Lithia Reports Record Second Quarter Results and Increases 2016 GuidanceDeclares Dividend of $0.25 per Share for Second Quarter
MEDFORD, OR -- (Marketwired - July 28, 2016) - Lithia Motors, Inc. (NYSE: LAD) reported the highest second quarter adjusted net income in company history, an increase of 2% over the prior year period.
2016 second quarter unadjusted net income was $51.4 million, or $2.01 per diluted share, compared to $51.2 million, or $1.93 per diluted share, for the second quarter of 2015. Adjusted net income for the second quarter of 2016 was $50.2 million, or $1.96 per diluted share, compared to 2015 second quarter adjusted net income of $49.4 million, or $1.86 per diluted share.
As shown in the attached non-GAAP reconciliation tables, the 2016 second quarter adjusted results exclude a non-core benefit of $0.05 related to an equity investment. The 2015 second quarter adjusted results exclude a $0.07 non-core net benefit from an equity investment and a gain on the sale of a store partially offset by an asset impairment.
Second quarter 2016 revenue increased $136.4 million, or 7%, to $2.1 billion from $2.0 billion for the second quarter 2015.
Second Quarter-over-Quarter Operating Highlights:
- Total same store sales increased 3.8%
- New vehicle same store sales increased 2.3%
- Used vehicle retail same store sales increased 10.2%
- Service, body and parts same store sales increased 7.4%
- Same store F&I per unit increased $60 to $1,273
- SG&A expense as a percentage of gross profit was 66.9%
For the first six months of 2016, revenues increased 8.7% to $4.1 billion from $3.8 billion in the first six months of 2015 and unadjusted net income was $3.56 per diluted share, compared to $3.47 per diluted share. Adjusted net income per diluted share for the first six months of 2016 increased 8.0% to $3.52 from $3.26 for the first six months of 2015.
"Our stores delivered strong results in the quarter, growing all business lines," said Bryan DeBoer, President and CEO. "Led by a 10.2% increase in used vehicle sales and a 7.4% increase in service, body and parts sales, our team is capitalizing on both a growing supply of used vehicles and units in operation sold over the past seven years that are now returning for service. We are capturing new vehicle market share and increasing F&I per unit, which we believe are the key drivers to future organic growth, while maintaining adjusted SG&A as a percentage of gross profit below 67%."
Corporate Development
With the addition of a GMC Buick franchise in Helena, Montana during the quarter, we have completed three acquisitions in 2016.
Mr. DeBoer added, "We anticipate a sustained new vehicle sales environment of 17 million units in the coming years. This provides Lithia several benefits including a predictable and profitable cadence of new car sales and incrementally higher service revenues as the vehicles sold over the past six years age and require maintenance. Additionally, the increasing supply of used vehicles will drive incremental revenue opportunities. Most importantly, a static SAAR level will spur further acquisitions as the aging dealer body seeks the optimal time to retire. These factors increase our confidence in establishing a new milestone of $9.00 in earnings per share, which we will strive to achieve through improvement in our existing locations and acquisition activity in both the Lithia and DCH platforms. We will continue our growth and believe the best use of capital is expanding our store base."
Balance Sheet Update
We ended the second quarter with $15 million in cash and $135 million in availability under our credit facilities. Additionally, approximately $218 million of our operating real estate is currently unfinanced, which we estimate could provide $164 million in capital, for total potential liquidity of $314 million.
On July 27, 2016, we amended our credit agreement to increase the facility by $300 million to $2.05 billion and extended the maturity to July 2021. The amended agreement provides for up to $1.3 billion in new vehicle inventory floor plan financing, $350 million in used vehicle inventory floor plan financing and $400 million in revolving loan financing.
Chris Holzshu, SVP and CFO, said, "We appreciate the support of our 18 commercial lender partners to increase the capacity and extend the duration of our credit facility. The primary reason for the amendment is to provide new vehicle floor plan financing for future acquisitions. We believe it is an opportune time to secure incremental capacity to meet our robust growth objectives and our $9.00 earnings milestone."
Dividend Payment and Share Repurchase
Our Board of Directors has approved a dividend of $0.25 per share related to second quarter 2016 financial results. We expect to pay the dividend on August 26, 2016 to shareholders of record on August 12, 2016.
In the second quarter 2016, we repurchased 603,225 shares at a weighted average price of $78.09 per share. In the first six months of 2016, we have repurchased approximately 5% of our outstanding float or 1.2 million shares at a weighted average price of $78.86. Approximately $201 million remains available under our existing repurchase authorization.
2016 Outlook
We project 2016 third quarter earnings of $2.11 to $2.15 per diluted share and 2016 full year earnings of $7.50 to $7.65 per diluted share. Both projections are based on the following annual assumptions:
- Total revenues of $8.5 to $8.6 billion
- New vehicle sales increasing 3.5%
- New vehicle gross margin of 5.9% to 6.1%
- Used vehicle sales increasing 9.5%
- Used vehicle gross margin of 11.9% to 12.1%
- Service body and parts sales increasing 7.5%
- Service body and parts gross margin of 48.8% to 49.0%
- Finance and insurance gross profit of $1,270 to $1,290 per unit
- Tax rate of 39.5%
- Average diluted shares outstanding of 25.6 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.
In October 2016, we expect to provide only annual earnings guidance with our regular quarterly and annual earnings announcements.
Second Quarter Earnings Conference Call and Updated Presentation
The second quarter conference call may be accessed at 11:00 a.m. ET today by telephone at 877-407-8029. An updated presentation highlighting the second quarter results has been added to www.lithiainvestorrelations.com.
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 31 brands of new vehicles and all brands of used vehicles at 139 stores in 15 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.lithia.com
www.lithiainvestorrelations.com
www.lithiacareers.com
Lithia Motors on Facebook
www.facebook.com/LithiaMotors
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 third quarter earnings per share of $2.11 to $2.15 per diluted share and 2016 full year earnings of $7.50 to $7.65 per diluted share and all projections set forth under the headings "2016 Outlook";
- Anticipated national new car sales levels
- Anticipated ability to improve store performance;
- Anticipated acquisition opportunities and additions of dealership locations to our portfolio in the future; 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 %
June 30, Increase Increase
------------------------
2016 2015 (Decrease) (Decrease)
----------- ----------- ----------- ----------
Revenues:
New vehicle retail $ 1,209,037 $ 1,149,512 $ 59,525 5.2%
Used vehicle retail 553,647 488,801 64,846 13.3
Used vehicle wholesale 66,714 66,796 (82) (0.1)
Finance and insurance 81,043 72,463 8,580 11.8
Service, body and parts 202,265 182,695 19,570 10.7
Fleet and other 20,633 36,680 (16,047) (43.7)
----------- ----------- ----------- ----------
Total revenues 2,133,339 1,996,947 136,392 6.8
Cost of sales:
New vehicle retail 1,136,175 1,080,170 56,005 5.2
Used vehicle retail 486,422 426,108 60,314 14.2
Used vehicle wholesale 65,228 65,390 (162) (0.2)
Service, body and parts 103,666 91,946 11,720 12.7
Fleet and other 19,812 35,684 (15,872) (44.5)
----------- ----------- ----------- ----------
Total cost of sales 1,811,303 1,699,298 112,005 6.6
----------- ----------- ----------- ----------
Gross profit 322,036 297,649 24,387 8.2
Asset impairments 3,498 6,130 (2,632) NM
SG&A expense 215,526 195,610 19,916 10.2
Depreciation and
amortization 12,503 10,287 2,216 21.5
----------- ----------- ----------- ----------
Income from operations 90,509 85,622 4,887 5.7
Floor plan interest
expense (6,209) (4,655) 1,554 33.4
Other interest expense (5,502) (4,972) 530 10.7
Other expense, net (1,495) (356) 1,139 NM
----------- ----------- ----------- ----------
Income before income
taxes 77,303 75,639 1,664 2.2
Income tax expense (25,875) (24,416) 1,459 6.0
Income tax rate 33.5% 32.3%
----------- ----------- ----------- ----------
Net income $ 51,428 $ 51,223 $ 205 0.4%
=========== =========== =========== ==========
Diluted net income per
share:
Net income per share $ 2.01 $ 1.93 $ 0.08 4.1%
Diluted shares
outstanding 25,534 26,496 (962) (3.6)%
NM - not meaningful
Lithia Motors, Inc.
Key Performance Metrics (Unaudited)
Three months ended %
June 30, Increase Increase
----------------------
2016 2015 (Decrease) (Decrease)
---------- ---------- ---------- ----------
Gross margin
New vehicle retail 6.0% 6.0% --bps
Used vehicle retail 12.1 12.8 (70)
Used vehicle wholesale 2.2 2.1 10
Finance and insurance 100.0 100.0 --
Service, body and parts 48.7 49.7 (100)
Fleet and other 4.0 2.7 130
Gross profit margin 15.1 14.9 20
Unit sales
New vehicle retail 36,059 35,112 947 2.7%
Used vehicle retail 27,716 24,689 3,027 12.3
Total retail units sold 63,775 59,801 3,974 6.6
Used vehicle wholesale 9,774 9,439 335 3.5
Average selling price
New vehicle retail $ 33,529 $ 32,738 $ 791 2.4%
Used vehicle retail 19,976 19,798 178 0.9
Used vehicle wholesale 6,826 7,077 (251) (3.5)
Average gross profit per
unit
New vehicle retail $ 2,021 $ 1,975 $ 46 2.3%
Used vehicle retail 2,425 2,539 (114) (4.5)
Used vehicle wholesale 152 149 3 2.0
Finance and insurance 1,271 1,212 59 4.9
Total vehicle(1) 3,491 3,443 48 1.4
Revenue mix
New vehicle retail 56.7% 57.6%
Used vehicle retail 26.0 24.5
Used vehicle wholesale 3.1 3.3
Finance and insurance, net 3.8 3.6
Service, body and parts 9.5 9.1
Fleet and other 0.9 1.9
Adjusted As reported
---------------------- ----------------------
Three months ended Three months ended
June 30, June 30,
---------------------- ----------------------
Other metrics 2016 2015 2016 2015
---------- ---------- ---------- ----------
SG&A as a % of revenue 10.1% 9.9% 10.1% 9.8%
SG&A as a % of gross profit 66.9 66.6 66.9 65.7
Operating profit as a % of
revenue 4.4 4.5 4.2 4.3
Operating profit as a % of
gross profit 29.2 30.0 28.1 28.8
Pretax margin 3.9 4.1 3.6 3.8
Net profit margin 2.4 2.5 2.4 2.6
(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 %
June 30, Increase Increase
----------------------
2016 2015 (Decrease) (Decrease)
---------- ---------- ---------- -----------
Revenues
New vehicle retail $1,172,249 $1,145,910 $ 26,339 2.3%
Used vehicle retail 536,454 486,600 49,854 10.2
Used vehicle wholesale 64,900 66,356 (1,456) (2.2)
Finance and insurance 78,634 72,284 6,350 8.8
Service, body and parts 195,164 181,720 13,444 7.4
Fleet and other 18,358 36,678 (18,320) (49.9)
---------- ---------- ----------
Total revenues $2,065,759 $1,989,548 $ 76,211 3.8
Gross profit
New vehicle retail $ 70,532 $ 69,178 $ 1,354 2.0%
Used vehicle retail 65,169 62,584 2,585 4.1
Used vehicle wholesale 1,452 1,455 (3) (0.2)
Finance and insurance 78,634 72,284 6,350 8.8
Service, body and parts 95,330 90,266 5,064 5.6
Fleet and other 811 959 (148) (15.4)
---------- ---------- ----------
Total gross profit $ 311,928 $ 296,726 $ 15,202 5.1
Gross margin
New vehicle retail 6.0% 6.0% --bps
Used vehicle retail 12.1 12.9 (80)
Used vehicle wholesale 2.2 2.2 --
Finance and insurance 100.0 100.0 --
Service, body and parts 48.8 49.7 (90)
Fleet and other 4.4 2.6 180
Gross profit margin 15.1 14.9 20
Unit sales
New vehicle retail 34,995 35,017 (22) (0.1)%
Used vehicle retail 26,778 24,568 2,210 9.0
Total retail units sold 61,773 59,585 2,188 3.7
Used vehicle wholesale 9,429 9,390 39 0.4
Average selling price
New vehicle retail $ 33,498 $ 32,724 $ 774 2.4%
Used vehicle retail 20,033 19,806 227 1.1
Used vehicle wholesale 6,883 7,067 (184) (2.6)
Average gross profit per
unit
New vehicle retail $ 2,015 $ 1,976 $ 39 2.0%
Used vehicle retail 2,434 2,547 (113) (4.4)
Used vehicle wholesale 154 155 (1) (0.6)
Finance and insurance 1,273 1,213 60 4.9
Total vehicle(1) 3,493 3,449 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)
%
Six months ended June 30, Increase Increase
-------------------------
2016 2015 (Decrease) (Decrease)
----------- ----------- ----------- ----------
Revenues:
New vehicle retail $ 2,305,092 $ 2,157,328 $ 147,764 6.8%
Used vehicle retail 1,086,373 951,732 134,641 14.1
Used vehicle wholesale 131,860 129,004 2,856 2.2
Finance and insurance 158,681 137,067 21,614 15.8
Service, body and parts 398,940 356,170 42,770 12.0
Fleet and other 35,254 54,824 (19,570) (35.7)
----------- ----------- ----------- ----------
Total revenues 4,116,200 3,786,125 330,075 8.7
Cost of sales:
New vehicle retail 2,165,464 2,026,212 139,252 6.9
Used vehicle retail 954,871 829,597 125,274 15.1
Used vehicle wholesale 128,544 125,437 3,107 2.5
Service, body and parts 204,222 180,982 23,240 12.8
Fleet and other 33,881 52,873 (18,992) (35.9)
----------- ----------- ----------- ----------
Total cost of sales 3,486,982 3,215,101 271,881 8.5
----------- ----------- ----------- ----------
Gross profit 629,218 571,024 58,194 10.2
Asset impairments 6,996 10,260 (3,264) NM
SG&A expense 434,632 387,228 47,404 12.2
Depreciation and
amortization 24,166 20,013 4,153 20.8
----------- ----------- ----------- ----------
Income from operations 163,424 153,523 9,901 6.4
Floor plan interest
expense (12,118) (9,304) 2,814 30.2
Other interest expense (10,961) (9,800) 1,161 11.8
Other expense, net (3,021) (724) 2,297 NM
----------- ----------- ----------- ----------
Income before income
taxes 137,324 133,695 3,629 2.7
Income tax expense (45,626) (41,819) 3,807 9.1
Income tax rate 33.2% 31.3%
----------- ----------- ----------- ----------
Net income $ 91,698 $ 91,876 $ (178) (0.2)%
=========== =========== =========== ==========
Diluted net income per
share:
Net income per share $ 3.56 $ 3.47 $ 0.09 2.6%
Diluted shares
outstanding 25,754 26,509 (755) (2.8)%
NM - not meaningful
Lithia Motors, Inc.
Key Performance Metrics (Unaudited)
%
Six months ended June 30, Increase Increase
-------------------------
2016 2015 (Decrease) (Decrease)
----------- ----------- ---------- ----------
Gross margin
New vehicle retail 6.1% 6.1% --bps
Used vehicle retail 12.1 12.8 (70)
Used vehicle wholesale 2.5 2.8 (30)
Finance and insurance 100.0 100.0 --
Service, body and parts 48.8 49.2 (40)
Fleet and other 3.9 3.6 30
Gross profit margin 15.3 15.1 20
Unit sales
New vehicle retail 68,808 65,735 3,073 4.7%
Used vehicle retail 55,147 48,893 6,254 12.8
Total retail units sold 123,955 114,628 9,327 8.1
Used vehicle wholesale 19,287 18,583 704 3.8
Average selling price
New vehicle retail $ 33,500 $ 32,819 $ 681 2.1%
Used vehicle retail 19,700 19,466 234 1.2
Used vehicle wholesale 6,837 6,942 (105) (1.5)
Average gross profit per
unit
New vehicle retail $ 2,029 $ 1,995 $ 34 1.7%
Used vehicle retail 2,385 2,498 (113) (4.5)
Used vehicle wholesale 172 192 (20) (10.4)
Finance and insurance 1,280 1,196 84 7.0
Total vehicle(1) 3,494 3,436 58 1.7
Revenue mix
New vehicle retail 56.0% 57.0%
Used vehicle retail 26.4 25.1
Used vehicle wholesale 3.2 3.4
Finance and insurance, net 3.9 3.6
Service, body and parts 9.7 9.4
Fleet and other 0.8 1.5
Adjusted As reported
-------------------------- -------------------------
Six Months Ended June 30, Six months ended June 30,
-------------------------- -------------------------
Other metrics 2016 2015 2016 2015
------------ ------------ ------------ ------------
SG&A as a % of revenue 10.5% 10.4% 10.6 10.2%
SG&A as a % of gross
profit 68.9 68.8 69.1 67.8
Operating profit as a
% of revenue 4.2 4.2 4.0 4.1
Operating profit as a
% of gross profit 27.2 27.6 26.0 26.9
Pretax margin 3.6 3.7 3.3 3.5
Net profit margin 2.2 2.3 2.2 2.4
(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)
%
Six months ended June 30, Increase Increase
-------------------------
2016 2015 (Decrease) (Decrease)
----------- ----------- ----------- ----------
Revenues
New vehicle retail $ 2,234,584 $ 2,146,678 $ 87,906 4.1%
Used vehicle retail 1,052,731 945,792 106,939 11.3
Used vehicle wholesale 128,705 128,305 400 0.3
Finance and insurance 153,999 136,490 17,509 12.8
Service, body and parts 385,132 353,836 31,296 8.8
Fleet and other 32,941 54,823 (21,882) (39.9)
----------- ----------- -----------
Total revenues $ 3,988,092 $ 3,765,924 $ 222,168 5.9
Gross profit
New vehicle retail $ 135,350 $ 130,456 $ 4,894 3.8%
Used vehicle retail 127,712 121,610 6,102 5.0
Used vehicle wholesale 3,207 3,677 (470) (12.8)
Finance and insurance 153,999 136,490 17,509 12.8
Service, body and parts 188,286 174,015 14,271 8.2
Fleet and other 1,355 1,915 (560) (29.2)
----------- ----------- -----------
Total gross profit $ 609,909 $ 568,163 $ 41,746 7.3
Gross margin
New vehicle retail 6.1% 6.1% --bps
Used vehicle retail 12.1 12.9 (80)
Used vehicle wholesale 2.5 2.9 (40)
Finance and insurance 100.0 100.0 --
Service, body and parts 48.9 49.2 (30)
Fleet and other 4.1 3.5 60
Total gross profit 15.3 15.1 20
Unit sales
New vehicle retail 66,774 65,408 1,366 2.1%
Used vehicle retail 53,309 48,540 4,769 9.8
Total retail units sold 120,083 113,948 6,135 5.4
Used vehicle wholesale 18,684 18,453 231 1.3
Average selling price
New vehicle retail $ 33,465 $ 32,820 $ 645 2.0%
Used vehicle retail 19,748 19,485 263 1.3
Used vehicle wholesale 6,889 6,953 (64) (0.9)
Average gross profit per
unit
New vehicle retail $ 2,027 $ 1,994 $ 33 1.7%
Used vehicle retail 2,396 2,505 (109) (4.4)
Used vehicle wholesale 172 199 (27) (13.6)
Finance and insurance 1,282 1,198 84 7.0
Total vehicle(1) 3,500 3,442 58 1.7
(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 June 30, Increase Increase
------------------------
2016 2015 (Decrease) (Decrease)
----------- ----------- ----------- ----------
Revenues
Domestic $ 826,709 $ 768,170 $ 58,539 7.6%
Import 934,018 855,305 78,713 9.2
Luxury 371,866 372,500 (634) (0.2)
----------- ----------- -----------
Total segment revenues 2,132,593 1,995,975 136,618 6.8
Corporate and other 746 972 (226) (23.3)
----------- ----------- -----------
Total revenues $ 2,133,339 $ 1,996,947 $ 136,392 6.8
Segment Income(1)
Domestic $ 27,614 $ 31,320 $ (3,706) (11.8)%
Import 28,228 28,149 79 0.3
Luxury 9,398 10,801 (1,403) (13.0)
----------- ----------- -----------
Total segment income 65,240 70,270 (5,030) (7.2)
Corporate and other 31,563 20,984 10,579 50.4
Depreciation and
amortization (12,503) (10,287) 2,216 21.5
Other interest expense (5,502) (4,972) 530 10.7
Other expense, net (1,495) (356) 1,139 NM
----------- ----------- -----------
Income before income
taxes $ 77,303 $ 75,639 $ 1,664 2.2
(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 11,634 11,479 155 1.4%
Import 20,158 19,351 807 4.2
Luxury 4,317 4,330 (13) (0.3)
----------- ----------- -----------
Total 36,109 35,160 949 2.7
Allocated to management (50) (48) (2) NM
----------- ----------- -----------
Total retail new vehicle
unit sales 36,059 35,112 947 2.7
NM - not meaningful
Lithia Motors, Inc.
Segment Operating Highlights (Unaudited)
%
Six months ended June 30, Increase Increase
-------------------------
2016 2015 (Decrease) (Decrease)
----------- ----------- ----------- ----------
Revenues
Domestic $ 1,595,611 $ 1,458,853 $ 136,758 9.4%
Import 1,799,761 1,615,385 184,376 11.4
Luxury 718,679 709,493 9,186 1.3
----------- ----------- -----------
Total segment revenues 4,114,051 3,783,731 330,320 8.7
Corporate and other 2,149 2,394 (245) (10.2)
----------- ----------- -----------
Total revenues $ 4,116,200 $ 3,786,125 $ 330,075 8.7
Segment Income(1)
Domestic $ 49,344 $ 58,613 $ (9,269) (15.8)%
Import 50,861 45,212 5,649 12.5
Luxury 13,633 17,446 (3,813) (21.9)
----------- ----------- -----------
Total segment income 113,838 121,271 (7,433) (6.1)
Corporate and other 61,634 42,961 18,673 43.5
Depreciation and
amortization (24,166) (20,013) 4,153 20.8
Other interest expense (10,961) (9,800) 1,161 11.8
Other expense, net (3,021) (724) 2,297 NM
----------- ----------- -----------
Income before income
taxes $ 137,324 133,695 $ 3,629 2.7
(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 22,283 21,491 792 3.7%
Import 38,272 36,156 2,116 5.9
Luxury 8,380 8,195 185 2.3
----------- ----------- -----------
Total 68,935 65,842 3,093 4.7
Allocated to management (127) (107) (20) NM
----------- ----------- -----------
Total retail new vehicle
unit sales 68,808 65,735 3,073 4.7
NM - not meaningful
Lithia Motors, Inc.
Other Highlights (Unaudited)
As of
June 30, December 31, June 30,
-------------- -------------- --------------
2016 2015 2015
-------------- -------------- --------------
Days Supply(1)
New vehicle inventory 77 67 65
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 June 30, 2016
-------------------------- ---------------------
Current ratio Not less than 1.10 to 1 1.25 to 1
Fixed charge coverage ratio Not less than 1.20 to 1 2.48 to 1
Leverage ratio Not more than 5.00 to 1 1.78 to 1
Funded debt restriction Not more than $900 million $404.6 million
Lithia Motors, Inc.
Other Highlights (Unaudited)
Three months ended Six months ended
June 30, June 30,
-------------------- --------------------
2016 2015 2016 2015
--------- --------- --------- ---------
New vehicle unit sales brand mix
Honda, Acura 23.8% 23.1% 23.5% 22.6%
Toyota, Lexus 19.8 20.0 19.7 20.1
Chrysler 18.9 19.1 18.8 19.1
General Motors 8.7 9.6 8.8 9.3
Subaru 6.8 6.5 7.0 6.8
BMW, Mini 5.3 5.5 5.4 5.6
Ford 4.6 4.0 4.9 4.3
Nissan 3.8 3.4 3.8 3.6
Volkswagen, Audi 2.9 3.4 2.8 3.1
Hyundai 2.1 2.0 2.0 2.1
Mercedes Benz 1.3 1.5 1.3 1.5
Kia 1.3 1.4 1.3 1.4
Other 0.7 0.5 0.7 0.5
Three months ended Six months ended
June 30, June 30,
-------------------- --------------------
2016 2015 2016 2015
--------- --------- --------- ---------
Revenue geographic mix
California 22.5% 20.7% 22.7% 21.5%
Oregon 16.7 16.3 16.7 16.6
New Jersey 14.4 15.1 14.2 14.4
Texas 13.7 15.8 13.8 15.7
Montana 6.4 5.8 6.4 5.8
Washington 5.2 5.1 5.3 5.1
Alaska 5.1 5.6 4.9 5.4
New York 3.0 3.3 3.0 3.0
Nevada 2.9 2.9 3.1 3.0
Idaho 2.7 2.8 2.7 2.9
Iowa 2.7 2.9 2.6 2.8
Hawaii 2.0 1.4 2.0 1.4
North Dakota 1.4 1.5 1.3 1.5
New Mexico 0.8 0.8 0.9 0.9
Massachusetts 0.5 -- 0.4 --
As of June 30, 2016
-----------------------
Current store count mix # of stores % of total
----------- -----------
Chrysler 27 19.6%
Honda, Acura 21 15.2
Toyota, Lexus 20 14.5
General Motors 16 11.6
BMW, Mini 11 8.0
Subaru 8 5.8
Volkswagen, Audi 8 5.8
Ford 7 5.1
Nissan 6 4.3
Hyundai 4 2.9
Mercedes Benz 4 2.9
Other 7 5.0
Lithia Motors, Inc.
Consolidated Balance Sheets (Unaudited)
(In thousands)
June 30, 2016 December 31, 2015
--------------- -----------------
Cash and cash equivalents $ 15,044 $ 45,008
Trade receivables, net 305,293 308,462
Inventories, net 1,582,274 1,470,987
Other current assets 38,192 54,408
--------------- -----------------
Total current assets $ 1,940,803 $ 1,878,865
Property and equipment, net 898,239 876,660
Goodwill 214,444 213,220
Franchise value 162,296 157,699
Other non-current assets 106,288 100,855
--------------- -----------------
Total assets $ 3,322,070 $ 3,227,299
=============== =================
Floor plan notes payable $ 56,767 $ 48,083
Floor plan notes payable: non trade 1,316,747 1,265,872
Current maturities of long-term debt 28,053 38,891
Trade payables 77,979 70,871
Accrued liabilities 184,160 167,108
--------------- -----------------
Total current liabilities $ 1,663,706 $ 1,590,825
Long-term debt 626,543 606,463
Deferred revenue 73,540 66,734
Deferred income taxes 54,647 53,129
Other long-term liabilities 86,173 81,984
--------------- -----------------
Total liabilities $ 2,504,609 $ 2,399,135
--------------- -----------------
Class A common stock 168,950 258,410
Class B common stock 219 316
Additional paid-in capital 37,230 38,822
Accumulated other comprehensive loss -- (277)
Retained earnings 611,062 530,893
--------------- -----------------
Total liabilities & stockholders' equity $ 3,322,070 $ 3,227,299
=============== =================
Lithia Motors, Inc.
Summarized Cash Flow from Operations (Unaudited)
(In thousands)
Six Months Ended June 30,
2016 2015
------------ ------------
Net income $ 91,698 $ 91,876
Adjustments to reconcile net income to net cash
provided by operating activities:
Asset impairments 6,996 10,260
Depreciation and amortization 24,166 20,013
Stock-based compensation 6,018 5,822
(Gain) loss on disposal of assets (4,512) 44
Gain on sale of franchise (1,102) (5,919)
Deferred income taxes 5,704 (1,145)
Excess tax benefit from share-based payment
arrangements (4,384) (4,865)
(Increase) decrease:
Trade receivables, net 6,564 7,570
Inventories (114,052) (122,660)
Other assets 5,688 (3,815)
Increase (decrease):
Floor plan notes payable, net 8,685 4,417
Trade payables 6,678 8,854
Accrued liabilities 17,595 7,717
Other long-term liabilities and deferred
revenue 10,668 11,161
------------ ------------
Net cash provided by operating activities $ 66,410 $ 29,330
============ ============
Lithia Motors, Inc.
Reconciliation of Non-GAAP Cash Flow from Operations (Unaudited)
(In thousands)
Six Months Ended June 30,
Net cash provided by operating activities 2016 2015
------------ ------------
As reported $ 66,410 $ 29,330
Floor plan notes payable, non-trade, net 58,622 35,685
------------ ------------
Adjusted $ 125,032 $ 65,015
============ ============
Lithia Motors, Inc.
Reconciliation of Certain Non-GAAP Financial Measures (Unaudited)
(In thousands, except for per share data)
Three Months Ended June 30, 2016
-------------------------------------
Equity
investment
fair value
As reported adjustment Adjusted
----------- ----------- -----------
Asset impairments $ 3,498 $ (3,498) $ --
Income from operations 90,509 3,498 94,007
Other (expense) income, net (1,495) 2,065 570
Income before income taxes $ 77,303 $ 5,563 $ 82,866
Income tax expense (25,875) (6,837) (32,712)
----------- ----------- -----------
Net income $ 51,428 $ (1,274) $ 50,154
=========== =========== ===========
Diluted earnings per share $ 2.01 $ (0.05) $ 1.96
Diluted share count 25,534
Three Months Ended June 30, 2015
---------------------------------------------------------
Disposal Equity
gain on investment
As sale of Asset fair value
reported stores impairment adjustment Adjusted
---------- --------- ---------- ---------- ----------
Asset impairments $ 6,130 $ -- $ (2,000) $ (4,130) $ --
Selling, general
and
administrative 195,610 2,570 -- -- 198,180
Income from
operations 85,622 (2,570) 2,000 4,130 89,182
Other (expense)
income, net (356) -- -- 1,733 1,377
Income before
income taxes $ 75,639 $ (2,570) $ 2,000 $ 5,863 $ 80,932
Income tax expense (24,416) 1,305 (780) (7,652) (31,543)
---------- --------- ---------- ---------- ----------
Net income $ 51,223 $ (1,265) $ 1,220 $ (1,789) $ 49,389
========== ========= ========== ========== ==========
Diluted earnings
per share $ 1.93 $ (0.05) $ 0.05 $ (0.07) $ 1.86
Diluted share
count 26,496
Lithia Motors, Inc.
Reconciliation of Certain Non-GAAP Financial Measures (Unaudited)
(In thousands, except for per share data)
Six Months Ended June 30, 2016
---------------------------------------------------------
Disposal Equity
gain on investment Legal
As sale of fair value reserve
reported store adjustment adjustment Adjusted
---------- --------- ---------- ---------- ----------
Asset impairments $ 6,996 $ -- $ (6,996) $ -- $ --
Selling, general
and
administrative 434,632 1,087 -- (1,906) 433,813
Income from
operations 163,424 (1,087) 6,996 1,906 171,239
Other expense, net (3,021) -- 4,131 -- 1,110
Income before
income taxes $ 137,324 $ (1,087) $ 11,127 $ 1,906 $ 149,270
Income tax expense (45,626) 426 (12,782) (747) (58,729)
---------- --------- ---------- ---------- ----------
Net income $ 91,698 $ (661) $ (1,655) $ 1,159 $ 90,541
========== ========= ========== ========== ==========
Diluted earnings
per share $ 3.56 $ (0.03) $ (0.06) $ 0.05 $ 3.52
Diluted share
count 25,754
Six Months Ended June 30, 2015
---------------------------------------------------------
Disposal Equity
gain on investment
As sale of Asset fair value
reported store impairment adjustment Adjusted
---------- --------- ---------- ---------- ----------
Asset impairments $ 10,260 $ -- $ (2,000) $ (8,260) $ --
Selling, general
and
administrative 387,228 5,919 -- -- 393,147
Income from
operations 153,523 (5,919) 2,000 8,260 157,864
Other expense, net (724) -- -- 3,465 2,741
Income before
income taxes $ 133,695 $ (5,919) $ 2,000 $ 11,725 $ 141,501
Income tax expense (41,819) 2,309 (780) (14,902) (55,192)
---------- --------- ---------- ---------- ----------
Net income $ 91,876 $ (3,610) $ 1,220 $ (3,177) $ 86,309
========== ========= ========== ========== ==========
Diluted earnings
per share $ 3.47 $ (0.14) $ 0.05 $ (0.12) $ 3.26
Diluted share
count 26,509
Contact:
John North
VP Finance and Chief Accounting Officer
(541) 618-5748
