Lithia Reports Record Third Quarter Results
MEDFORD, OR -- (Marketwired) -- 10/20/16 -- 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
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Lithia Motors on Twitter http://twitter.com/lithiamotors
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 ) bps
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 Three months ended
September 30, 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 % (50)
5.8 % 6.3 bps
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 ) bps
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 Nine months ended
September 30, 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 bps
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
------------------------
As of September 30,
Requirement 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 Nine months ended
September 30, 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 Nine months ended
September 30, 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, December 31,
2016 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,
Net cash provided by operating activities 2016 2015
-------------- --------------
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
-------------------------------------
Equity
investment
fair value
As reported 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
-------------------------------------------
Equity
investment
As Transition fair value
reported Agreement 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
-----------------------------------------------------
Disposal Equity
gain on investment Legal
As sale fair value reserve
reported of store adjustment 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
-----------------------------------------------------------
Disposal Equity
gain on investment
As sale of Asset fair value Transition
reported store impairment adjustment 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
Contact: John North VP Finance and Chief Accounting Officer (541) 618-5748
Source: Lithia Motors