MEDFORD, OR—(Marketwired – Oct 21, 2015) – Lithia Motors, Inc. (
NYSE
:
LAD
) reported adjusted net income of $53.6 million for the third quarter of 2015, the highest quarterly net income in company history and a 54% increase over the prior year period.
2015 third quarter adjusted net income was $2.03 per diluted share. This compares to 2014 third quarter adjusted net income of $34.9 million, or $1.32 per diluted share.
Unadjusted net income for the third quarter of 2015 was $43.4 million, or $1.64 per diluted share, compared to $34.5 million, or $1.31 per diluted share, for the third quarter of 2014. As shown in the attached non–GAAP reconciliation tables, the 2015 third quarter adjusted results exclude a $0.39 non–core net charge related to a previously announced employee transition agreement partially offset by an equity investment. The 2014 third quarter adjusted results exclude a $0.01 non–core net charge related to acquisition expenses partially offset by a non–core benefit resulting from a tax attribute.
Third quarter 2015 revenue increased $788 million, or 61%, to $2.1 billion from $1.3 billion for the third quarter of 2014.
Third Quarter–over–Quarter Operating Highlights:
Total same store sales increased 12%
New vehicle same store sales increased 11%
Used vehicle retail same store sales increased 13%
Service, body and parts same store sales increased 10%
Same store F&I per unit increased $71 to $1,274
Adjusted SG&A expense as a percentage of gross profit was 66.0%
“Our third quarter earnings were the highest in company history,” said Bryan DeBoer, President and CEO. “Same store sales in all four business lines grew by double digits, led by a 13% increase in used vehicle sales. Total revenues increased 61% and adjusted earnings per share increased 54% over the prior year period. A robust new vehicle sales environment, improving supply of late model used vehicles, and the continued growth in our service, body and parts business is allowing our store leaders to unlock new opportunities to improve performance across our company. We remain positive on the overall outlook for both organic and acquisition growth in 2016.”
For the first nine months of 2015, revenue from continuing operations increased 63% to $5.9 billion from $3.6 billion in 2014.
For the first nine months of 2015, adjusted net income per diluted share increased 43% to $5.28 from $3.69 for the first nine months of 2014. Unadjusted net income from continuing operations was $5.10 per diluted share for the first nine months of 2015, compared to $3.58 per diluted share for the first nine months of 2014.
Chris Holzshu, SVP and CFO, said, “Adjusted SG&A as a percentage of gross profit was 66.0% in the third quarter of 2015, bringing the first nine months of the year down to 67.8%, thanks to strong performance from both Lithia and DCH. For the third quarter, incremental throughput, or the percentage of additional same store gross profit dollars that we retain after deducting incremental selling costs, was 49.3% We are targeting consolidated SG&A as a percentage of gross profit in the mid–60s on a full year basis. Additionally, same store F&I per unit was $1,274 per unit, an increase of $71 over the prior year. We still believe opportunity remains to improve this number given continued focus by our store personnel.”
Corporate Development
As previously announced, in the third quarter of 2015 we acquired a Ford store in Missoula, Montana, an Acura store in Honolulu, Hawaii, and a Subaru Hyundai GMC store in Great Falls, Montana. Also as previously announced, in October, 2015 we acquired a Chrysler Jeep Dodge Ram Fiat store in Concord, California. We estimate these stores will contribute approximately $175 million in annual revenues.
Bryan DeBoer, President and CEO, stated, “We have purchased or opened six stores in 2015 which will add cumulative annual revenues of approximately $220 million. We are actively seeking stores in both our Lithia exclusive market strategy and in our DCH metropolitan market strategy. The acquisition market remains robust and we anticipate further transactions for both Lithia and DCH in the near term.”
Balance Sheet Update
We ended the second quarter with $33 million in cash and $163 million in availability on our credit facilities. Additionally, approximately $144 million of our operating real estate is currently unfinanced, which could provide an estimated additional $108 million in available liquidity, for total potential liquidity of $304 million.
Dividend Payment
Our Board of Directors has approved a dividend of $0.20 per share related to third quarter 2015 financial results. We will pay the dividend November 20, 2015 to shareholders of record on November 6, 2015.
2015 Outlook
We project 2015 fourth quarter earnings of $1.61 to $1.65 per diluted share and 2015 full year earnings of $6.89 to $6.93 per diluted share. Both projections are based on the following annual assumptions:
Continuing Operations Projections
Total revenues of $7.8 to $7.9 billion
New vehicle sales increasing 48%
New vehicle gross margin of 6.0% to 6.2%
Used vehicle sales increasing 41%
Used vehicle gross margin of 12.4% to 12.6%
Service body and parts sales increasing 44%
Service body and parts gross margin of 48.8% to 49.2%
Finance and insurance gross profit of $1,190 per unit
Tax rate of 39.0%
Average diluted shares outstanding of 26.5 million
Same Store Projections
Total revenues of $5.7 to $5.9 billion
New vehicle same store sales increasing 9%
Used vehicle same store sales increasing 12.5%
Service body and parts same store sales increasing 10%
Finance and insurance gross profit of $1,230 per unit
2016 Earnings Guidance
We project 2016 first quarter earnings of $1.46 to $1.50 per diluted share and 2016 full year earnings of $7.15 to $7.35 per diluted share. Both projections are based on the following annual assumptions:
Total revenues of $8.3 to $8.4 billion
New vehicle sales increasing 5.5%
New vehicle gross margin of 5.9% to 6.1%
Used vehicle sales increasing 6%
Used vehicle gross margin of 12.4% to 12.6%
Service body and parts sales increasing 5%
Service body and parts gross margin of 49.0%to 49.4%
Finance and insurance gross profit of $1,210 per unit
Tax rate of 40.0%
Average diluted shares outstanding of 26.6 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.
Third Quarter Earnings Conference Call and Updated Presentation
The third quarter conference call may be accessed at 11:00 a.m. ET today by telephone at 877–407–8029. An updated presentation highlighting the third 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. Lithia sells 31 brands of new vehicles and all brands of used vehicles at 135 stores in 14 states. Lithia also arranges finance, warranty, and credit insurance contracts; and 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
http://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:
Future market conditions;
Expected operating results, such as improved store performance; continued improvement of SG&A as a percentage of gross profit; generating 2015 fourth quarter earnings per share of $1.61 to $1.65 per diluted share and 2015 full year earnings of $6.89 to $6.93 per diluted share; generating 2016 first quarter earnings per share of $1.46 to $1.50 per diluted share and 2016 full year earnings of $7.15 to $7.35 per diluted share and all projections set forth under the headings “2015 Outlook”, “Continuing Operations Projections”, “Same Store Projections” and “2016 Earnings Guidance”;
Anticipated continued success and growth of DCH;
Anticipated ability to improve store performance; ability to find accretive acquisitions; and additions of dealership locations to the company's portfolio in the future; and
Anticipated availability of liquidity from our 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 from continuing operations, 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
2015
2014
(Decrease)
(Decrease)
Revenues:
New vehicle retail
$
1,227,080
$
732,121
$
494,959
67.6
%
Used vehicle retail
505,885
340,522
165,363
48.6
Used vehicle wholesale
69,472
48,853
20,619
42.2
Finance and insurance
76,633
46,855
29,778
63.6
Service, body and parts
189,796
120,772
69,024
57.2
Fleet and other
15,979
7,988
7,991
100.0
Total revenues
2,084,845
1,297,111
787,734
60.7
Cost of sales:
New vehicle retail
1,149,923
684,473
465,450
68.0
Used vehicle retail
443,598
296,624
146,974
49.5
Used vehicle wholesale
68,892
48,349
20,543
42.5
Service, body and parts
95,846
62,351
33,495
53.7
Fleet and other
15,399
7,474
7,925
106.0
Total cost of sales
1,773,658
1,099,271
674,387
61.3
Gross profit
311,187
197,840
113,347
57.3
Asset impairments
4,131
–
4,131
NM
SG&A expense
223,728
131,627
92,101
70.0
Depreciation and amortization
10,531
6,067
4,464
73.6
Income from operations
72,797
60,146
12,651
21.0
Floor plan interest expense
(4,951
)
(3,127
)
1,824
58.3
Other interest expense
(4,900
)
(2,051
)
2,849
138.9
Other (expense) income, net
(307
)
1,027
(1,334
)
NM
Income before income taxes
62,639
55,995
6,644
11.9
Income tax expense
(19,248
)
(21,458
)
2,210
10.3
Income tax rate
30.7
%
38.3
%
Net income
$
43,391
$
34,537
$
8,854
25.6
%
Diluted net income per share:
Net income per share
$
1.64
$
1.31
$
0.33
25.2
%
Diluted shares outstanding
26,480
26,359
121
0.5
%
NM – not meaningful
Lithia Motors, Inc.
Key Performance Metrics (Unaudited)
Three months ended
%
September 30,
Increase
Increase
2015
2014
(Decrease)
(Decrease)
Gross margin
New vehicle retail
6.3
%
6.5
%
(20) bps
Used vehicle retail
<