Lithia Motors Reports Record 3Q Revenues and Earnings Per Share of 75 Cents
MEDFORD, Ore.--Oct. 2, 20041, 2004--Lithia Motors, Inc. :
Lithia Motors' Highlights for continuing operations for period
ended Sept. 30, 2004:
Third Quarter 2004 First Nine Months 2004
------------------ ----------------------
Operating Profits: +17% Operating Profits: +26%
Net Income: +12% Net Income: +27%
Earnings per Share: +9% Earnings per Share: +22%
Operating Margin (EBIT): 4.1% Operating Margin (EBIT): 3.5%
Lithia Motors, Inc. today announced that net income from continuing operations rose 12% to $14.3 million in the third quarter of 2004 compared to $12.8 million in the third quarter of 2003. Earnings per share from continuing operations rose 9% to $0.75 per share versus $0.69 in the same period last year. This was on 2% more diluted shares outstanding.
Third quarter 2004 sales increased 8% to $755.9 million from $701.4 million in the third quarter of 2003. New vehicle sales increased 10%, used vehicle sales increased 1%, parts/service sales increased 10%, and finance/insurance sales increased 12%.
Sidney B. DeBoer, Lithia's Chairman and Chief Executive Officer, commented, "Margin improvement in the face of a volatile sales environment characterizes our third quarter results. The third quarter operating margin improved 30 basis points to 4.1%, as compared to the same period last year. This is the highest operating margin level for the third quarter that we have seen since 2000. These trends are similar to what we experienced in the second quarter of the year. Lithia has now experienced year-over-year operating margin improvements for 5 consecutive quarters."
"Total retail same-store sales declined 4.2% for the quarter. We maximized profitability in a slower sales environment. The ability to increase margins in a volatile sales environment is a result of Lithia's store network that runs on strong operating systems that are common to all stores. The gross profit margin for the quarter improved 40 basis points as compared to the same period last year. Sales general & administrative (SG&A) expense, as a percentage of gross profit, improved by 190 basis points as compared to the third quarter of last year, as many cost saving initiatives continue to show positive results."
"Finally, new vehicle inventories are well positioned going into the fourth quarter. New vehicle inventories at the end of September were 7 days lower than year-end 2003 levels and 16 days lower than at the end of the second quarter of the year," concluded Mr. DeBoer.
For the nine-month period ended September 30, 2004, Lithia's net income from continuing operations rose 27% to $32.7 million as compared to $25.8 million in the same period last year. Earnings per share rose 22% to $1.71 per share versus $1.40 in the same period last year. This was on 4% more diluted shares outstanding.
For the first nine months, total sales increased 9% to $2.08 billion from $1.90 billion in the same period last year. New vehicle sales increased 11%, used vehicle sales increased 2%, parts/service sales increased 16%, and finance/insurance sales increased 12%.
Jeffrey B. DeBoer, Senior Vice President and CFO, added, "In the third quarter, Lithia completed three acquisitions: Toyota of Odessa, Texas, and Lithia Chrysler Jeep Dodge and Lithia Honda, both in Great Falls, Montana. These stores have combined annualized sales of approximately $60 million. More recently we acquired a small BMW store in an existing market and Chrysler and Jeep franchises in Santa Rosa, California, which were added to our Dodge store in that market. So far this year we have completed acquisitions with approximately $305 million in annualized sales. For the trailing four quarters, we have acquired approximately $385 million in annualized sales, which represents nearly 15% growth on our total revenues for the same period. We expect to close further acquisitions prior to year end."
The Financial Accounting Standards Board's Emerging Issues Task Force (EITF) recently approved a change, expected to be effective in December of 2004, in the calculation of diluted earnings per share. As a result of EITF's recent ratification of Issue No. 04-8, the company will be required to include in its share count, in determining diluted earnings per share, the shares potentially issuable to the holders of its $85,000,000 in principal amount 2.875% Senior Subordinated Notes Due 2014, even though the holder of such notes cannot convert the notes into common stock except under certain limited circumstances and then only at a conversion price of approximately $37.69 per share. Previously, the shares issuable would only be included in the calculation of diluted EPS if the holders were then entitled to convert the notes. For purposes of calculating diluted EPS, Lithia will be required to increase its share count by the approximately 2,255,000 shares contingently issuable to the noteholders. Adoption of the accounting statement change will not affect net income, cash flow or basic earnings per share of the company.
"Our annual guidance for 2004 has been increased to a range of $2.15 to $2.18 per fully diluted share, prior to giving effect of the recently ratified consensus in EITF Issue No. 04-8. For the full-year 2005, we are providing guidance of $2.31 to $2.41, which assumes a steady pace of acquisitions. It is anticipated that the final adoption of the consensus in EITF Issue No. 04-8 will reduce fully diluted EPS by approximately $0.10 in 2004 and $0.18 in 2005," concluded Jeffrey B. DeBoer.
Conference Call Information
Lithia Motors will be providing more detailed information on the results for the third quarter 2004 in its conference call scheduled for 11 a.m. PDT today. The call can be accessed live by calling 973-582-2700. To listen to a live webcast or hear a replay, log-on to: www.lithia.com -- go to Investor Relations -- and click on the Live Webcast icon.
About Lithia
Lithia Motors, Inc. is a Fortune 1000 and Russell 2000 Company that sells 25 brands of new vehicles and operates 85 stores and 162 franchises in 12 states in the Western United States and over the Internet through "Lithia.com-America's Car & Truck Store." Lithia also sells used vehicles; arranges finance, warranty, and credit insurance contracts; and provides vehicle parts, maintenance, and repair services at all of its locations. Lithia retailed 95,255 new and used vehicles and had $2.51 billion in total revenue in 2003.
Forward Looking Statements
LITHIA MOTORS, INC.
(In Thousands except per share and unit data)
Unaudited Three Months Ended
--------- September 30,
------------------ $ Increase % Increase
2004 2003 (Decrease) (Decrease)
---- ---- ---------- ----------
New Vehicle Sales $451,005 $411,358 $39,647 9.6%
Used Vehicle Sales 198,534 196,280 2,254 1.1
Service, Body & Parts Sales 74,617 67,849 6,768 10.0
Finance & Insurance 28,029 25,071 2,958 11.8
Fleet & Other Revenues 3,708 882 2,826 320.4
-------- -------- -------- --------
Total Revenues 755,893 701,440 54,453 7.8
Cost of Sales 631,327 588,636 42,691 7.3
-------- -------- -------- --------
Gross Profit 124,566 112,804 11,762 10.4
SG&A Expense 90,362 83,904 6,458 7.7
Depreciation/Amortization 3,254 2,504 750 30.0
-------- -------- -------- --------
Income from Operations 30,950 26,396 4,554 17.3
Flooring Interest Expense (4,498) (3,324) (1,174) 35.3
Other Interest Expense (2,464) (1,496) (968) 64.7
Other Expense, net (502) (243) (259) 106.6
-------- -------- -------- --------
Income from continuing
operations before income
taxes 23,486 21,333 2,153 10.1
Income Tax Expense 9,159 8,491 668 7.9
Income Tax Rate 39.0% 39.8%
Net Income from continuing
ops. 14,327 12,842 1,485 11.6
-------- -------- -------- --------
Income (Loss) from
discontinued operations,
net of income taxes 143 39 104 266.7
Net Income $ 14,470 $ 12,881 $ 1,589 12.3%
======== ======== ======== ========
Diluted Net income per
share:
Continuing Operations $ 0.75 $ 0.69 $ 0.06 8.7%
Discontinued Operations 0.01 -
-------- --------
Net Income $ 0.76 $ 0.69 $ 0.07 10.1%
======== ======== ======== ========
Diluted Shares
Outstanding 19,121 18,708 413 2.2%
Unit Sales: 2004 2003
----------- ---- ----
New Vehicle 16,012 15,358 654 4.3%
Used -- Retail Vehicle 10,845 11,492 (647) (5.6)
Used -- Wholesale 6,154 6,980 (826) (11.8)
Total Units Sold 33,011 33,830 (819) (2.4)
Average Selling Price:
----------------------
New Vehicle $ 28,167 $ 26,785 $ 1,382 5.2%
Used -- Retail Vehicle 15,330 14,361 969 6.7
Used -- Wholesale 5,246 4,477 769 17.2
Key Financial Data:
-------------------
Gross Profit Margin 16.5% 16.1%
SG&A as a % of Gross Profit 72.5% 74.4%
Operating Margin 4.1% 3.8%
Pre-Tax Margin 3.1% 3.0%
Total Retail Same-Store Sales (4.2)% (0.2)%
LITHIA MOTORS, INC.
(In Thousands except per share and unit data)
Unaudited Nine Months Ended
--------- September 30,
----------------- $ Increase % Increase
2004 2003 (Decrease) (Decrease)
---- ---- ---------- ----------
New Vehicle Sales $1,204,823 $1,083,697 $121,126 11.2%
Used Vehicle Sales 572,626 559,468 13,158 2.4
Service, Body & Parts Sales 215,796 185,366 30,430 16.4
Finance & Insurance 76,158 67,959 8,199 12.1
Fleet & Other Revenues 6,606 4,822 1,784 37.0
-------- -------- -------- --------
Total Revenues 2,076,009 1,901,312 174,697 9.2
Cost of Sales 1,729,270 1,598,282 130,988 8.2
-------- -------- -------- --------
Gross Profit 346,739 303,030 43,709 14.4
SG&A Expense 264,114 237,718 26,396 11.1
Depreciation/Amortization 9,297 6,889 2,408 35.0
-------- -------- -------- --------
Income from Operations 73,328 58,423 14,905 25.5
Flooring Interest Expense (12,237) (10,542) (1,695) 16.1
Other Interest Expense (6,361) (4,448) (1,913) 43.0
Other Income (Expense), net (1,199) (645) (554) 85.9
-------- -------- -------- --------
Income from continuing
operations before income
taxes 53,531 42,788 10,743 25.1
Income Tax Expense 20,877 17,030 3,847 22.6
Income Tax Rate 39.0% 39.8%
Net Income from continuing
ops. 32,654 25,758 6,896 26.8
-------- -------- -------- --------
Income (Loss) from
discontinued operations,
net of income taxes 135 (193) 328 (169.9)
Net Income $ 32,789 $ 25,565 $ 7,224 28.3%
======== ======== ======== ========
Diluted Net income per
share:
Continuing Operations $ 1.71 $ 1.40 $ 0.31 22.1%
Discontinued Operations - (0.01)
-------- --------
Net Income $ 1.71 $ 1.39 $ 0.32 23.0%
======== ======== ======== ========
Diluted Shares
Outstanding 19,127 18,430 697 3.8%
Unit Sales: 2004 2003
----------- ---- ----
New Vehicle 43,255 41,088 2,167 5.3%
Used -- Retail Vehicle 31,875 32,036 (161) (0.5)
Used -- Wholesale 17,961 19,921 (1,960) (9.8)
Total Units Sold 93,091 93,045 46 0.0
Average Selling Price:
----------------------
New Vehicle $ 27,854 $ 26,375 $ 1,479 5.6%
Used -- Retail Vehicle 14,981 14,516 465 3.2
Used -- Wholesale 5,295 4,740 555 11.7
Key Financial Data:
-------------------
Gross Profit Margin 16.7% 15.9%
SG&A as a % of Gross Profit 76.2% 78.4%
Operating Margin 3.5% 3.1%
Pre-Tax Margin 2.6% 2.3%
Total Retail Same-Store Sales (2.9)% 1.9%
Balance Sheet Highlights (Dollars in Thousands)
September 30, 2004 December 31, 2003
------------------ -----------------
Unaudited
---------
Cash & Cash Equivalents $ 39,129 $ 74,408
Trade Receivables(a) 93,113 86,908
Inventory 500,273 445,281
Assets Held for Sale 12,163 20,408
Other Current Assets 12,353 9,932
-------- --------
Total Current Assets 657,031 636,937
Real Estate, net 208,246 164,676
Equipment & Leases, net 70,382 62,637
Goodwill, net 238,611 207,027
Other Assets 46,498 31,505
-------- --------
Total Assets $1,220,768 $1,102,782
======== ========
Floorplan Notes Payable $ 410,116 $ 378,961
Liabilities Held for Sale 3,431 13,045
Other Current Liabilities 89,576 84,865
-------- --------
Total Current Liabilities 503,123 476,871
Used Vehicle Flooring 17,000 56,267
Real Estate Debt 124,775 80,159
Other Long-Term Debt 136,522 98,308
Other Liabilities 44,460 32,251
-------- --------
Total Liabilities 825,880 743,856
-------- --------
Shareholders' Equity 394,888 358,926
-------- --------
Total Liabilities &
Shareholders' Equity $1,220,768 $1,102,782
======== ========
------------
(a) Includes contracts-in-transit of $52,014 and $44,709 for 2004
and 2003 respectively.
Other Balance Sheet Data (Dollars in Thousands)
Current Ratio 1.3x 1.3x
LT Debt/Total Cap. (Excluding Used-
Vehicle Flooring) 40% 33%
LT Debt/Total Cap. (Excluding Used-
Vehicle Flooring and Real Estate) 26% 22%
Working Capital $153,908 $160,066
Book Value per Basic Share $ 20.98 $ 19.57