,881				48,327				33,554				69.4
Depreciation and amortization			(36,372	)			(30,544	)			5,828				19.1
Other interest expense			(16,608	)			(14,700	)			1,908				13.0
Other expense, net			(4,534	)			(1,031	)			3,503				NM
Income before income taxes		$	217,401				196,334			$	21,067				10.7

 

 ⁽¹⁾ Segment income for each of the segments is defined as Income before income taxes, less Depreciation and amortization, Other interest expense and Other expense, net.

 

Retail New Vehicle Unit Sales
Domestic			34,917				33,852				1,065				3.1	%
Import			59,840				56,814				3,026				5.3
Luxury			12,667				12,650				17				0.1
Total			107,424				103,316				4,108				4.0
Allocated to management			(199	)			(180	)			(19	)			NM
Total retail new vehicle unit sales			107,225				103,136				4,089				4.0

 

NM - not meaningful

 

 

Lithia Motors, Inc.

Other Highlights (Unaudited)

 

		As of
		September 30,				December 31,				September 30,
		2016				2015				2015
Days Supply(1)
New vehicle inventory			65				67				64
Used vehicle inventory			57				55				54

 

⁽¹⁾ Days supply calculated based on current inventory levels, excluding in-transit vehicles, and a 30-day historical cost of sales level.

 

 

Financial covenants
	Requirement		As of September 30, 2016
Current ratio	Not less than 1.10 to 1		1.22		to 1
Fixed charge coverage ratio	Not less than 1.20 to 1		2.61		to 1
Leverage ratio	Not more than 5.00 to 1		2.06		to 1
Funded debt restriction	Not more than $900 million		$	425.9	million

 

 

Lithia Motors, Inc.

Other Highlights (Unaudited)

 

		Three months ended September 30,								Nine months ended September 30,
		2016				2015				2016				2015
New vehicle unit sales brand mix
Honda, Acura			22.3	%			22.5	%			23.1	%			22.6	%
Toyota, Lexus		19.8				19.8				19.8				20.0
Chrysler			18.5				18.5				18.6				18.9
General Motors			9.2				9.5				8.9				9.3
Subaru			7.8				6.7				7.3				6.8
BMW, Mini			4.9				5.5				5.2				5.6
Ford			5.3				5.0				5.0				4.6
Nissan			3.8				4.0				3.8				3.8
Volkswagen, Audi			3.0				3.2				2.9				3.1
Hyundai			2.1				2.2				2.0				2.1
Kia			1.5				1.3				1.4				1.3
Mercedes Benz			1.2				1.4				1.3				1.5
Other			0.6				0.4				0.7				0.4

 

		Three months ended September 30,								Nine months ended September 30,
		2016				2015				2016				2015
Revenue geographic mix
California			22.6	%			21.4	%			22.7	%			21.4	%
Oregon			16.9				16.8				16.8				16.6
New Jersey			13.9				14.4				14.0				14.4
Texas			12.9				14.9				13.5				15.4
Montana			6.3				6.3				6.3				6.0
Washington			5.5				5.1				5.4				5.1
Alaska			4.8				5.4				4.9				5.4
New York			3.7				2.9				3.2				3.0
Nevada			3.0				3.1				3.0				3.1
Idaho			2.9				2.9				2.8				2.9
Iowa			2.6				3.0				2.6				2.9
Hawaii			1.9				1.5				2.0				1.4
North Dakota			1.3				1.4				1.3				1.5
New Mexico			0.8				0.9				0.9				0.9
Massachusetts			0.6				—				0.5				—
Vermont			0.3				—				0.1				—
Wyoming			—				—				—				—

 

 

		October 20, 2016
Current store count mix		# of stores				% of total
Chrysler			28				18.4	%
Honda, Acura			22				14.5
Toyota, Lexus			21				13.8
General Motors			17				11.2
Ford			11				7.2
BMW, Mini			11				7.2
Volkswagen, Audi			10				6.6
Subaru			9				5.9
Nissan			7				4.6
Hyundai			5				3.3
Mercedes Benz			4				2.6
Other			7				4.7

 

 

Lithia Motors, Inc.

Consolidated Balance Sheets (Unaudited)

(In thousands)

 

		September 30, 2016				December 31, 2015
Cash and cash equivalents		$	24,116			$	45,008
Trade receivables, net			317,664				308,462
Inventories, net			1,657,693				1,470,987
Other current assets			33,225				54,408
Total current assets		$	2,032,698			$	1,878,865
Property and equipment, net			991,721				876,660
Goodwill			219,021				213,220
Franchise value			163,220				157,699
Other non-current assets			156,946				100,855
Total assets		$	3,563,606			$	3,227,299
Floor plan notes payable		$	73,762			$	48,083
Floor plan notes payable: non trade			1,351,940				1,265,872
Current maturities of long-term debt			26,674				38,891
Trade payables			78,442				70,871
Accrued liabilities			204,361				167,108
Total current liabilities		$	1,735,179			$	1,590,825
Long-term debt			727,191				606,463
Deferred revenue			77,577				66,734
Deferred income taxes			58,721				53,129
Other long-term liabilities			98,848				81,984
Total liabilities		$	2,697,516			$	2,399,135
Class A common stock			167,596				258,410
Class B common stock			219				316
Additional paid-in capital			39,359				38,822
Accumulated other comprehensive loss			—				(277	)
Retained earnings			658,916				530,893
Total liabilities & stockholders' equity		$	3,563,606			$	3,227,299

  

 

Lithia Motors, Inc.

Summarized Cash Flow from Operations (Unaudited)

(In thousands)

 

		Nine Months Ended September 30,
		2016				2015
Net income		$	145,739			$	135,267
Adjustments to reconcile net income to net cash provided by operating activities:
Asset impairments			10,494				14,391
Depreciation and amortization			36,372				30,544
Stock-based compensation			8,665				8,579
(Gain) loss on disposal of assets			(4,299	)			27
Gain on sale of franchise			(1,102	)			(5,919	)
Deferred income taxes			9,782				(7,955	)
Excess tax benefit from share-based payment arrangements			(4,388	)			(4,923	)
(Increase) decrease:
Trade receivables, net			(5,911	)			9,685
Inventories			(85,564	)			(132,407	)
Other assets			4,627				(5,339	)
Increase (decrease):
Floor plan notes payable, net			18,122				5,604
Trade payables			6,153				7,768
Accrued liabilities			32,874				16,949
Other long-term liabilities and deferred revenue			18,227				34,651
Net cash provided by operating activities		$	189,791			$	106,922

 

  

  

Lithia Motors, Inc.

Reconciliation of Non-GAAP Cash Flow from Operations (Unaudited)

(In thousands)

 

		Nine Months Ended September 30,
		2016				2015
Net cash provided by operating activities
As reported		$	189,791			$	106,922
Floor plan notes payable, non-trade, net			93,817				36,204
Less: Borrowings on floor plan notes payable, non-trade associated with acquired new vehicle inventory			(88,147	)			(7,490	)
Adjusted		$	195,461			$	135,636

  

 

Lithia Motors, Inc.

Reconciliation of Certain Non-GAAP Financial Measures (Unaudited)

(In thousands, except for per share data)

 

		Three Months Ended September 30, 2016
		As reported				Equity investment fair value adjustment				Adjusted
Asset impairments		$	3,498			$	(3,498	)		$	—
Income from operations			93,423				3,498				96,921
Other (expense) income, net			(1,513	)			2,066				553
Income before income taxes		$	80,077			$	5,564			$	85,641
Income tax expense			(26,036	)			(7,592	)			(33,628	)
Net income		$	54,041			$	(2,028	)		$	52,013
Diluted earnings per share		$	2.14			$	(0.08	)		$	2.06
Diluted share count			25,290

 

 

		Three Months Ended September 30, 2015
		As reported				Transition Agreement				Equity investment fair value adjustment				Adjusted
Asset impairments		$	4,131			$	—				(4,131	)		$	—
Selling, general and administrative			223,728				(18,296	)			—				205,432
Income from operations			72,797				18,296				4,131				95,224
Other (expense) income, net			(307	)			—				1,731				1,424
Income before income taxes		$	62,639			$	18,296				5,862			$	86,797
Income tax expense			(19,248	)			(6,507	)			(7,414	)			(33,169	)
Net income		$	43,391			$	11,789				(1,552	)		$	53,628
Diluted earnings per share		$	1.64			$	0.44				(0.05	)		$	2.03
Diluted share count			26,480

  

 

Lithia Motors, Inc.

Reconciliation of Certain Non-GAAP Financial Measures (Unaudited)

(In thousands, except for per share data)

 

		Nine Months Ended September 30, 2016
		As reported				Disposal gain on sale of store				Equity investment fair value adjustment				Legal reserve adjustment				Adjusted
Asset impairments		$	10,494			$	—			$	(10,494	)		$	—			$	—
Selling, general and administrative			662,766				1,087				—				(1,906	)			661,947
Income from operations			256,847				(1,087	)			10,494				1,906				268,160
Other expense, net			(4,534	)			—				6,197				—				1,663
Income before income taxes		$	217,401			$	(1,087	)		$	16,691			$	1,906			$	234,911
Income tax expense			(71,662	)			426				(20,374	)			(747	)			(92,357	)
Net income		$	145,739			$	(661	)		$	(3,683	)		$	1,159			$	142,554
Diluted earnings per share		$	5.69			$	(0.03	)		$	(0.14	)		$	0.05			$	5.57
Diluted share count			25,598

 

 

 

		Nine Months Ended September 30, 2015
		As reported				Disposal gain on sale of store				Asset impairment				Equity investment fair value adjustment				Transition Agreement				Adjusted
Asset impairments		$	14,391			$	—			$	(2,000	)		$	(12,391	)		$					—
Selling, general and administrative			610,956				5,919				—				—				(18,296	)			598,579
Income from operations			226,320				(5,919	)			2,000				12,391				18,296				253,088
Other expense, net			(1,031	)			—				—				5,196								4,165
Income before income taxes		$	196,334			$	(5,919	)		$	2,000			$	17,587			$	18,296				228,298
Income tax expense			(61,067	)			2,309				(780	)			(22,316	)			(6,507	)			(88,361	)
Net income		$	135,267			$	(3,610	)		$	1,220			$	(4,729	)		$	11,789				139,937
Diluted earnings per share		$	5.10			$	(0.14	)		$	0.05			$	(0.18	)		$	0.45				5.28
Diluted share count			26,500