MEDFORD, Ore.—Lithia Motors, Inc. today reported the highest third quarter revenue in company history and the 28th consecutive quarter of record results.

Third quarter 2017 net income per diluted share decreased 3% to $2.07 from $2.14 for the third quarter of 2016. Adjusted net income per diluted share increased 6% to $2.18 from $2.06 for the same period in 2016. Third quarter 2017 net income decreased 4% to $51.9 million from $54.0 million for the third quarter of 2016. Adjusted net income increased 5% to $54.8 million compared to third quarter 2016 adjusted net income of $52.0 million.

As shown in the attached non-GAAP reconciliation tables, the 2017 third quarter adjusted results exclude $0.11 per share in non-core charges related to storm insurance reserves and acquisition related expenses. The 2016 third quarter non-core adjustments exclude a $0.08 benefit associated with an equity investment.

Third quarter 2017 revenue increased 19% to $2.7 billion from $2.3 billion in the third quarter of 2016.

Third Quarter-over-Quarter Operating Highlights:

  • Total same store sales increased 1%
  • New vehicle same store sales increased 1%
  • Used vehicle retail same store sales increased 4%
  • Service, body and parts same store sales increased 3%
  • Same store F&I per unit was $1,286
  • Adjusted SG&A expense as a percentage of gross profit was 68.7%

For the first nine months of 2017, revenues increased 16% to $7.4 billion, compared to $6.4 billion in the first nine months of 2016. Net income for the first nine months of 2017 was $6.19 per diluted share, compared to $5.69 per diluted share for the similar period in 2016. Adjusted net income per diluted share for the first nine months of 2017 increased 12% to $6.24 from $5.57 for the first nine months of 2016.

"We increased quarterly revenues 19% and adjusted earnings per share 6% over last year, driven by our significant acquisition cadence," said Bryan DeBoer, President and CEO. "We grew same-store sales in all departments, outpacing a plateauing new vehicle sales environment. We remain focused on integrating acquisitions while continuing to unlock the substantial opportunity to improve performance across our broader store base."

Corporate Development

As previously announced in August, we completed the acquisition of the Downtown Los Angeles ("DTLA") Auto Group comprised of Audi, Mercedes-Benz, Nissan, Porsche, Toyota, and Volkswagen stores located in downtown Los Angeles, California and a Nissan store in nearby Carson, California. In 2017, we have completed the acquisition of 15 stores and opened one store which we forecast will generate over $1.5 billion in annualized revenues.

"We continue to see a significant number of stores available," said DeBoer. "Given the annual cash flow from our existing base of business, ample liquidity and availability of capital, we anticipate a future cadence similar to what we have experienced in the prior three years."

Balance Sheet Update

We ended the third quarter with $39 million in cash and $269 million in availability under our credit facility. Additionally, approximately $282 million of our operating real estate is currently unfinanced, which we estimate could provide $211 million in capital, for total potential liquidity of $519 million.

In July 2017, we completed a $300 million aggregate principal amount offering of 5.25% senior notes due 2025 in a private offering that is exempt from the registration requirements of the Securities Act of 1933, as amended. During the third quarter, we used approximately half the net proceeds to fund the DTLA acquisition, and the remainder for general corporate purposes, including capital expenditures and debt repayment.

Dividend Payment

Our Board of Directors has approved a dividend of $0.27 per share related to third quarter 2017 financial results. We expect to pay the dividend on November 24, 2017 to shareholders of record on November 10, 2017.

Earnings Outlook

For 2017, we expect same store sales growth of 3%, full year revenues of $10.0 billion to $10.2 billion and adjusted earnings per share of $8.30 to $8.35.

For 2018, we target full year revenues of $11.0 to $11.5 billion and earnings per share of $9.25.

Commenting on the earnings guidance, John North, Senior Vice President and CFO, stated, "We experienced approximately $0.20 in headwinds in the quarter related to reserve adjustments and higher than anticipated depreciation and floor plan interest expense. Opportunity also remains to better leverage expenses in personnel and advertising. As a result, we expect 2017 adjusted earnings in a range of $8.30 to $8.35 per share, representing a 12% increase over last year. For 2018, we are targeting growth of approximately 11% for both revenue and earnings through acquisitions and leveraging our shared cost structure."

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 10:00 a.m. ET today by telephone at 877-407-8029. An updated presentation highlighting the third quarter results has been added to our investor relations website.

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 and is among the fastest growing companies in the Fortune 500 (#318-2017) with 166 stores representing 30 brands in 18 states. We offer vehicles online and through our nationwide retail network. Our "Growth Powered by People" strategy drives us to innovate and continuously improve the customer experience.

Sites

www.lithiamotors.com

www.lithiainvestorrelations.com

www.lithiacareers.com

Lithia Motors on Facebook

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:

  • Expected operating results, such as improved store efficiency and performance; generating 2017 full year earnings of $8.30 to $8.35 per diluted share and achieving a 2018 full year earnings target of $9.25 per diluted share and all projections set forth under the headings "Earnings Outlook";
  • Our ability to improve store performance;
  • Anticipated acquisition opportunities and additions of dealership locations to our portfolio in the future, and our ability to improve earnings and achieve returns on investments;
  • Anticipated revenues from acquired and open point stores; and
  • Anticipated availability of liquidity from our credit facility and 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, adjusted SG&A as a percentage of revenue and gross profit, adjusted operating margin, adjusted operating profit as a percentage of gross profit, adjusted pre-tax margin, EBITDA, adjusted EBITDA, leveraged cash flow and adjusted total debt. 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,

     %    

Nine months ended
September 30,

     %
Increase Increase
2017     2016 (Decrease) 2017     2016 (Decrease)
Revenues:
New vehicle retail $ 1,557,076 $ 1,297,511 20.0 % $ 4,151,435 $ 3,602,603 15.2 %
Used vehicle retail 679,632 580,885 17.0 1,915,490 1,667,258 14.9
Used vehicle wholesale 75,720 75,271 0.6 216,735 207,131 4.6
Finance and insurance 101,044 87,709 15.2 282,672 246,390 14.7
Service, body and parts 265,683 217,148 22.4 744,262 616,088 20.8
Fleet and other 15,185   11,443   32.7   86,883   46,697   86.1  
Total revenues 2,694,340 2,269,967 18.7 % 7,397,477 6,386,167 15.8 %
Cost of sales:
New vehicle retail 1,469,031 1,221,668 20.2 3,912,733 3,387,132 15.5
Used vehicle retail 600,974 512,076 17.4 1,693,543 1,466,947 15.4
Used vehicle wholesale 74,546 74,353 0.3 212,332 202,897 4.7
Service, body and parts 133,191 112,806 18.1 376,096 317,028 18.6
Fleet and other 13,577   11,803   15.0   82,829   45,684   81.3  
Total cost of sales 2,291,319   1,932,706   18.6   6,277,533   5,419,688   15.8  
Gross profit 403,021 337,261 19.5 % 1,119,944 966,479 15.9 %
Asset impairments — 3,498 (100.0 ) — 10,494 (100.0 )
SG&A expense 282,241 228,134 23.7 782,303 662,766 18.0
Depreciation and amortization 14,828   12,206   21.5   41,598   36,372   14.4  
Income from operations 105,952 93,423 13.4 % 296,043 256,847 15.3 %
Floor plan interest expense (10,629 ) (6,186 ) 71.8 (28,013 ) (18,304 ) 53.0
Other interest expense (9,905 ) (5,647 ) 75.4 (23,745 ) (16,608 ) 43.0
Other income (expense), net 1,125   (1,513 ) NM   11,357   (4,534 ) NM  
Income before income taxes 86,543 80,077 8.1 % 255,642 217,401 17.6 %
Income tax expense (34,657 ) (26,036 ) 33.1 (99,829 ) (71,662 ) 39.3
Income tax rate 40.0 % 32.5 %   39.1 % 33.0 %  
Net income $ 51,886   $ 54,041   (4.0 )% $ 155,813   $ 145,739   6.9 %
 
Diluted net income per share:
Net income per share $ 2.07 $ 2.14 (3.3 )% $ 6.19 $ 5.69 8.8 %
 
Diluted shares outstanding 25,076 25,290 (0.8 )% 25,158 25,598 (1.7 )%
 
NM - not meaningful
 
 
Lithia Motors, Inc.

Key Performance Metrics (Unaudited)

 
     

Three months ended
September 30,

     %    

Nine months ended
September 30,

     %
Increase Increase
2017     2016 (Decrease) 2017     2016 (Decrease)

Gross margin
New vehicle retail 5.7 % 5.8 % (10)bps 5.7 % 6.0 % (30)bps
Used vehicle retail 11.6 11.8 (20)bps 11.6 12.0 (40)bps
Finance and insurance 100.0 100.0 —bps 100.0 100.0 —bps
Service, body and parts 49.9 48.1 180bps 49.5 48.5 100bps
Gross profit margin 15.0 14.9 10bps 15.1 15.1 —bps
 

Unit sales
New vehicle retail 45,570 38,417 18.6 % 122,062 107,225 13.8 %
Used vehicle retail 34,737 29,636 17.2 97,691 84,783 15.2
Total retail units sold 80,307 68,053 18.0 219,753 192,008 14.4
 

Average selling price
New vehicle retail $ 34,169 $ 33,774 1.2 % $ 34,011 $ 33,599 1.2 %
Used vehicle retail 19,565 19,601 (0.2 ) 19,608 19,665 (0.3 )
 

Average gross profit per unit

 

New vehicle retail $ 1,932 $ 1,974 (2.1 )% $ 1,956 $ 2,010 (2.7 )%
Used vehicle retail 2,264 2,322 (2.5 ) 2,272 2,363 (3.9 )
Finance and insurance 1,258 1,289 (2.4 ) 1,286 1,283 0.2
Total vehicle(1) 3,349 3,428 (2.3 ) 3,403 3,471 (2.0 )
 

Revenue mix
New vehicle retail 57.8 % 57.2 % 56.1 % 56.4 %
Used vehicle retail 25.2 25.6 25.9 26.1
Used vehicle wholesale 2.8 3.3 2.9 3.2
Finance and insurance, net 3.8 3.9 3.8 3.9
Service, body and parts 9.9 9.6 10.1 9.6
Fleet and other 0.5 0.4 1.2 0.8
 
      Adjusted     As reported     Adjusted     As reported

Three months ended
September 30,

Three months ended
September 30,

Nine months ended
September 30,

Nine months ended
September 30,

Other metrics

 2017     2016 2017     2016 2017     2016 2017     2016
SG&A as a % of revenue 10.3 % 10.1 % 10.5 % 10.1 % 10.4 % 10.4 % 10.6 % 10.4 %
SG&A as a % of gross profit 68.7 67.6 70.0 67.6 68.8 68.5 69.9 68.6
Operating profit as a % of revenue 4.1 4.3 3.9 4.1 4.2 4.2 4.0 4.0
Operating profit as a % of gross profit 27.6 28.7 26.3 27.7 27.4 27.7 26.4 26.6
Pretax margin 3.4 3.8 3.2 3.5 3.5 3.7 3.5 3.4
Net profit margin 2.0 2.3 1.9 2.4 2.1 2.2 2.1 2.3
 
(1) - includes the sales and gross profit related to new, used retail, used wholesale and finance and insurance and unit sales for new and used retail
 
 
Lithia Motors, Inc.

Same Store Operating Highlights (Unaudited)

 
     

Three months ended
September 30,

     %    

Nine months ended
September 30,

     %
Increase Increase
2017     2016 (Decrease) 2017     2016 (Decrease)

Revenues
New vehicle retail $ 1,290,305 $ 1,280,030 0.8 % $ 3,604,571 $ 3,582,725 0.6 %
Used vehicle retail 593,695 572,862 3.6 1,730,905 1,656,119 4.5
Finance and insurance 87,371 86,951 0.5 257,155 245,397 4.8
Service, body and parts 221,356 214,391 3.2 648,309 612,142 5.9
Total revenues 2,262,056 2,238,787 1.0 6,492,755 6,347,785 2.3
 

Gross profit
New vehicle retail $ 72,246 $ 74,903 (3.5 )% $ 207,549 $ 214,415 (3.2 )%
Used vehicle retail 71,248 68,215 4.4 205,438 199,432 3.0
Finance and insurance 87,371 86,951 0.5 257,155 245,397 4.8
Service, body and parts 109,591 103,025 6.4 320,345 297,185 7.8
Total gross profit 342,707 333,636 2.7 997,597 961,722 3.7
 

Gross margin
New vehicle retail 5.6 % 5.9 % 5.8 % 6.0 %
Used vehicle retail 12.0 11.9 11.9 12.0
Finance and insurance 100.0 100.0 100.0 100.0
Service, body and parts 49.5 48.1 49.4 48.5
Gross profit margin 15.2 14.9 15.4 15.2
 

Unit sales
New vehicle retail 37,819 37,870 (0.1 )% 105,927 106,599 (0.6 )%
Used vehicle retail 30,133 29,171 3.3 87,571 84,148 4.1
 

Average selling price
New vehicle retail $ 34,118 $ 33,801 0.9 % $ 34,029 $ 33,609 1.2 %
Used vehicle retail 19,702 19,638 0.3 19,766 19,681 0.4
 

Average gross profit per unit
New vehicle retail $ 1,910 $ 1,978 (3.4 )% $ 1,959 $ 2,011 (2.6 )%
Used vehicle retail 2,364 2,338 1.1 2,346 2,370 (1.0 )
Finance and insurance 1,286 1,297 (0.8 ) 1,329 1,287 3.3
Total vehicle(1) 3,412 3,446 (1.0 ) 3,483 3,479 0.1
 
(1) - includes the sales and gross profit related to new, used retail, used wholesale and finance and insurance and unit sales for new and used retail
 
 
Lithia Motors, Inc.

Segment Operating Highlights (Unaudited)

 
     

Three months ended
September 30,

     %    

Nine months ended
September 30,

     %
Increase Increase
2017     2016 (Decrease) 2017     2016 (Decrease)

Revenues
Domestic $ 1,014,650 $ 893,156 13.6 % $ 2,869,357 $ 2,495,468 15.0 %
Import 1,215,669 983,947 23.6 3,282,380 2,777,007 18.2
Luxury   465,419     392,537   18.6   1,248,385     1,111,215   12.3
Total segment revenues 2,695,738 2,269,640 18.8 7,400,122 6,383,690 15.9
Corporate and other   (1,398 )   327   NM   (2,645 )   2,477   NM
Total revenues $ 2,694,340   $ 2,269,967   18.7 $ 7,397,477   $ 6,386,167   15.8
 

Segment Income(1)
Domestic $ 31,141 $ 32,292 (3.6 )% $ 84,440 $ 84,420 — %
Import 36,954 32,934 12.2 91,365 86,878 5.2
Luxury   7,515     7,423   1.2   22,542     21,736   3.7
Total segment income 75,610 72,649 4.1 198,347 193,034 2.8
Corporate and other 34,541 26,794 28.9 111,281 81,881 35.9
Depreciation and amortization (14,828 ) (12,206 ) 21.5 (41,598 ) (36,372 ) 14.4
Other interest expense (9,905 ) (5,647 ) 75.4 (23,745 ) (16,608 ) 43.0
Other income (expense), net   1,125     (1,513 ) NM   11,357     (4,534 ) NM
Income before income taxes $ 86,543   $ 80,077   8.1 $ 255,642   $ 217,401   17.6
 
(1) Segment income for each of the segments is defined as Income before income taxes, less Depreciation and amortization, Other interest expense and Other income, net.
 

Retail New Vehicle Unit Sales

      

Three months ended
September 30,

     %    

Nine months ended
September 30,

     %
Increase Increase
2017     2016 (Decrease) 2017     2016 (Decrease)
Domestic 14,004 12,735 10.0 % 39,500 35,176 12.3 %
Import 26,643 21,467 24.1 69,665 59,581 16.9
Luxury 5,032   4,287   17.4 13,171   12,667   4.0
Total 45,679 38,489 18.7 122,336 107,424 13.9
Allocated to management (109 ) (72 ) NM (274 ) (199 ) NM
Total new retail unit sales 45,570   38,417   18.6 122,062   107,225   13.8
 
NM - not meaningful
 
 
Lithia Motors, Inc.

Other Highlights (Unaudited)

 
      As of
September 30,     December 31,     September 30,
2017 2016 2016

Days Supply(1)
New vehicle inventory 69 68 65
Used vehicle inventory

63

56 57
 
(1) Days supply calculated based on current inventory levels, excluding in-transit vehicles, and a 30-day historical cost of sales level.
 
         

Financial covenants
Requirement As of September 30, 2017
Current ratio Not less than 1.10 to 1 1.32 to 1
Fixed charge coverage ratio Not less than 1.20 to 1 2.82 to 1
Leverage ratio Not more than 5.00 to 1 2.93 to 1
Funded debt restriction Not more than $900 million $784.0 million
 
 
Lithia Motors, Inc.

Condensed Consolidated Balance Sheets (Unaudited)

(In thousands)

 

      September 30, 2017     December 31, 2016
Cash and cash equivalents $ 38,577 $ 50,282
Trade receivables, net 446,613 417,714
Inventories, net 1,966,456 1,772,587
Other current assets   59,622   46,611
Total current assets $ 2,511,268 $ 2,287,194
 
Property and equipment, net 1,087,920 1,006,130
Intangibles 444,162 443,667
Other non-current assets   328,243   107,159
Total assets $ 4,371,593 $ 3,844,150
 
Floor plan notes payable 1,712,944 1,601,497
Other current liabilities   361,818   320,497
Total current liabilities $ 2,074,762 $ 1,921,994
 
Long-term debt 991,333 769,916
Other long-term liabilities and deferred revenue   274,122   241,464
Total liabilities $ 3,340,217 $ 2,933,374
 
Stockholder's Equity   1,031,376   910,776
Total liabilities & stockholders' equity $ 4,371,593 $ 3,844,150
 
 
Lithia Motors, Inc.

Summarized Cash Flow from Operations (Unaudited)

(In thousands)

 
      Nine months ended September 30,
2017     2016
Net income $ 155,813 $ 145,739
Adjustments to reconcile net income to net cash provided by operating

activities:
Asset impairments — 10,494
Depreciation and amortization 41,598 36,372
Stock-based compensation 8,396 8,665
(Gain) loss on disposal of assets (382 ) (4,299 )
Gain on sale of franchise — (1,102 )
Deferred income taxes 7,398 9,782
(Increase) decrease:
Trade receivables, net (13,345 ) (5,911 )
Inventories (16,098 ) (85,564 )
Other assets 15,207 4,688
Increase (decrease):
Floor plan notes payable, net 12,126 18,122
Trade payables 12,397 6,153
Accrued liabilities 25,907 32,874
Other long-term liabilities and deferred revenue   11,519     18,227  
Net cash provided by operating activities $ 260,536   $ 194,240  
 
 
Lithia Motors, Inc.

Reconciliation of Non-GAAP Cash Flow from Operations (Unaudited)

(In thousands)

 
      Nine months ended September 30,

Net cash provided by operating activities

 2017     2016
As reported $ 260,536 $ 194,240
Floor plan notes payable, non-trade, net 34,056 93,817
Less: Borrowings on floor plan notes payable, non-trade associated with acquired new vehicle inventory   (85,527 )   (88,147 )
Adjusted $ 209,065   $ 199,910  
 
 

Lithia Motors, Inc.

Reconciliation of Certain Non-GAAP Financial Measures (Unaudited)

(In thousands, except for per share data)
 
      Three Months Ended September 30, 2017
As reported      

Insurance
reserves

      

Acquisition
expenses

     Adjusted
Selling, general and administrative $ 282,241 $ (1,704 ) $ (3,516 ) $ 277,021
 
Income from operations 105,952 1,704 3,516 111,172
 
Other income (expense), net 1,125 — — 1,125
 
Income before income taxes $ 86,543 $ 1,704 $ 3,516 $ 91,763
Income tax expense   (34,657 )   (943 )   (1,380 )   (36,980 )
Net income $ 51,886   $ 761   $ 2,136   $ 54,783  
 
Diluted earnings per share $ 2.07 $ 0.03 $ 0.08 $ 2.18
Diluted share count 25,076
 
Three Months Ended September 30, 2016
As reported

Equity
investment
fair value
adjustment

 Adjusted
Asset impairments $ 3,498 $ (3,498 ) $ —
 
Selling, general and administrative 228,134 — 228,134
 
Income from operations 93,423 3,498 96,921
 
Other income (expense), net (1,513 ) 2,066 553
 
Income before income taxes $ 80,077 $ 5,564 $ 85,641
Income tax expense   (26,036 )   (7,592 )   (33,628 )
Net income $ 54,041   $ (2,028 ) $ 52,013  
 
Diluted earnings per share $ 2.14 $ (0.08 ) $ 2.06
Diluted share count 25,290
 
 
Lithia Motors, Inc.

Reconciliation of Certain Non-GAAP Financial Measures (Unaudited)

(In thousands, except for per share data)

 

      Nine Months Ended September 30, 2017
As reported    

Insurance
reserves

    

Acquisition
expenses

    

OEM
settlement

     Adjusted
Selling, general and administrative $ 782,303 $ (5,582 ) $ (5,653 ) $ — $ 771,068
 
Income from operations 296,043 5,582 5,653 — 307,278
 
Other income (expense), net 11,357 — — (9,111 ) 2,246
 
Income before income taxes $ 255,642 5,582 $ 5,653 $ (9,111 ) $ 257,766
Income tax expense   (99,829 )   (2,174 )   (2,201 )   3,423     (100,781 )
Net income $ 155,813     3,408   $ 3,452   $ (5,688 ) $ 156,985  
 
Diluted earnings per share $ 6.19 0.14 $ 0.14 $ (0.23 ) $ 6.24
Diluted share count 25,158
 
Nine Months Ended September 30, 2016
As reported

Disposal
gain on sale
of store

Equity
investment
fair value
adjustment

Legal
reserve

 Adjusted
Asset impairments $ 10,494 $ — $ (10,494 ) $ — $ —
 
Selling, general and administrative 662,766 1,087 — (1,906 ) 661,947
 
Income from operations 256,847 (1,087 ) 10,494 1,906 268,160
 
Other income (expense), net (4,534 ) — 6,197 — 1,663
 
Income before income taxes $ 217,401 $ (1,087 ) $ 16,691 $ 1,906 $ 234,911
Income tax expense   (71,662 )   426     (20,374 )   (747 )   (92,357 )
Net income $ 145,739   $ (661 ) $ (3,683 ) $ 1,159   $ 142,554  
 
Diluted earnings per share $ 5.69 $ (0.03 ) $ (0.14 ) $ 0.05 $ 5.57
Diluted share count 25,598
 
 
Lithia Motors, Inc.

Adjusted EBITDA and Leveraged Free Cash Flow (Unaudited)

 

   

Three months ended
September 30,

     %    

Nine months ended
September 30,

     %
Increase Increase
2017     2016 (Decrease) 2017     2016 (Decrease)

EBITDA and Adjusted EBITDA
Net income $ 51,886

 

$

54,041

(4.0 )% $ 155,813 $ 145,739 6.9 %
Other interest expense 9,905 5,647 75.4 23,745 16,608 43.0
Income tax expense 34,657 26,036 33.1 99,829 71,662 39.3
Depreciation and amortization   14,828     12,206   21.5   41,598     36,372   14.4
EBITDA $ 111,276   $ 97,930   13.6 % $ 320,985   $ 270,381   18.7 %
 
Other adjustments:
Less: used vehicle line of credit interest expense (365 ) (915 ) (60.1 ) (2,522 ) (2,605 ) (3.2 )
Add: equity investment fair value adjustment — 5,564 (100.0 ) — 16,691 (100.0 )
Less: OEM legal settlements — — NM (9,111 ) — NM
Add: acquisition expenses 3,516 — NM 5,653 — NM
Add: insurance reserve   1,704     —   NM   5,582     —   NM
Adjusted EBITDA $ 116,131   $ 102,579   13.2 % $ 320,587   $ 284,467   12.7 %
 

Leveraged Free Cash Flow
Adjusted EBITDA $ 116,131 $ 102,579 13.2 % $ 320,587 $ 284,467 12.7 %
Less: Capital expenditures   (39,908 )   (38,116 ) 4.7   (72,174 )   (81,363 ) (11.3 )
Leveraged free cash flow $ 76,223   $ 64,463   18.2 % $ 248,413   $ 203,104   22.3 %

Contacts

Lithia Motors, Inc.
John North, 541-618-5748
Senior Vice President and Chief Financial Officer