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| 8-K - 8-K - LITHIA MOTORS INC | lad2017q3-8kearningsrelease.htm |
LITHIA REPORTS RECORD THIRD QUARTER 2017 RESULTS, INCREASES REVENUE 19%
_____________________________________________________
DECLARES DIVIDEND OF $0.27 PER SHARE FOR THIRD QUARTER
Medford, Oregon, October 25, 2017 - Lithia Motors, Inc. (NYSE: LAD) today reported the highest third quarter revenue in company history and the 28th consecutive quarter of record results.
Third quarter 2017 net income per diluted share decreased 3% to $2.07 from $2.14 for the third quarter of 2016. Adjusted net income per diluted share increased 6% to $2.18 from $2.06 for the same period in 2016. Third quarter 2017 net income decreased 4% to $51.9 million from $54.0 million for the third quarter of 2016. Adjusted net income increased 5% to $54.8 million compared to third quarter 2016 adjusted net income of $52.0 million.
As shown in the attached non-GAAP reconciliation tables, the 2017 third quarter adjusted results exclude $0.11 per share in non-core charges related to storm insurance reserves and acquisition related expenses. The 2016 third quarter non-core adjustments exclude a $0.08 benefit associated with an equity investment.
Third quarter 2017 revenue increased 19% to $2.7 billion from $2.3 billion in the third quarter of 2016.
Third Quarter-over-Quarter Operating Highlights:
• | Total same store sales increased 1% |
• | New vehicle same store sales increased 1% |
• | Used vehicle retail same store sales increased 4% |
• | Service, body and parts same store sales increased 3% |
• | Same store F&I per unit was $1,286 |
• | Adjusted SG&A expense as a percentage of gross profit was 68.7% |
For the first nine months of 2017, revenues increased 16% to $7.4 billion, compared to $6.4 billion in the first nine months of 2016. Net income for the first nine months of 2017 was $6.19 per diluted share, compared to $5.69 per diluted share for the similar period in 2016. Adjusted net income per diluted share for the first nine months of 2017 increased 12% to $6.24 from $5.57 for the first nine months of 2016.
"We increased quarterly revenues 19% and adjusted earnings per share 6% over last year, driven by our significant acquisition cadence," said Bryan DeBoer, President and CEO. "We grew same-store sales in all departments, outpacing a plateauing new vehicle sales environment. We remain focused on integrating acquisitions while continuing to unlock the substantial opportunity to improve performance across our broader store base."
Corporate Development
As previously announced in August, we completed the acquisition of the Downtown Los Angeles ("DTLA") Auto Group comprised of Audi, Mercedes-Benz, Nissan, Porsche, Toyota, and Volkswagen stores located in downtown Los Angeles, California and a Nissan store in nearby Carson, California. In 2017, we have completed the acquisition of 15 stores and opened one store which we forecast will generate over $1.5 billion in annualized revenues.
"We continue to see a significant number of stores available," said DeBoer. "Given the annual cash flow from our existing base of business, ample liquidity and availability of capital, we anticipate a future cadence similar to what we have experienced in the prior three years."
Balance Sheet Update
We ended the third quarter with $39 million in cash and $269 million in availability under our credit facility. Additionally, approximately $282 million of our operating real estate is currently unfinanced, which we estimate could provide $211 million in capital, for total potential liquidity of $519 million.
In July 2017, we completed a $300 million aggregate principal amount offering of 5.25% senior notes due 2025 in a private offering that is exempt from the registration requirements of the Securities Act of 1933, as amended. During the third quarter, we used approximately half the net proceeds to fund the DTLA acquisition, and the remainder for general corporate purposes, including capital expenditures and debt repayment.
Dividend Payment
Our Board of Directors has approved a dividend of $0.27 per share related to third quarter 2017 financial results. We expect to pay the dividend on November 24, 2017 to shareholders of record on November 10, 2017.
Earnings Outlook
For 2017, we expect same store sales growth of 3%, full year revenues of $10.0 billion to $10.2 billion and adjusted earnings per share of $8.30 to $8.35.
For 2018, we target full year revenues of $11.0 to $11.5 billion and earnings per share of $9.25.
Commenting on the earnings guidance, John North, Senior Vice President and CFO, stated, "We experienced approximately $0.20 in headwinds in the quarter related to reserve adjustments and higher than anticipated depreciation and floor plan interest expense. Opportunity also remains to better leverage expenses in personnel and advertising. As a result, we expect 2017 adjusted earnings in a range of $8.30 to $8.35 per share , representing a 12% increase over last year. For 2018, we are targeting growth of approximately 11% for both revenue and earnings through acquisitions and leveraging our shared cost structure."
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 (#318-2017) with 166 stores representing 30 brands in 18 states. We offer vehicles online and through our nationwide retail network. Our "Growth Powered by People" strategy drives us to innovate and continuously improve the customer experience.
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
Senior Vice President and Chief Financial 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 2017 full year earnings of $8.30 to $8.35 per diluted share and achieving a 2018 full year earnings target of $9.25 per diluted share and all projections set forth under the headings "Earnings Outlook"; |
• | Our ability to improve store performance; |
• | Anticipated acquisition opportunities and additions of dealership locations to our portfolio in the future, and our ability to improve earnings and achieve returns on investments; |
• | Anticipated revenues from acquired and open point 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 revenue and gross profit, adjusted operating margin, adjusted operating profit as a percentage of gross profit, adjusted pre-tax margin, EBITDA, adjusted EBITDA, leveraged cash flow and adjusted total debt. 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, | % | Nine months ended September 30, | % | |||||||||||||||||||
Increase | Increase | |||||||||||||||||||||
2017 | 2016 | (Decrease) | 2017 | 2016 | (Decrease) | |||||||||||||||||
Revenues: | ||||||||||||||||||||||
New vehicle retail | $ | 1,557,076 | $ | 1,297,511 | 20.0 | % | $ | 4,151,435 | $ | 3,602,603 | 15.2 | % | ||||||||||
Used vehicle retail | 679,632 | 580,885 | 17.0 | 1,915,490 | 1,667,258 | 14.9 | ||||||||||||||||
Used vehicle wholesale | 75,720 | 75,271 | 0.6 | 216,735 | 207,131 | 4.6 | ||||||||||||||||
Finance and insurance | 101,044 | 87,709 | 15.2 | 282,672 | 246,390 | 14.7 | ||||||||||||||||
Service, body and parts | 265,683 | 217,148 | 22.4 | 744,262 | 616,088 | 20.8 | ||||||||||||||||
Fleet and other | 15,185 | 11,443 | 32.7 | 86,883 | 46,697 | 86.1 | ||||||||||||||||
Total revenues | 2,694,340 | 2,269,967 | 18.7 | % | 7,397,477 | 6,386,167 | 15.8 | % | ||||||||||||||
Cost of sales: | ||||||||||||||||||||||
New vehicle retail | 1,469,031 | 1,221,668 | 20.2 | 3,912,733 | 3,387,132 | 15.5 | ||||||||||||||||
Used vehicle retail | 600,974 | 512,076 | 17.4 | 1,693,543 | 1,466,947 | 15.4 | ||||||||||||||||
Used vehicle wholesale | 74,546 | 74,353 | 0.3 | 212,332 | 202,897 | 4.7 | ||||||||||||||||
Service, body and parts | 133,191 | 112,806 | 18.1 | 376,096 | 317,028 | 18.6 | ||||||||||||||||
Fleet and other | 13,577 | 11,803 | 15.0 | 82,829 | 45,684 | 81.3 | ||||||||||||||||
Total cost of sales | 2,291,319 | 1,932,706 | 18.6 | 6,277,533 | 5,419,688 | 15.8 | ||||||||||||||||
Gross profit | 403,021 | 337,261 | 19.5 | % | 1,119,944 | 966,479 | 15.9 | % | ||||||||||||||
Asset impairments | — | 3,498 | (100.0 | ) | — | 10,494 | (100.0 | ) | ||||||||||||||
SG&A expense | 282,241 | 228,134 | 23.7 | 782,303 | 662,766 | 18.0 | ||||||||||||||||
Depreciation and amortization | 14,828 | 12,206 | 21.5 | 41,598 | 36,372 | 14.4 | ||||||||||||||||
Income from operations | 105,952 | 93,423 | 13.4 | % | 296,043 | 256,847 | 15.3 | % | ||||||||||||||
Floor plan interest expense | (10,629 | ) | (6,186 | ) | 71.8 | (28,013 | ) | (18,304 | ) | 53.0 | ||||||||||||
Other interest expense | (9,905 | ) | (5,647 | ) | 75.4 | (23,745 | ) | (16,608 | ) | 43.0 | ||||||||||||
Other income (expense), net | 1,125 | (1,513 | ) | NM | 11,357 | (4,534 | ) | NM | ||||||||||||||
Income before income taxes | 86,543 | 80,077 | 8.1 | % | 255,642 | 217,401 | 17.6 | % | ||||||||||||||
Income tax expense | (34,657 | ) | (26,036 | ) | 33.1 | (99,829 | ) | (71,662 | ) | 39.3 | ||||||||||||
Income tax rate | 40.0 | % | 32.5 | % | 39.1 | % | 33.0 | % | ||||||||||||||
Net income | $ | 51,886 | $ | 54,041 | (4.0 | )% | $ | 155,813 | $ | 145,739 | 6.9 | % | ||||||||||
Diluted net income per share: | ||||||||||||||||||||||
Net income per share | $ | 2.07 | $ | 2.14 | (3.3 | )% | $ | 6.19 | $ | 5.69 | 8.8 | % | ||||||||||
Diluted shares outstanding | 25,076 | 25,290 | (0.8 | )% | 25,158 | 25,598 | (1.7 | )% | ||||||||||||||
NM - not meaningful
Lithia Motors, Inc.
Key Performance Metrics (Unaudited)
Three months ended September 30, | % | Nine months ended September 30, | % | |||||||||||||||||||
Increase | Increase | |||||||||||||||||||||
2017 | 2016 | (Decrease) | 2017 | 2016 | (Decrease) | |||||||||||||||||
Gross margin | ||||||||||||||||||||||
New vehicle retail | 5.7 | % | 5.8 | % | (10 | )bps | 5.7 | % | 6.0 | % | (30 | )bps | ||||||||||
Used vehicle retail | 11.6 | 11.8 | (20 | )bps | 11.6 | 12.0 | (40 | )bps | ||||||||||||||
Finance and insurance | 100.0 | 100.0 | — | 100.0 | 100.0 | — | ||||||||||||||||
Service, body and parts | 49.9 | 48.1 | 180 | bps | 49.5 | 48.5 | 100 | bps | ||||||||||||||
Gross profit margin | 15.0 | 14.9 | 10 | bps | 15.1 | 15.1 | — | |||||||||||||||
Unit sales | ||||||||||||||||||||||
New vehicle retail | 45,570 | 38,417 | 18.6 | % | 122,062 | 107,225 | 13.8 | % | ||||||||||||||
Used vehicle retail | 34,737 | 29,636 | 17.2 | 97,691 | 84,783 | 15.2 | ||||||||||||||||
Total retail units sold | 80,307 | 68,053 | 18.0 | 219,753 | 192,008 | 14.4 | ||||||||||||||||
Average selling price | ||||||||||||||||||||||
New vehicle retail | $ | 34,169 | $ | 33,774 | 1.2 | % | $ | 34,011 | $ | 33,599 | 1.2 | % | ||||||||||
Used vehicle retail | 19,565 | 19,601 | (0.2 | ) | 19,608 | 19,665 | (0.3 | ) | ||||||||||||||
Average gross profit per unit | ||||||||||||||||||||||
New vehicle retail | $ | 1,932 | $ | 1,974 | (2.1 | )% | $ | 1,956 | $ | 2,010 | (2.7 | )% | ||||||||||
Used vehicle retail | 2,264 | 2,322 | (2.5 | ) | 2,272 | 2,363 | (3.9 | ) | ||||||||||||||
Finance and insurance | 1,258 | 1,289 | (2.4 | ) | 1,286 | 1,283 | 0.2 | |||||||||||||||
Total vehicle(1) | 3,349 | 3,428 | (2.3 | ) | 3,403 | 3,471 | (2.0 | ) | ||||||||||||||
Revenue mix | ||||||||||||||||||||||
New vehicle retail | 57.8 | % | 57.2 | % | 56.1 | % | 56.4 | % | ||||||||||||||
Used vehicle retail | 25.2 | 25.6 | 25.9 | 26.1 | ||||||||||||||||||
Used vehicle wholesale | 2.8 | 3.3 | 2.9 | 3.2 | ||||||||||||||||||
Finance and insurance, net | 3.8 | 3.9 | 3.8 | 3.9 | ||||||||||||||||||
Service, body and parts | 9.9 | 9.6 | 10.1 | 9.6 | ||||||||||||||||||
Fleet and other | 0.5 | 0.4 | 1.2 | 0.8 | ||||||||||||||||||
Adjusted | As reported | Adjusted | As reported | ||||||||||||||||||||
Three months ended September 30, | Three months ended September 30, | Nine months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||
Other metrics | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | |||||||||||||||
SG&A as a % of revenue | 10.3 | % | 10.1 | % | 10.5 | % | 10.1 | % | 10.4 | % | 10.4 | % | 10.6 | % | 10.4 | % | |||||||
SG&A as a % of gross profit | 68.7 | 67.6 | 70.0 | 67.6 | 68.8 | 68.5 | 69.9 | 68.6 | |||||||||||||||
Operating profit as a % of revenue | 4.1 | 4.3 | 3.9 | 4.1 | 4.2 | 4.2 | 4.0 | 4.0 | |||||||||||||||
Operating profit as a % of gross profit | 27.6 | 28.7 | 26.3 | 27.7 | 27.4 | 27.7 | 26.4 | 26.6 | |||||||||||||||
Pretax margin | 3.4 | 3.8 | 3.2 | 3.5 | 3.5 | 3.7 | 3.5 | 3.4 | |||||||||||||||
Net profit margin | 2.0 | 2.3 | 1.9 | 2.4 | 2.1 | 2.2 | 2.1 | 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)
Three months ended September 30, | % | Nine months ended September 30, | % | |||||||||||||||||
Increase | Increase | |||||||||||||||||||
2017 | 2016 | (Decrease) | 2017 | 2016 | (Decrease) | |||||||||||||||
Revenues | ||||||||||||||||||||
New vehicle retail | $ | 1,290,305 | $ | 1,280,030 | 0.8 | % | $3,604,571 | $ | 3,582,725 | 0.6 | % | |||||||||
Used vehicle retail | 593,695 | 572,862 | 3.6 | 1,730,905 | 1,656,119 | 4.5 | ||||||||||||||
Finance and insurance | 87,371 | 86,951 | 0.5 | 257,155 | 245,397 | 4.8 | ||||||||||||||
Service, body and parts | 221,356 | 214,391 | 3.2 | 648,309 | 612,142 | 5.9 | ||||||||||||||
Total revenues | 2,262,056 | 2,238,787 | 1.0 | 6,492,755 | 6,347,785 | 2.3 | ||||||||||||||
Gross profit | ||||||||||||||||||||
New vehicle retail | $ | 72,246 | $ | 74,903 | (3.5 | )% | $207,549 | $ | 214,415 | (3.2 | )% | |||||||||
Used vehicle retail | 71,248 | 68,215 | 4.4 | 205,438 | 199,432 | 3.0 | ||||||||||||||
Finance and insurance | 87,371 | 86,951 | 0.5 | 257,155 | 245,397 | 4.8 | ||||||||||||||
Service, body and parts | 109,591 | 103,025 | 6.4 | 320,345 | 297,185 | 7.8 | ||||||||||||||
Total gross profit | 342,707 | 333,636 | 2.7 | 997,597 | 961,722 | 3.7 | ||||||||||||||
Gross margin | ||||||||||||||||||||
New vehicle retail | 5.6 | % | 5.9 | % | 5.8% | 6.0 | % | |||||||||||||
Used vehicle retail | 12.0 | 11.9 | 11.9 | 12.0 | ||||||||||||||||
Finance and insurance | 100.0 | 100.0 | 100.0 | 100.0 | ||||||||||||||||
Service, body and parts | 49.5 | 48.1 | 49.4 | 48.5 | ||||||||||||||||
Gross profit margin | 15.2 | 14.9 | 15.4 | 15.2 | ||||||||||||||||
Unit sales | ||||||||||||||||||||
New vehicle retail | 37,819 | 37,870 | (0.1 | )% | 105,927 | 106,599 | (0.6 | )% | ||||||||||||
Used vehicle retail | 30,133 | 29,171 | 3.3 | 87,571 | 84,148 | 4.1 | ||||||||||||||
Average selling price | ||||||||||||||||||||
New vehicle retail | $ | 34,118 | $ | 33,801 | 0.9 | % | $34,029 | $ | 33,609 | 1.2 | % | |||||||||
Used vehicle retail | 19,702 | 19,638 | 0.3 | 19,766 | 19,681 | 0.4 | ||||||||||||||
Average gross profit per unit | ||||||||||||||||||||
New vehicle retail | $ | 1,910 | $ | 1,978 | (3.4 | )% | $1,959 | $ | 2,011 | (2.6 | )% | |||||||||
Used vehicle retail | 2,364 | 2,338 | 1.1 | 2,346 | 2,370 | (1.0 | ) | |||||||||||||
Finance and insurance | 1,286 | 1,297 | (0.8 | ) | 1,329 | 1,287 | 3.3 | |||||||||||||
Total vehicle(1) | 3,412 | 3,446 | (1.0 | ) | 3,483 | 3,479 | 0.1 | |||||||||||||
(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.
Segment Operating Highlights (Unaudited)
Three months ended September 30, | % | Nine months ended September 30, | % | |||||||||||||||||||
Increase | Increase | |||||||||||||||||||||
2017 | 2016 | (Decrease) | 2017 | 2016 | (Decrease) | |||||||||||||||||
Revenues | ||||||||||||||||||||||
Domestic | $ | 1,014,650 | $ | 893,156 | 13.6 | % | $ | 2,869,357 | $ | 2,495,468 | 15.0 | % | ||||||||||
Import | 1,215,669 | 983,947 | 23.6 | 3,282,380 | 2,777,007 | 18.2 | ||||||||||||||||
Luxury | 465,419 | 392,537 | 18.6 | 1,248,385 | 1,111,215 | 12.3 | ||||||||||||||||
Total segment revenues | 2,695,738 | 2,269,640 | 18.8 | 7,400,122 | 6,383,690 | 15.9 | ||||||||||||||||
Corporate and other | (1,398 | ) | 327 | NM | (2,645 | ) | 2,477 | NM | ||||||||||||||
Total revenues | $ | 2,694,340 | $ | 2,269,967 | 18.7 | $ | 7,397,477 | $ | 6,386,167 | 15.8 | ||||||||||||
Segment Income(1) | ||||||||||||||||||||||
Domestic | $ | 31,141 | $ | 32,292 | (3.6 | )% | $ | 84,440 | $ | 84,420 | — | % | ||||||||||
Import | 36,954 | 32,934 | 12.2 | 91,365 | 86,878 | 5.2 | ||||||||||||||||
Luxury | 7,515 | 7,423 | 1.2 | 22,542 | 21,736 | 3.7 | ||||||||||||||||
Total segment income | 75,610 | 72,649 | 4.1 | 198,347 | 193,034 | 2.8 | ||||||||||||||||
Corporate and other | 34,541 | 26,794 | 28.9 | 111,281 | 81,881 | 35.9 | ||||||||||||||||
Depreciation and amortization | (14,828 | ) | (12,206 | ) | 21.5 | (41,598 | ) | (36,372 | ) | 14.4 | ||||||||||||
Other interest expense | (9,905 | ) | (5,647 | ) | 75.4 | (23,745 | ) | (16,608 | ) | 43.0 | ||||||||||||
Other income (expense), net | 1,125 | (1,513 | ) | NM | 11,357 | (4,534 | ) | NM | ||||||||||||||
Income before income taxes | $ | 86,543 | $ | 80,077 | 8.1 | $ | 255,642 | $ | 217,401 | 17.6 | ||||||||||||
(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 | Three months ended September 30, | % | Nine months ended September 30, | % | ||||||||||||||
Increase | Increase | |||||||||||||||||
2017 | 2016 | (Decrease) | 2017 | 2016 | (Decrease) | |||||||||||||
Domestic | 14,004 | 12,735 | 10.0 | % | 39,500 | 35,176 | 12.3 | % | ||||||||||
Import | 26,643 | 21,467 | 24.1 | 69,665 | 59,581 | 16.9 | ||||||||||||
Luxury | 5,032 | 4,287 | 17.4 | 13,171 | 12,667 | 4.0 | ||||||||||||
Total | 45,679 | 38,489 | 18.7 | 122,336 | 107,424 | 13.9 | ||||||||||||
Allocated to management | (109 | ) | (72 | ) | NM | (274 | ) | (199 | ) | NM | ||||||||
Total new retail unit sales | 45,570 | 38,417 | 18.6 | 122,062 | 107,225 | 13.8 | ||||||||||||
NM - not meaningful
Lithia Motors, Inc.
Other Highlights (Unaudited)
As of | |||||
September 30, | December 31, | September 30, | |||
2017 | 2016 | 2016 | |||
Days Supply(1) | |||||
New vehicle inventory | 69 | 68 | 65 | ||
Used vehicle inventory | 63 | 56 | 57 | ||
(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, 2017 | |||
Current ratio | Not less than 1.10 to 1 | 1.32 | to 1 | |
Fixed charge coverage ratio | Not less than 1.20 to 1 | 2.82 | to 1 | |
Leverage ratio | Not more than 5.00 to 1 | 2.93 | to 1 | |
Funded debt restriction | Not more than $900 million | $784.0 million | ||
Lithia Motors, Inc.
Condensed Consolidated Balance Sheets (Unaudited)
(In thousands)
September 30, 2017 | December 31, 2016 | |||||||
Cash and cash equivalents | $ | 38,577 | $ | 50,282 | ||||
Trade receivables, net | 446,613 | 417,714 | ||||||
Inventories, net | 1,966,456 | 1,772,587 | ||||||
Other current assets | 59,622 | 46,611 | ||||||
Total current assets | $ | 2,511,268 | $ | 2,287,194 | ||||
Property and equipment, net | 1,087,920 | 1,006,130 | ||||||
Intangibles | 444,162 | 443,667 | ||||||
Other non-current assets | 328,243 | 107,159 | ||||||
Total assets | $ | 4,371,593 | $ | 3,844,150 | ||||
Floor plan notes payable | 1,712,944 | 1,601,497 | ||||||
Other current liabilities | 361,818 | 320,497 | ||||||
Total current liabilities | $ | 2,074,762 | $ | 1,921,994 | ||||
Long-term debt | 991,333 | 769,916 | ||||||
Other long-term liabilities and deferred revenue | 274,122 | 241,464 | ||||||
Total liabilities | $ | 3,340,217 | $ | 2,933,374 | ||||
Stockholder's Equity | 1,031,376 | 910,776 | ||||||
Total liabilities & stockholders' equity | $ | 4,371,593 | $ | 3,844,150 | ||||
Lithia Motors, Inc.
Summarized Cash Flow from Operations (Unaudited)
(In thousands)
Nine months ended September 30, | ||||||||
2017 | 2016 | |||||||
Net income | $ | 155,813 | $ | 145,739 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Asset impairments | — | 10,494 | ||||||
Depreciation and amortization | 41,598 | 36,372 | ||||||
Stock-based compensation | 8,396 | 8,665 | ||||||
(Gain) loss on disposal of assets | (382 | ) | (4,299 | ) | ||||
Gain on sale of franchise | — | (1,102 | ) | |||||
Deferred income taxes | 7,398 | 9,782 | ||||||
(Increase) decrease: | ||||||||
Trade receivables, net | (13,345 | ) | (5,911 | ) | ||||
Inventories | (16,098 | ) | (85,564 | ) | ||||
Other assets | 15,207 | 4,688 | ||||||
Increase (decrease): | ||||||||
Floor plan notes payable, net | 12,126 | 18,122 | ||||||
Trade payables | 12,397 | 6,153 | ||||||
Accrued liabilities | 25,907 | 32,874 | ||||||
Other long-term liabilities and deferred revenue | 11,519 | 18,227 | ||||||
Net cash provided by operating activities | $ | 260,536 | $ | 194,240 | ||||
Lithia Motors, Inc.
Reconciliation of Non-GAAP Cash Flow from Operations (Unaudited)
(In thousands)
Nine months ended September 30, | ||||||
Net cash provided by operating activities | 2017 | 2016 | ||||
As reported | $ | 260,536 | $ | 194,240 | ||
Floor plan notes payable, non-trade, net | 34,056 | 93,817 | ||||
Less: Borrowings on floor plan notes payable, non-trade associated with acquired new vehicle inventory | (85,527 | ) | (88,147 | ) | ||
Adjusted | $ | 209,065 | $ | 199,910 | ||
Lithia Motors, Inc.
Reconciliation of Certain Non-GAAP Financial Measures (Unaudited)
(In thousands, except for per share data)
Three Months Ended September 30, 2017 | ||||||||||||||||
As reported | Insurance reserves | Acquisition expenses | Adjusted | |||||||||||||
Selling, general and administrative | $ | 282,241 | $ | (1,704 | ) | $ | (3,516 | ) | $ | 277,021 | ||||||
Income from operations | 105,952 | 1,704 | 3,516 | 111,172 | ||||||||||||
Other income (expense), net | 1,125 | — | — | 1,125 | ||||||||||||
Income before income taxes | $ | 86,543 | $ | 1,704 | $ | 3,516 | $ | 91,763 | ||||||||
Income tax expense | (34,657 | ) | (943 | ) | (1,380 | ) | (36,980 | ) | ||||||||
Net income | $ | 51,886 | $ | 761 | $ | 2,136 | $ | 54,783 | ||||||||
Diluted earnings per share | $ | 2.07 | $ | 0.03 | $ | 0.08 | $ | 2.18 | ||||||||
Diluted share count | 25,076 | |||||||||||||||
Three Months Ended September 30, 2016 | ||||||||||||
As reported | Equity investment fair value adjustment | Adjusted | ||||||||||
Asset impairments | $ | 3,498 | $ | (3,498 | ) | $ | — | |||||
Selling, general and administrative | 228,134 | — | 228,134 | |||||||||
Income from operations | 93,423 | 3,498 | 96,921 | |||||||||
Other income (expense), 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 | |||||||||||
Lithia Motors, Inc.
Reconciliation of Certain Non-GAAP Financial Measures (Unaudited)
(In thousands, except for per share data)
Nine Months Ended September 30, 2017 | ||||||||||||||||||||
As reported | Insurance reserves | Acquisition expenses | OEM settlement | Adjusted | ||||||||||||||||
Selling, general and administrative | $ | 782,303 | $ | (5,582 | ) | $ | (5,653 | ) | $ | — | $ | 771,068 | ||||||||
Income from operations | 296,043 | 5,582 | 5,653 | — | 307,278 | |||||||||||||||
Other income (expense), net | 11,357 | — | — | (9,111 | ) | 2,246 | ||||||||||||||
Income before income taxes | $ | 255,642 | 5,582 | $ | 5,653 | $ | (9,111 | ) | $ | 257,766 | ||||||||||
Income tax expense | (99,829 | ) | (2,174 | ) | (2,201 | ) | 3,423 | (100,781 | ) | |||||||||||
Net income | $ | 155,813 | 3,408 | $ | 3,452 | $ | (5,688 | ) | $ | 156,985 | ||||||||||
Diluted earnings per share | $ | 6.19 | 0.14 | $ | 0.14 | $ | (0.23 | ) | $ | 6.24 | ||||||||||
Diluted share count | 25,158 | |||||||||||||||||||
Nine Months Ended September 30, 2016 | ||||||||||||||||||||
As reported | Disposal gain on sale of store | Equity investment fair value adjustment | Legal reserve | 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 income (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 | |||||||||||||||||||
Lithia Motors, Inc.
Adjusted EBITDA and Leveraged Free Cash Flow (Unaudited)
Three months ended September 30, | % | Nine months ended September 30, | % | |||||||||||||||||||
Increase | Increase | |||||||||||||||||||||
2017 | 2016 | (Decrease) | 2017 | 2016 | (Decrease) | |||||||||||||||||
EBITDA and Adjusted EBITDA | ||||||||||||||||||||||
Net income | $ | 51,886 | $ | 54,041 | (4.0 | )% | $ | 155,813 | $ | 145,739 | 6.9 | % | ||||||||||
Other interest expense | 9,905 | 5,647 | 75.4 | 23,745 | 16,608 | 43.0 | ||||||||||||||||
Income tax expense | 34,657 | 26,036 | 33.1 | 99,829 | 71,662 | 39.3 | ||||||||||||||||
Depreciation and amortization | 14,828 | 12,206 | 21.5 | 41,598 | 36,372 | 14.4 | ||||||||||||||||
EBITDA | $ | 111,276 | $ | 97,930 | 13.6 | % | $ | 320,985 | $ | 270,381 | 18.7 | % | ||||||||||
Other adjustments: | ||||||||||||||||||||||
Less: used vehicle line of credit interest expense | (365 | ) | (915 | ) | (60.1 | ) | (2,522 | ) | (2,605 | ) | (3.2 | ) | ||||||||||
Add: equity investment fair value adjustment | — | 5,564 | (100.0 | ) | — | 16,691 | (100.0 | ) | ||||||||||||||
Less: OEM legal settlements | — | — | NM | (9,111 | ) | — | NM | |||||||||||||||
Add: acquisition expenses | 3,516 | — | NM | 5,653 | — | NM | ||||||||||||||||
Add: insurance reserve | 1,704 | — | NM | 5,582 | — | NM | ||||||||||||||||
Adjusted EBITDA | $ | 116,131 | $ | 102,579 | 13.2 | % | $ | 320,587 | $ | 284,467 | 12.7 | % | ||||||||||
Leveraged Free Cash Flow | ||||||||||||||||||||||
Adjusted EBITDA | $ | 116,131 | $ | 102,579 | 13.2 | % | $ | 320,587 | $ | 284,467 | 12.7 | % | ||||||||||
Less: Capital expenditures | (39,908 | ) | (38,116 | ) | 4.7 | (72,174 | ) | (81,363 | ) | (11.3 | ) | |||||||||||
Leveraged free cash flow | $ | 76,223 | $ | 64,463 | 18.2 | % | $ | 248,413 | $ | 203,104 | 22.3 | % | ||||||||||