Car Dealer Lithia Motors Q2 Revenues Grow to a Record $885 Million, Profit $10.7 Million

MEDFORD, Ore.--Lithia Motors, Inc. today announced that second quarter 2007 sales increased 11% to $885.1 million as compared to $801.2 million in the same period last year. New vehicle sales increased 10%, used vehicle sales increased 9%, finance/insurance sales increased 5%, and parts/service sales increased 19%.

Second quarter 2007 net income from continuing operations was $10.7 million as compared to $12.1 million in the second quarter of 2006. Diluted earnings per share from continuing operations were $0.50 as compared to $0.57 in the second quarter of 2006. For a more accurate comparison of earnings, last year’s fair market value adjustment to our swaps needs to be considered. Our interest rate swaps did not qualify for hedge accounting in 2006, which had the effect of increasing second quarter 2006 earnings per share by 3 cents. Our swaps do qualify for hedge accounting in 2007 and there was no comparable effect on earnings per share in the second quarter.

Sid DeBoer, Lithia’s Chairman and CEO, commented, “The highlight of the quarter was Lithia’s parts and service business which continued its strong performance with same-store sales growth of 4.6% on top of 8.0% growth in the second quarter of last year.”

“Total sales grew 11% in the second quarter driven by strong parts and service sales and revenues from acquisitions made in the past 12 months. Second quarter total same-store sales declined 2.0%; however, we had a difficult comparison against 9.3% growth in the second quarter of 2006. Regardless of the difficult year over year comparisons, retail sales have been lackluster in the first half of the year. We believe that we are seeing a challenging retail environment for automotive sales in our markets that will continue for the rest of the year. This is related to the ripple affects from the slowdown in residential construction, high gas prices and customer concerns over personal debt.”

“Vehicle inventories are at low levels going into the third quarter of the year. New vehicle inventories at the end of June were 9 days below our historical average levels. Finally, earnings per share from continuing operations in the second quarter were down 12% from last year as a result of the retail sales environment, continuing costs related to L2 Auto and our future operating initiatives and higher year over year interest expense,” concluded Mr. DeBoer.

For the six-month period ending June 30, 2007, total sales increased 10% to $1.66 billion as compared to $1.51 billion in the same period last year. New vehicle sales increased 9%, used vehicle sales increased 9%, finance/insurance sales increased 8%, and parts/service sales increased 20%.

For the first six-months, Lithia’s net income from continuing operations was $17.9 million as compared to $22.9 million in 2006. Diluted earnings per share from continuing operations were $0.85 as compared to $1.08 in the first six-months of 2006. Last year’s fair market value adjustment to our swaps had the effect of increasing first half 2006 earnings per share by 7 cents. There was no comparable effect on earnings per share in the first half of this year.

Jeffrey B. DeBoer, Senior Vice President and CFO added, “We are lowering our guidance for the full-year 2007. Our initial 2007 guidance was in-line with what we had earned for the full-year 2006. We are adjusting guidance lower to take into account the slower than expected retail environment in the first half of the year and the costs associated with the investments, for the future, we are making in our company this year. We do not foresee an impact to the company’s dividend or current operating initiatives as a result of our updated projections for the year.”

“In the second quarter, we had five stores and one body shop classified as discontinued operations as we continue to dispose of our lowest performing operations. Of the 12 cents in discontinued operations, 1 cent is related to operating losses and 11 cents are due to a one-time non-cash write-off of intangibles related to the discontinued stores.”

“The full-year 2007 guidance is on a continuing operations basis and assumes a steady pace of acquisitions and dispositions," concluded Jeffrey B. DeBoer.

		Guidance
Earnings per Share From Continuing Operations:		FY 2007
		$1.60 - $1.80

Conference Call Information

Lithia Motors will be providing more detailed information on the results for the second quarter 2007 in its conference call scheduled for today at 2 p.m. PDT and 5 p.m. EDT. The call can be accessed live by calling 973-582-2750; Conference ID #: 9010604. To listen LIVE on our website or for REPLAY: Log-on to www.Lithia.com – Go to Investor Relations – and click on the Conference Call Icon.

About Lithia

Lithia Motors, Inc. is a Fortune 700 and Russell 2000 Company. Lithia sells 30 brands of new vehicles at 108 stores which are located in 46 markets within 15 states. Internet sales are centralized at www.Lithia.com. 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 109,648 new and used vehicles and had $3.17 billion in total revenue in 2006.

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, which management believes are a benefit to shareholders. These statements are necessarily subject to risk and uncertainty and actual results could differ materially due to certain risk factors including, without limitation, economic conditions, acquisition risk factors and others set forth from time to time in the company’s filings with the SEC. Specific risks in this press release include the accuracy of the company’s internal forecasts, comments and predictions related to the retail sales environment, anticipated costs related to new initiatives and projected full-year 2007 earnings per share guidance.

Additional Information

For additional information on Lithia Motors, contact the Investor Relations Department: 541-776-6591 or log-on to: www.lithia.com – go to Investor Relations.

LITHIA MOTORS, INC.
(In Thousands except per share data)
Unaudited		Three Months Ended
		June 30,								$ Increase				% Increase
			2007				2006			(Decrease)				(Decrease)
New Vehicle Sales		$	515,234			$	468,710			$	46,524			9.9	%
Used Vehicle Sales			238,936				219,149				19,787			9.0
Finance & Insurance			33,143				31,487				1,656			5.3
Service, Body & Parts Sales			96,490				81,062				15,428			19.0
Fleet & Other Revenues			1,306				796				510			64.1
Total Revenues			885,109				801,204				83,905			10.5
Cost of Sales			736,797				664,909				71,888			10.8
Gross Profit			148,312				136,295				12,017			8.8
SG&A Expense			112,135				100,482				11,653			11.6
Depreciation/Amortization			5,097				4,007				1,090			27.2
Income from Operations			31,080				31,806				(726	)		(2.3	)
Flooring Interest Expense			(8,480	)			(7,800	)			680			8.7
Other Interest Expense			(5,039	)			(3,312	)			1,727			52.1
Other Income, net			113				261				(148	)		(56.7	)
Income from continuing operations before income taxes			17,674				20,955				(3,281	)		(15.7	)
Income Tax Expense			7,022				8,834				(1,812	)		(20.5	)
Income Tax Rate			39.7	%			42.2	%
Income from continuing ops.			10,652				12,121				(1,469	)		(12.1	)%
Discontinued Operations:
Loss from operations, net of tax			(228	)			(230	)
Loss from impairment, net of tax			(2,481	)			0
Loss from discontinued operations, net of income tax			(2,709	)			(230	)			2,479			1,077.8
Net Income		$	7,943			$	11,891			$	(3,185	)		(26.8	)%
Diluted Net Income per share:
Continuing Operations		$	0.50			$	0.57			$	(0.07	)		(12.3	)%
Discontinued Operations:
Loss from operations			(0.01	)			(0.01	)
Loss from impairment			(0.11	)			0
Total Discontinued Operations			(0.12	)			(0.01	)
Net Income per share		$	0.38			$	0.56				(0.18	)		(32.1	)%
Diluted Shares Outstanding			22,109				22,150				(41	)		(0.2	)%

LITHIA MOTORS, INC.		Three Months Ended
(Continuing Operations)		June 30,								Increase				% Increase
Unit Sales:			2007				2006			(Decrease)				(Decrease)
New Vehicle			17,882				17,326				556			3.2	%
Used - Retail Vehicle			11,814				11,328				486			4.3
Used - Wholesale			6,625				5,999				626			10.4
Total Units Sold			36,321				34,653				1,668			4.8
Average Selling Price:
New Vehicle		$	28,813			$	27,052			$	1,761			6.5	%
Used - Retail Vehicle			16,676				16,161				515			3.2
Used - Wholesale			6,329				6,013				316			5.3
Key Financial Data:
Gross Profit Margin			16.8	%			17.0	%		-20 bps
SG&A as a % of Gross Profit			75.6	%			73.7	%		+190 bps
Operating Margin			3.5	%			4.0	%		-50 bps
Pre-Tax Margin			2.0	%			2.6	%		-60 bps
Gross Margin/Profit Data
New Vehicle Retail			7.3	%			7.3	%		-
Used Vehicle Retail			15.0	%			15.8	%		-80 bps
Used Vehicle Wholesale			2.7	%			2.8	%		-10 bps
Service, Body & Parts			48.2	%			49.3	%		-110 bps
Finance & Insurance			100.0	%			100.0	%		-
New Retail Gross Profit/Unit		$	2,101			$	1,988				+$113
Used Retail Gross Profit/Unit		$	2,497			$	2,560				-$63
Used Wholesale Gross Profit/Unit		$	173			$	170				+$3
Finance & Insurance/Retail Unit		$	1,116			$	1,099				+$17
Revenue Mix:
New Vehicles			58.2	%			58.5	%
Used Retail Vehicles			22.3	%			22.9	%
Used Wholesale Vehicles			4.7	%			4.5	%
Finance and Insurance, Net			3.7	%			3.9	%
Service and Parts			10.9	%			10.1	%
Fleet and other			0.2	%			0.1	%
New Vehicle Unit Sales Brand Mix:
Chrysler Brands			38.9	%			39.5	%
General Motors & Saturn			15.7	%			17.2	%
Toyota			14.2	%			13.0	%
Honda			6.6	%			5.4	%
Ford			5.7	%			7.4	%
Hyundai			4.1	%			4.8	%
BMW			3.8	%			2.3	%
Nissan			3.2	%			3.4	%
Subaru			2.0	%			2.8	%
Volkswagen			2.0	%			1.5	%
Mercedes-Benz			1.1	%			0.7	%
Other			2.7	%			2.0	%
			100	%			100	%
Lithia Motors Selected Same Store Data
		Three Months Ended
		June 30,								Increase				% Increase
Same Store Unit Sales:			2007				2006			(Decrease)				(Decrease)
New Vehicle			15,956				17,204				(1,248	)		(7.3	)%
Used - Retail Vehicle			10,624				11,297				(673	)		(6.0	)
Used - Wholesale			5,902				5,999				(97	)		(1.6	)
Total Units Sold			32,482				34,500				(2,018	)		(5.8	)
Same Store Average Selling Price:
New Vehicle		$	28,353			$	27,041			$	1,312			4.9	%
Used - Retail Vehicle			16,452				16,160				292			1.8
Used - Wholesale			6,363				6,013				350			5.8
Same Store Retail Revenue
New Vehicle Retail Sales			(2.8	)%			8.1	%
Used Vehicle Retail Sales			(4.3	)%			12.0	%
Used Vehicle Wholesale Sales			4.1	%			10.1	%
Total Vehicle Sales (excluding fleet)			(2.8	)%			9.2	%
Finance & Insurance Sales			(1.4	)%			15.8	%
Service, Body & Parts Sales			4.6	%			8.0	%
Total Sales (excluding Fleet)			(2.0	)%			9.3	%
Total Gross Profit (excluding Fleet)			(3.0	)%			7.5	%
Same Store Average Gross Profit Data
New Retail Gross Profit/Unit		$	2,058			$	1,989				+$69
Used Retail Gross Profit/Unit		$	2,450			$	2,537				-$87
Used Wholesale Gross Profit/Unit		$	166			$	170				-$4
Same Store Total Sales Geographic Mix:
Texas			21.9	%			19.0	%
Oregon			16.2	%			17.3	%
California			12.1	%			13.5	%
Washington			11.8	%			11.7	%
Alaska			7.4	%			7.6	%
Montana			7.0	%			5.9	%
Colorado			6.9	%			7.3	%
Idaho			6.0	%			6.4	%
Nevada			4.4	%			5.0	%
Nebraska			2.8	%			3.1	%
South Dakota			2.3	%			2.1	%
New Mexico			1.2	%			1.1	%
			100	%			100	%

LITHIA MOTORS, INC.
(In Thousands except per share data)
Unaudited		Six Months Ended
		June 30,								$ Increase				% Increase
			2007				2006			(Decrease)				(Decrease)
New Vehicle Sales		$	952,741			$	872,799			$	79,942			9.2	%
Used Vehicle Sales			451,970				415,269				36,701			8.8
Finance & Insurance			62,787				57,905				4,882			8.4
Service, Body & Parts Sales			190,107				158,685				31,422			19.8
Fleet & Other Revenues			1,996				1,949				47			2.4
Total Revenues			1,659,601				1,506,607				152,994			10.2
Cost of Sales			1,375,311				1,247,132				128,179			10.3
Gross Profit			284,290				259,475				24,815			9.6
SG&A Expense			219,679				194,391				25,288			13.0
Depreciation/ Amortization			9,860				7,848				2,012			25.6
Income from Operations			54,751				57,236				(2,485	)		(4.3	)
Flooring Interest Expense			(15,834	)			(12,861	)			2,973			23.1
Other Interest Expense			(9,667	)			(6,335	)			3,332			52.6
Other Income, net			325				637				(312	)		(49.0	)
Income from continuing operations before income taxes			29,575				38,677				(9,102	)		(23.5	)
Income Tax Expense			11,698				15,737				(4,039	)		(25.7	)
Income Tax Rate			39.6	%			40.7	%
Income from continuing ops.			17,877				22,940				(5,063	)		(22.1	)%
Discontinued Operations:
Loss from operations, net of tax			(378	)			(1,681	)
Loss from impairment, net of tax			(2,481	)			0
Loss from discontinued operations, net of income tax			(2,859	)			(1,681	)			1,178			70.1
Net Income		$	15,018			$	21,259			$	(6,241	)		(29.4	)%
Diluted Net Income per share:
Continuing Operations		$	0.85			$	1.08			$	(0.23	)		(21.3	)%
Discontinued Operations:
Loss from operations			(0.02	)			(0.08	)
Loss from impairment			(0.11	)			0
Discontinued Operations			(0.13	)			(0.08	)
Net Income per share		$	0.72			$	1.00				(0.28	)		(28.0	)%
Diluted Shares Outstanding			22,116				22,109				7			0.0	%

LITHIA MOTORS, INC.		Six Months Ended
(Continuing Operations)		June 30,								Increase				% Increase
Unit Sales:			2007				2006			(Decrease)				(Decrease)
New Vehicle			33,165				31,798				1,367			4.3	%
Used - Retail Vehicle			22,447				21,544				903			4.2
Used - Wholesale			12,687				11,174				1,513			13.5
Total Units Sold			68,299				64,516				3,783			5.9
Average Selling Price:
New Vehicle		$	28,727			$	27,448			$	1,279			4.7	%
Used - Retail Vehicle			16,456				16,098				358			2.2
Used - Wholesale			6,509				6,126				383			6.3
Key Financial Data:
Gross Profit Margin			17.1	%			17.2	%		-10 bps
SG&A as a % of Gross Profit			77.3	%			74.9	%		+240 bps
Operating Margin			3.3	%			3.8	%		-50 bps
Pre-Tax Margin			1.8	%			2.6	%		-80 bps
Gross Margin/Profit Data
New Vehicle Retail			7.5	%			7.6	%		-10 bps
Used Vehicle Retail			15.0	%			15.7	%		-70 bps
Used Vehicle Wholesale			3.4	%			4.0	%		-60 bps
Service, Body & Parts			47.8	%			48.5	%		-70 bps
Finance & Insurance			100.0	%			100.0	%		-
New Retail Gross Profit/Unit		$	2,155			$	2,096				+$59
Used Retail Gross Profit/Unit		$	2,476			$	2,521				-$45
Used Wholesale Gross Profit/Unit		$	219			$	244				-$25
Finance & Insurance/Retail Unit		$	1,129			$	1,086				+$43
Revenue Mix:
New Vehicles			57.4	%			57.9	%
Used Retail Vehicles			22.3	%			23.0	%
Used Wholesale Vehicles			4.9	%			4.7	%
Finance and Insurance, Net			3.8	%			3.8	%
Service and Parts			11.5	%			10.5	%
Fleet and other			0.1	%			0.1	%
New Vehicle Unit Sales Brand Mix:
Chrysler Brands			39.9	%			41.1	%
General Motors & Saturn			16.2	%			16.2	%
Toyota			13.5	%			12.4	%
Ford			6.1	%			7.4	%
Honda			6.0	%			5.4	%
BMW			3.8	%			2.3	%
Hyundai			3.7	%			4.4	%
Nissan			3.4	%			3.6	%
Subaru			2.2	%			2.9	%
Volkswagen			1.7	%			1.4	%
Mercedes-Benz			1.1	%			0.6	%
Other			2.4	%			2.3	%
			100	%			100	%
Lithia Motors Selected Same Store Data
		Six Months Ended
		June 30,								Increase				% Increase
Same Store Unit Sales:			2007				2006			(Decrease)				(Decrease)
New Vehicle			29,830				31,676				(1,846	)		(5.8	)%
Used - Retail Vehicle			20,383				21,513				(1,130	)		(5.3	)
Used - Wholesale			11,488				11,173				315			2.8
Total Units Sold			61,701				64,362				(2,661	)		(4.1	)
Same Store Average Selling Price:
New Vehicle		$	28,254			$	27,444			$	810			3.0	%
Used - Retail Vehicle			16,249				16,097				152			0.9
Used - Wholesale			6,528				6,123				405			6.6
Same Store Retail Revenue
New Vehicle Retail Sales			(3.0	)%			9.4	%
Used Vehicle Retail Sales			(4.4	)%			4.4	%
Used Vehicle Wholesale Sales			9.6	%			3.7	%
Total Vehicle Sales (excluding fleet)			(2.7	)%			7.7	%
Finance & Insurance Sales			0.7	%			9.5	%
Service, Body & Parts Sales			5.1	%			5.3	%
Total Sales (excluding Fleet)			(1.8	)%			7.5	%
Total Gross Profit (excluding Fleet)			(2.1	)%			5.3	%
Same Store Average Gross Profit Data
New Retail Gross Profit/Unit		$	2,122			$	2,097				+$25
Used Retail Gross Profit/Unit		$	2,428			$	2,490				-$62
Used Wholesale Gross Profit/Unit		$	213			$	254				-$41
Same Store Total Sales Geographic Mix:
Texas			21.3	%			18.3	%
Oregon			16.5	%			17.9	%
California			12.0	%			13.5	%
Washington			11.9	%			11.5	%
Alaska			7.2	%			7.3	%
Colorado			7.2	%			7.4	%
Montana			6.7	%			6.1	%
Idaho			6.0	%			6.3	%
Nevada			4.7	%			5.2	%
Nebraska			2.9	%			3.2	%
South Dakota			2.4	%			2.2	%
New Mexico			1.2	%			1.1	%
			100	%			100	%

LITHIA MOTORS, INC.
Balance Sheet Highlights (Dollars in Thousands)
		June 30, 2007			December 31, 2006
		Unaudited
Cash & Cash Equivalents		$	32,903		$	26,600
Trade Receivables (a)			131,278			118,528
Inventory			684,926			603,306
Assets Held for Sale			68,859			15,485
Other Current Assets			16,080			15,721
Total Current Assets			934,046			779,640
Real Estate, net			333,540			327,890
Equipment & Leases, net			95,513			89,213
Goodwill, net			309,065			307,424
Other Assets			74,938			75,190
Total Assets		$	1,747,102		$	1,579,357
Floorplan Notes Payable		$	573,332		$	499,679
Liabilities held for sale			48,513			11,610
Other Current Liabilities			121,060			118,650
Total Current Liabilities			742,905			629,939
Used Vehicle Flooring			111,843			95,614
Real Estate Debt			161,629			155,890
Other Long-Term Debt			152,324			140,879
Other Liabilities			71,580			63,642
Total Liabilities			1,240,281			1,085,964
Shareholders' Equity			506,821			493,393
Total Liabilities &
Shareholders' Equity		$	1,747,102		$	1,579,357
(a) Includes contracts-in-transit of $60,281 and $56,211 for 2007 and 2006.
Other Balance Sheet Data (Dollars in Thousands except per share data)
Current Ratio			1.3x			1.2x
LT Debt/Total Cap.
(Excludes Real Estate)			34%			32%
Working Capital		$	191,141		$	149,701
Book Value per Basic Share		$	26.01		$	25.32