Lithia Motors Reports Record Revenues and Record Net Income for the Full-Year 2004
MEDFORD, Ore.--Feb. 1, 20058, 2005--Lithia Motors, Inc. :
Lithia Motors' Highlights for continuing operations for period
ended Dec. 31, 2004:
Full-Year 2004
--------------
Operating Profits: +21%
Net Income: +20%
Operating Margin (EBIT): 3.5% (+30 basis points)
Lithia Motors, Inc. today announced that net income from continuing operations rose 20% to $42.6 million for the full-year 2004 compared to $35.6 million in 2003. Earnings per share from continuing operations, excluding the dilutive effect of the change in accounting for convertible notes, rose 16% to $2.22 per share versus $1.92 in the same period last year. Including the effect of the accounting change for convertible notes earnings per share from continuing operations were $2.12 per fully diluted share.
Full-year 2004 revenues increased 9% to $2.75 billion from $2.51 billion in 2003. New vehicle sales increased 10%, used vehicle sales increased 4%, parts/service sales increased 16%, and finance/insurance sales increased 13%.
Sidney B. DeBoer, Lithia's Chairman and Chief Executive Officer, commented, "During 2004 we continued to grow our business and we were able increase margins across all business lines. The full-year operating margin improved 30 basis points to 3.5%, as compared to the same period last year."
The total gross profit margin for the year improved 80 basis points as compared to the same period last year. Sales general & administrative (SG&A) expense, as a percentage of gross profit, improved by 160 basis points as compared to last year.
"We owe our margin improvements for the year to a store network that runs on strong operating systems that are common to all stores, the improving strength of our workforce and a regional market focus. Our ability to integrate new stores, and improve the performance of existing stores is better today than ever before. We are building our company for long-term success," concluded Mr. DeBoer.
For the fourth quarter, Lithia's net income from continuing operations was $9.9 million equal to $9.9 million in the same period last year. Earnings per share from continuing operations, excluding the dilutive effect of the change in accounting for convertible notes, were $0.52, the same as in the fourth quarter of last year. Including the effect of the accounting change for convertible notes, earnings per share from continuing operations were $0.48 per fully diluted share.
Fourth quarter total revenues increased 9% to $669.8 million from $612.2 million in the same period last year. New vehicle sales increased 8%, used vehicle sales increased 10%, parts/service sales increased 13%, and finance/insurance sales increased 15%.
Jeffrey B. DeBoer, Senior Vice President and CFO added, "In the fourth quarter, Lithia completed four acquisitions; Chrysler and Jeep franchises in Santa Rosa, California; BMW of Anchorage, Alaska; Lithia Chrysler Dodge Jeep of Santa Fe, New Mexico and Lithia Dodge of Helena, Montana. These stores have combined annualized sales of approximately $60 million. More recently, we acquired Chrysler and Jeep franchises in Concord, California that were added to our Dodge store in that market, a Chrysler franchise in Eugene, Oregon that was added to our Dodge store in that market and finally a Chrysler Dodge Jeep store in Omaha, Nebraska. So far this year we have completed acquisitions with approximately $110 million in annualized sales. For the year, we acquired approximately $340 million in annualized sales, which represents nearly 14% growth on our total revenues of $2.5 billion in 2003."
"Our guidance for the first quarter and full-year 2005 is included in the table below. It includes the effect of the new accounting pronouncements for convertible notes and stock options," concluded Jeffrey B. DeBoer.
EPS excluding new 1Q 2005 2005 2004
accounting ------- ---- -----
pronouncements: $0.43 - $0.45 $2.33 - $2.43 $2.22
Effect of Convertible
Notes ($0.03) ($0.16) ($0.10)
Effect of FAS 123(R)
(6 months) - ($0.05) N/A
------------- ------------- -----
EPS - Reportable $0.40 - $0.42 $2.12 - $2.22 N/A
In October of 2004, the Financial Accounting Standards Board's Emerging Issues Task Force (EITF) ratified Issue No. 04-8, requiring the company 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 principle 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 have been included in the calculation of diluted EPS if the holders were then entitled to convert the notes. For purposes of calculating diluted EPS for the fourth quarter and full-year ended 2004, Lithia was required to increase its share count by the amount contingently issuable to the noteholders. This resulted in an additional 2.256 million shares for the fourth quarter and 1.485 million shares for the full-year. Adoption of the accounting statement change does not affect the cash flow of the company.
Also in December 2004, the Financial Accounting Standards Board ("FASB") issued Financial Accounting Standards Statement 123 (revised 2004) ("FAS 123 (R)") that will require that the value of all equity-based compensation arrangements, including stock options and employee stock purchase plans, be accounted for using a "fair value" method. Previously, the Company had accounted for such arrangements under the "intrinsic method" permitted by APB 25. The new rules, absent any change, will be effective for the Company commencing with the third quarter of 2005. Adoption of this accounting change does not affect the cash flow of the Company.
Conference Call Information
Lithia Motors will be providing more detailed information on the results for the fourth quarter and full-year 2004 in its conference call scheduled for 8 a.m. PT 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 87 stores and 171 franchises in 13 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 98,331 new and used vehicles and had $2.7 billion in total revenue in 2004.
LITHIA MOTORS, INC.
(In Thousands except per share and unit data)
Unaudited Twelve Months Ended
--------- December 31,
------------- $Increase % Increase
2004 2003 (Decrease) (Decrease)
-------- --------- ---------- ----------
New Vehicle Sales $1,589,613 $1,441,000 $148,613 10.3%
Used Vehicle Sales 755,822 725,547 30,275 4.2
Finance & Insurance 101,374 89,982 11,392 12.7
Service, Body & Parts
Sales 290,386 251,316 39,070 15.5
Fleet & Other Revenues 8,592 5,657 2,935 51.9
--------- --------- -------- ---------
Total Revenues 2,745,787 2,513,502 232,285 9.2
Cost of Sales 2,285,851 2,110,393 175,458 8.3
--------- --------- -------- ---------
Gross Profit 459,936 403,109 56,827 14.1
SG&A Expense 349,946 313,289 36,657 11.7
Depreciation/
Amortization 13,143 9,593 3,550 37.0
--------- --------- -------- ---------
Income from Operations 96,847 80,227 16,620 20.7
Flooring Interest
Expense (16,702) (13,997) (2,705) 19.3
Other Interest Expense (9,174) (6,081) (3,093) 50.9
Other Income (Expense),
net (1,520) (951) (569) 59.8
--------- --------- -------- ---------
Income from continuing
operations before
income taxes 69,451 59,198 10,253 17.3
Income Tax Expense 26,878 23,561 3,317 14.1
Income Tax Rate 38.7% 39.8%
Net Income from
continuing ops. 42,573 35,637 6,936 19.5
--------- --------- -------- ---------
Income (Loss) from
discontinued
operations, net of
income taxes 98 (90) 188
Net Income $ 42,671 $ 35,547 $ 7,124 20.0%
========= ========= ======== =========
Diluted Net income per
share before effect
of convertibles notes:
Continuing Operations $ 2.22 $ 1.92 $ 0.30 15.6%
Discontinued Operations 0.01 0.00
--------- ---------
Net Income $ 2.23 $ 1.92 0.31 16.1%
========= ========= ======== =========
Diluted Shares
Outstanding 19,162 18,546 616 3.3%
Diluted Net income per
share including effect
of convertibles notes:
Continuing Operations $ 2.22 $ 1.92 $ 0.30 15.6%
Effects of convertible
senior sub. notes (0.10) N/A
Discontinued Operations 0.01 0.00
Net Income $ 2.13 $ 1.92 0.21 10.9%
========= ========= ======== =========
Diluted Shares
Outstanding 20,647 18,546 2,101 11.3%
Unit Sales: 2004 2003
---------- --------- ---------
New Vehicle 56,529 53,804 2,725 5.1%
Used - Retail Vehicle 41,802 41,451 351 0.8
Used - Wholesale 23,137 25,982 (2,845) (10.9)
Total Units Sold 121,468 121,237 231 0.2
Average Selling Price:
---------------------
New Vehicle $ 28,120 $ 26,782 $ 1,338 5.0%
Used - Retail Vehicle 15,093 14,550 543 3.7
Used - Wholesale 5,399 4,713 686 14.6
Key Financial Data:
------------------
Gross Profit Margin 16.8% 16.0%
SG&A as a % of Gross
Profit 76.1% 77.7%
Operating Margin 3.5% 3.2%
Pre-Tax Margin 2.5% 2.4%
(In Thousands except per share and unit data)
Unaudited Three Months Ended
--------- December 31,
------------------- $Increase %Increase
2004 2003 (Decrease) (Decrease)
--------- --------- --------- ----------
New Vehicle Sales $384,790 $357,303 $27,487 7.7%
Used Vehicle Sales 183,196 166,079 17,117 10.3
Finance & Insurance 25,216 22,023 3,193 14.5
Service, Body & Parts Sales 74,590 65,950 8,640 13.1
Fleet & Other Revenues 1,986 835 1,151 137.8
--------- --------- --------- ----------
Total Revenues 669,778 612,190 57,588 9.4
Cost of Sales 556,581 512,111 44,470 8.7
--------- --------- --------- ----------
Gross Profit 113,197 100,079 13,118 13.1
SG&A Expense 85,832 75,571 10,261 13.6
Depreciation/Amortization 3,846 2,704 1,142 42.2
--------- --------- --------- ----------
Income from Operations 23,519 21,804 1,715 7.9
Flooring Interest Expense (4,465) (3,455) (1,010) 29.2
Other Interest Expense (2,813) (1,633) (1,180) 72.3
Other Expense, net (321) (306) (15) 4.9
--------- --------- --------- ----------
Income from continuing
operations before
income taxes 15,920 16,410 (490) (3.0)
Income Tax Expense 6,001 6,531 (530) (8.1)
Income Tax Rate 37.7% 39.8%
Net Income from continuing
ops. 9,919 9,879 40 0.4
--------- --------- --------- ----------
Income (Loss) from
discontinued operations,
net of income taxes (37) 103 (140)
Net Income $ 9,882 $ 9,982 (100) (1.0)%
========= ========= ========= ==========
Diluted Net income per
share before effect of
convertibles notes:
Continuing Operations $ 0.52 $ 0.52 $ 0.00 0.0%
Discontinued Operations 0.00 0.01
--------- ---------
Net Income $ 0.52 $ 0.53 (0.01) (1.9)%
========= ========= ========= ==========
Diluted Shares Outstanding 19,260 18,922 338 1.8%
Diluted Net income per
share including effect
of convertibles notes:
Continuing Operations $ 0.52 $ 0.52 $ 0.00 0.0%
Effects of convertible
senior sub. notes (0.04) N/A
Discontinued Operations 0.00 0.01
--------- ---------
Net Income $ 0.48 $ 0.53 (0.05) (9.4)%
========= ========= ========= ==========
Diluted Shares Outstanding 21,516 18,922 2,594 13.7%
Unit Sales: 2004 2003
---------- ---- ----
New Vehicle 13,274 12,716 558 4.4%
Used - Retail Vehicle 9,927 9,415 512 5.4
Used - Wholesale 5,176 6,061 (885) (14.6)
Total Units Sold 28,377 28,192 185 0.7
Average Selling Price:
---------------------
New Vehicle $ 28,988 $ 28,099 $ 889 3.2%
Used - Retail Vehicle 15,451 14,663 788 5.4
Used - Wholesale 5,760 4,625 1,135 24.5
Key Financial Data:
------------------
Gross Profit Margin 16.9% 16.3%
SG&A as a % of Gross Profit 75.8% 75.5%
Operating Margin 3.5% 3.6%
Pre-Tax Margin 2.4% 2.7%
Gross Margin/Profit Data Three Months Ended Twelve Months Ended
------------------------ December 31, December 31,
------------------ --------------------
2004 2003 2004 2003
---------- ------- ----------- --------
New Vehicle Retail 7.8% 7.8% 7.8% 7.7%
Used Vehicle Retail 14.1% 13.6% 14.3% 13.8%
Used Vehicle Wholesale 1.5% 0.5% 2.9% (0.2)%
Service, Body & Parts 48.0% 47.3% 48.1% 47.2%
New Retail Gross Profit/Unit $ 2,247 $ 2,182 $2,200 $ 2,055
Used Retail Gross Profit/Unit $ 2,182 $ 1,998 $2,152 $ 2,010
Used Wholesale Gross
Profit/Unit $ 86 $ 25 $ 157 $ (8)
Finance & Insurance/Retail
Unit $ 1,087 $ 995 $1,031 $ 945
Same Store Data Three Months Ended Twelve Months Ended
--------------- December 31, December 31,
------------------ --------------------
2004 2003 2004 2003
---------- ------- ----------- --------
New Vehicle Retail Sales -3.3% 2.3% -2.4% 6.2%
Used Vehicle Sales (includes
Wholesale) 1.7% -8.7% -5.7% -8.8%
Total Vehicle Sales (excludes
fleet) -1.7% -1.5% -3.5% 0.7%
Service, Body & Parts Sales 2.9% 2.2% 3.0% 0.7%
Finance & Insurance Sales 6.2% 0.4% 1.9% 5.1%
Total Sales (Excluding Fleet) -1.0% -1.0% -2.7% 0.8%
Total Gross Profit (Excluding
Fleet) 2.6% -0.7% 1.9% 0.7%
Balance Sheet Highlights (Dollars in Thousands)
-----------------------------------------------
Unaudited December 31, December 31,
--------- 2004 2003
------------ ------------
Cash & Cash Equivalents $ 29,264 $ 74,408
Trade Receivables(a) 84,489 87,116
Inventory 536,653 445,281
Assets Held for Sale 135 20,408
Other Current Assets 12,334 9,724
------------ ------------
Total Current Assets 662,875 636,937
Real Estate, net 226,356 164,676
Equipment & Leases, net 73,275 62,637
Goodwill, net 244,532 207,027
Other Assets 49,866 31,505
------------ ------------
Total Assets $1,256,904 $1,102,782
============ ============
Floorplan Notes Payable $ 450,859 $ 378,961
Liabilities Held for Sale 0 13,045
Other Current Liabilities 85,839 84,865
------------ ------------
Total Current Liabilities 536,698 476,871
Used Vehicle Flooring 0 56,267
Real Estate Debt 139,702 80,159
Other Long-Term Debt 127,608 98,308
Other Liabilities 46,950 32,251
------------ ------------
Total Liabilities 850,958 743,856
------------ ------------
Shareholders' Equity 405,946 358,926
Total Liabilities &
Shareholders' Equity $1,256,904 $1,102,782
============ ===========
(a) Includes contracts-in-transit of $42,913 and $44,709 for 2004
and 2003 respectively.
Other Balance Sheet Data (Dollars in Thousands)
Current Ratio 1.2x 1.3x
LT Debt/Total Cap. (Excluding Used -
Vehicle Flooring) 40% 33%
LT Debt/Total Cap. (Excluding Used -
Vehicle Flooring and Real Estate) 24% 22%
Working Capital $126,177 $160,066
Book Value per Basic Share $ 21.62 $ 19.63