Lithia Motors Q1 2005 Earnings Per Share Rise
MEDFORD, Ore.--April 26, 2005--Lithia Motors, Inc. :Lithia Motors' First-quarter 2005 Highlights for Continuing Operations: Operating Profits: +36% Net Income: +31% Adjusted earnings per Share: +30%
Lithia Motors, Inc. today announced that first quarter 2005 net income from continuing operations increased 31% to $10.0 million from $7.7 million in the first quarter of 2004. Earnings per share from continuing operations, excluding the dilutive effect of the change in accounting for convertible notes, increased 30% to $0.52 as compared to $0.40 in the first quarter of 2004. Including the effect of the accounting change for convertible notes and discontinued operations, earnings per share were $0.48 per fully diluted share.
First quarter 2005 sales increased 6% to $670.8 million as compared to $632.8 million in the same period last year. New vehicle sales increased 4%, used vehicle sales increased 7%, parts/service sales increased 11%, and finance/insurance sales increased 10%.
Sid DeBoer, Lithia's Chairman and CEO, commented, "In the first quarter, we saw sales growth and margin improvements across all business lines. Our operating margin improved by 80 basis points to a record level of 3.6% for the quarter."
The total gross profit margin for the quarter was 17.8%, an improvement of 110 basis points as compared to the same period last year. Sales general & administrative (SG&A) expense, as a percentage of gross profit, improved by 350 basis points as compared to last year.
"The benefits of Lithia's operating model are readily apparent. This is the eighth consecutive quarter of total gross margin improvement for the company. In 2004, our SG&A expense as a percentage of total gross profit improved by 160 basis points year-over-year, and we are pleased to see this positive trend continuing in the first quarter of 2005," concluded Mr. DeBoer.
Jeffrey B. DeBoer, Senior Vice President and CFO added, "In the first quarter, we completed three acquisitions; a Chrysler and Jeep franchise in Concord, California which was added to our Dodge store in that market, a Chrysler franchise in Eugene, Oregon which was added to our Dodge store in that market and a Chrysler Dodge Jeep store in Omaha, Nebraska. Last week we completed the acquisition of Lithia Chrysler Dodge in Eureka, California. These stores and franchises represent approximately $178 million in annualized revenues."
"Our guidance for the second quarter and full-year 2005 is included in the table below. It includes the effect of the recent accounting pronouncements for convertible notes. Previous full-year 2005 guidance included the effect of accounting pronouncements for stock options that was to go into effect in the third quarter of the year and amounted to a five-cent decrease in annual earnings per share. A recent rule adopted by the SEC has delayed the required implementation of FAS 123(R) until the first quarter of 2006. The Company is not intending to implement FAS 123(R) early. Guidance for 2005 has been updated to reflect this delay," concluded Jeffrey B. DeBoer.
Guidance Actual Guidance Actual
EPS excluding new
accounting 2Q 2005 2Q 2004 2005 2004
------- ------- ---- ----
pronouncements: $0.59 - $0.61 $0.57 $2.41 - $2.49 $2.22
Effect of Convertible
Notes ($0.04) ($0.03) ($0.16) ($0.10)
Effect of FAS 123(R) N/A N/A N/A N/A
------------- ------ ------------- ------
EPS - Reportable $0.55 - $0.57 $0.54 $2.25 - $2.33 $2.12
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 reported diluted EPS for the first quarter ended 2005, Lithia is required to increase its share count by the amount contingently issuable to the noteholders. This resulted in an additional 2.255 million shares for the first quarter of 2005. Adoption of the accounting statement 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. Previously, FASB had determined that the new rules, absent any change, would be effective for the Company commencing with the third quarter of 2005. A recent modification by the SEC has determined that these rules will not be effective until the first quarter of 2006. Company guidance for 2005 has been updated to account for this change. Adoption of this accounting change will not affect the cash flow of the Company.
About Lithia
Lithia Motors, Inc. is a Fortune 1000 and Russell 2000 Company that sells 25 brands of new vehicles and operates 88 stores and 174 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.
Forward Looking Statements
LITHIA MOTORS, INC.
(In Thousands except per share and unit data)
Unaudited Three Months Ended
March 31, $Increase % Increase
------------------
2005 2004 (Decrease) (Decrease)
-------- -------- ------------- -----------
New Vehicle Sales $365,647 $351,405 $ 14,242 4.1%
Used Vehicle Sales 200,534 187,856 12,678 6.7
Finance & Insurance 25,633 23,227 2,406 10.4
Service, Body & Parts
Sales 76,027 68,771 7,256 10.6
Fleet & Other Revenues 2,964 1,531 1,433 93.6
-------- -------- ------------ -----------
Total Revenues 670,805 632,790 38,015 6.0
Cost of Sales 551,533 527,302 24,231 4.6
-------- -------- ------------ -----------
Gross Profit 119,272 105,488 13,784 13.1
SG&A Expense 91,681 84,853 6,828 8.0
Depreciation/Amortization 3,441 2,900 541 18.7
-------- -------- ------------ -----------
Income from Operations 24,150 17,735 6,415 36.2
Flooring Interest Expense (5,248) (3,582) 1,666 46.5
Other Interest Expense (2,809) (1,734) 1,075 62.0
Other Expense, net 317 221 96 43.4
-------- -------- ------------ -----------
Income from continuing
operations
before income taxes 16,410 12,640 3,770 29.8
Income Tax Expense (6,350) (4,930) 1,420 28.8
Income Tax Rate 38.7% 39.0%
Net Income from
continuing ops. 10,060 7,710 2,350 30.5
-------- -------- ------------ -----------
Income (Loss) from
discontinued
operations, net of
income taxes (70) (231) 161 (69.7)
Net Income $ 9,990 $ 7,479 2,511 33.6%
======== ======== ============ ===========
Diluted Net income per
share including effect of
convertibles notes:
Continuing Operations $ 0.52 $ 0.40 $ 0.12 30.0%
Effects of convertible
senior sub. notes (0.03) N/A
Discontinued Operations (0.01) (0.01)
Net Income per share $ 0.48 $ 0.39 0.09 23.1%
======== ======== ============ ===========
Diluted Shares
Outstanding 21,704 19,111 2,593 13.6%
Diluted Net income per
share before effect of
convertibles notes:
Continuing Operations $ 0.52 $ 0.40 $ 0.12 30.0%
Discontinued Operations (0.01) (0.01)
Net Income per share $ 0.51 $ 0.39 0.12 30.8%
======== ======== ============ ===========
Diluted Shares
Outstanding 19,449 19,111 338 1.8%
Unit Sales: 2005 2004
----------- ------ ------
New Vehicle 13,065 12,756 309 2.4%
Used - Retail Vehicle 10,965 10,658 307 2.9
Used - Wholesale 5,691 6,007 (316) (5.3)
Total Units Sold 29,721 29,421 300 1.0
Average Selling Price: 2005 2004
---------------------- ---- ----
New Vehicle $27,987 $27,548 $439 1.6%
Used - Retail Vehicle 15,205 14,636 569 3.9
Used - Wholesale 5,942 5,305 637 12.0
Key Financial Data:
-------------------
Gross Profit Margin 17.8% 16.7%
SG&A as a % of Gross Profit 76.9% 80.4%
Operating Margin 3.6% 2.8%
Pre-Tax Margin 2.4% 2.0%
Gross Margin/Profit
Data Three Months Ended
------------------- March 31,
------------------
2005 2004
---- ----
New Vehicle Retail 8.1% 7.5%
Used Vehicle Retail 15.2% 14.2%
Used Vehicle Wholesale 4.4% 3.0%
Service, Body & Parts 48.5% 47.4%
New Retail Gross
Profit/Unit $2,268 $2,067
Used Retail Gross
Profit/Unit $2,319 $2,082
Used Wholesale Gross
Profit/Unit $259 $161
Finance & Insurance/
Retail Unit $1,065 $985
Same Store Data Three Months Ended
--------------- March 31,
------------------
2005 2004
---- ----
New Vehicle Retail Sales -6.4% 1.4%
Used Vehicle Sales
(includes Wholesale) -1.9% -1.4%
Total Vehicle Sales
(excludes fleet) -4.8% 0.4%
Finance & Insurance Sales -1.8% 2.7%
Service, Body & Parts Sales -0.1% 8.0%
Total Sales
(Excluding Fleet) -4.2% 1.2%
Total Gross Profit
(Excluding Fleet) 1.1% 6.8%
Balance Sheet Highlights (Dollars in Thousands)
March 31, 2005 December 31, 2004
-------------- -----------------
Unaudited
--------------
Cash & Cash Equivalents $ 19,562 $ 29,264
Trade Receivables (a) 84,615 84,489
Inventory 563,995 536,653
Assets Held for Sale 15,260 135
Other Current Assets 14,072 12,334
---------- ----------
Total Current Assets 697,504 662,875
Real Estate, net 233,113 226,356
Equipment & Leases, net 75,095 73,275
Goodwill, net 249,905 244,532
Other Assets 49,950 49,866
---------- ----------
Total Assets $1,305,567 $1,256,904
========== ==========
Floorplan Notes Payable $ 467,929 $ 450,859
Liabilities Held for Sale 3,719 -
Other Current Liabilities 86,122 85,839
---------- ----------
Total Current Liabilities 557,770 536,698
Used Vehicle Flooring - -
Real Estate Debt 147,677 139,702
Other Long-Term Debt 131,820 127,608
Other Liabilities 48,912 46,950
---------- ----------
Total Liabilities 886,179 850,958
---------- ----------
Shareholders' Equity 419,388 405,946
---------- ----------
Total Liabilities &
Shareholders' Equity $1,305,567 $1,256,904
========== ==========
-------------
(a) Includes contracts-in-transit of $42,683 and $42,913 for 2005 and
2004.
Other Balance Sheet Data (Dollars in Thousands)
Current Ratio 1.3x 1.2x
LT Debt/Total Cap.
(Excludes Used -Vehicle Flooring
and Real Estate) 24% 24%
Working Capital $139,734 $126,177
Book Value per Basic Share $22.00 $21.79