MEDFORD, Ore.--(BUSINESS WIRE)--Lithia Motors, Inc. today reported the highest fourth quarter and full year revenue and earnings per share in company history and the 29th consecutive quarter of record results.
Fourth quarter 2017 net income per diluted share increased 75% to $3.56 from $2.03 for the fourth quarter of 2016. Adjusted net income per diluted share increased 16% to $2.15 from $1.86 for the same period in 2016. Fourth quarter 2017 net income increased 74% to $89 million from $51 million for the fourth quarter of 2016. Adjusted net income increased 15% to $54 million compared to $47 million for the same period of 2016.
As shown in the attached non-GAAP reconciliation tables, the 2017 fourth quarter adjusted results excludes $0.10 per share of non-core benefit related to the sale of a store and a $1.31 benefit related to adjustments to deferred tax balances due to the recent tax law changes. The 2016 fourth quarter adjusted results exclude a $0.10 benefit associated with an equity investment, a $0.02 benefit related to an indemnified legal reserve and a 0.05 benefit from a tax attribute.
Fourth quarter 2017 revenue increased 18% to $2.7 billion from $2.3 billion in the fourth quarter of 2016.
Fourth Quarter-over-Quarter Operating Highlights:
- Total same store sales increased 3%
- New vehicle same store sales increased 3%
- Used vehicle retail same store sales increased 2%
- Service, body and parts same store sales increased 4%
- Same store F&I per unit was $1,342
- Adjusted SG&A expense as a percentage of gross profit was 68.7%
Net income per diluted share in 2017 increased 26% to $9.75 from $7.72 for 2016. Adjusted net income per diluted share increased 13% to $8.39 from $7.42 for 2016. Net income for 2017 increased 24% to $245 million from $197 million for 2016. Adjusted net income increased 11% to $211 million for 2017 from $189 million for 2016.
As shown in the attached non-GAAP reconciliation tables, the 2017 adjusted results exclude a $1.36 net non-core benefit from an OEM settlement, the sale of a store and the Tax Cuts and Jobs Act partially offset by a charge for insurance reserves and acquisition expenses. The 2016 adjusted results exclude a $0.30 net non-core benefit from an equity investment, a disposal gain and a tax attribute partially offset by an indemnified legal reserve.
Full year 2017 revenue increased 16% to $10.1 billion from $8.7 billion in 2016.
Full Year-over-Year Operating Highlights:
- Total same store sales increased 2%
- New vehicle same store sales increased 1%
- Used vehicle retail same store sales increased 4%
- Service, body and parts same store sales increased 5%
- Same store F&I per unit increased $53 to $1,333
- Adjusted SG&A expense as a percentage of gross profit was 68.8%
"We are excited to have added an eleventh digit to our annual revenues, as we exceeded ten billion dollars this year," said Bryan DeBoer, President and CEO. "We delivered double digit growth in 2017 and our organization is poised to continue its upward growth trajectory regardless of market conditions. Our store leaders have significant opportunity to unlock earnings dry powder by improving operations. We estimate over $200 million in unrealized earnings potential is possible and remain focused on challenging and inspiring each other to achieve higher levels of performance."
Corporate Development
During the fourth quarter, we completed the acquisition of Armory Chrysler Jeep Dodge Ram in Albany, New York and Crater Lake Ford Lincoln and Crater Lake Mazda in Medford, Oregon. In 2017, we completed the acquisition of 18 stores and opened one store which we forecast will generate over $1.7 billion in annualized revenues. In January, 2018, we completed the acquisition of Ray Laks Honda in Orchard Park, NY and Ray Laks Acura in Buffalo, New York, which we estimate will add $140 million in annualized revenues.
"For the second consecutive year, we acquired over a billion dollars in annualized revenues," said DeBoer. "We continue to see an active acquisition market with ample stores available. Our leverage ratio is approximately 2.0 times, and coupled with the free cash flow produced by our operations, we remain poised for additional acquisition growth in 2018."
Balance Sheet Update
We ended the fourth quarter with $57 million in cash and $223 million in availability under our credit facility. Additionally, approximately $315 million of our operating real estate is currently unfinanced, which we estimate could provide $236 million in capital, for total potential liquidity of $516 million.
Dividend Payment
Our Board of Directors has approved a dividend of $0.27 per share related to fourth quarter 2017 financial results. We expect to pay the dividend on March 23, 2018 to shareholders of record on March 9, 2018.
Earnings Outlook
For 2018, we target full year revenues of $11.0 to $11.5 billion and earnings per share of $10.50.
Commenting on the earnings guidance, John North, Senior Vice President and CFO, stated, "We have updated our guidance to adjust for the recently passed tax legislation, anticipated interest rate increases and changing consumer behaviors on the east and west coasts due to the limitation on the deductibility of state and local taxes. We anticipate our effective tax rate will decline to approximately 27% in 2018."
Actual results may be affected by items described under Forward-Looking Statements below.
Fourth Quarter Earnings Conference Call and Updated Presentation
The fourth quarter conference call may be accessed at 10:00 a.m. ET today by telephone at 877-407-8029. An updated presentation highlighting the fourth 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 171 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; achieving a 2018 full year earnings target of $10.50 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.
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Consolidated Statements of Operations (Unaudited) |
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(In thousands except per share data) |
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| 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| New vehicle retail | $ | 1,615,717 | $ | 1,335,833 | 21.0 | % | $ | 5,763,587 | $ | 4,938,436 | 16.7 | % | |||||||||||
| Used vehicle retail | 629,341 | 559,693 | 12.4 | 2,544,379 | 2,226,951 | 14.3 | |||||||||||||||||
| Used vehicle wholesale | 71,090 | 69,485 | 2.3 | 277,844 | 276,616 | 0.4 | |||||||||||||||||
| Finance and insurance | 103,191 | 84,532 | 22.1 | 385,863 | 330,922 | 16.6 | |||||||||||||||||
| Service, body and parts | 271,511 | 228,417 | 18.9 | 1,015,773 | 844,505 | 20.3 | |||||||||||||||||
| Fleet and other | 12,180 | 14,030 | (13.2 | ) | 99,064 | 60,727 | 63.1 | ||||||||||||||||
| Total revenues | 2,703,030 | 2,291,990 | 17.9 | % | 10,086,510 | 8,678,157 | 16.2 | % | |||||||||||||||
| Cost of sales: | |||||||||||||||||||||||
| New vehicle retail | 1,514,576 | 1,261,892 | 20.0 | 5,423,744 | 4,649,024 | 16.7 | |||||||||||||||||
| Used vehicle retail | 564,453 | 496,320 | 13.7 | 2,257,544 | 1,963,267 | 15.0 | |||||||||||||||||
| Used vehicle wholesale | 70,706 | 69,406 | 1.9 | 273,058 | 272,303 | 0.3 | |||||||||||||||||
| Service, body and parts | 146,554 | 117,194 | 25.1 | 522,649 | 434,222 | 20.4 | |||||||||||||||||
| Fleet and other | 10,600 | 12,342 | (14.1 | ) | 93,429 | 58,026 | 61.0 | ||||||||||||||||
| Total cost of sales | 2,306,889 | 1,957,154 | 17.9 | 8,570,424 | 7,376,842 | 16.2 | |||||||||||||||||
| Gross profit | 396,141 | 334,836 | 18.3 | % | 1,516,086 | 1,301,315 | 16.5 | % | |||||||||||||||
| Asset impairments | — | 3,498 | (100.0 | ) | — | 13,992 | (100.0 | ) | |||||||||||||||
| SG&A expense | 267,075 | 236,824 | 12.8 | 1,049,378 | 899,590 | 16.7 | |||||||||||||||||
| Depreciation and amortization | 16,124 | 12,997 | 24.1 | 57,722 | 49,369 | 16.9 | |||||||||||||||||
| Income from operations | 112,942 | 81,517 | 38.6 | % | 408,986 | 338,364 | 20.9 | % | |||||||||||||||
| Floor plan interest expense | (11,323 | ) | (7,227 | ) | 56.7 | (39,336 | ) | (25,531 | ) | 54.1 | |||||||||||||
| Other interest expense | (11,031 | ) | (6,599 | ) | 67.2 | (34,776 | ) | (23,207 | ) | 49.9 | |||||||||||||
| Other income (expense), net | 839 | (1,569 | ) | NM | 12,195 | (6,103 | ) | NM | |||||||||||||||
| Income before income taxes | 91,427 | 66,122 | 38.3 | % | 347,069 | 283,523 | 22.4 | % | |||||||||||||||
| Income tax expense | (2,023 | ) | (14,803 | ) | (86.3 | ) | (101,852 | ) | (86,465 | ) | 17.8 | ||||||||||||
| Income tax rate | 2.2 | % | 22.4 | % | 29.3 | % | 30.5 | % | |||||||||||||||
| Net income | $ | 89,404 | $ | 51,319 | 74.2 | % | $ | 245,217 | $ | 197,058 | 24.4 | % | |||||||||||
| Diluted net income per share: | |||||||||||||||||||||||
| Net income per share | $ | 3.56 | 2.03 | 75.4 | % | $ | 9.75 | 7.72 | 26.3 | % | |||||||||||||
| Diluted shares outstanding | 25,103 | 25,294 | (0.8 | )% | 25,145 | 25,521 | (1.5 | )% | |||||||||||||||
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Key Performance Metrics (Unaudited) |
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| 2017 | 2016 | 2017 | 2016 | |||||||||||||||||||
| Gross margin | ||||||||||||||||||||||
| New vehicle retail | 6.3 | % | 5.5 | % | 80 | bps | 5.9 | % | 5.9 | % | — | bps | ||||||||||
| Used vehicle retail | 10.3 | 11.3 | (100 | )bps | 11.3 | 11.8 | (50 | )bps | ||||||||||||||
| Finance and insurance | 100.0 | 100.0 | — | bps | 100.0 | 100.0 | — | bps | ||||||||||||||
| Service, body and parts | 46.0 | 48.7 | (270 | )bps | 48.5 | 48.6 | (10 | )bps | ||||||||||||||
| Gross profit margin | 14.7 | 14.6 | 10 | bps | 15.0 | 15.0 | — | bps | ||||||||||||||
| Unit sales | ||||||||||||||||||||||
| New vehicle retail | 45,202 | 38,547 | 17.3 | % | 167,146 | 145,772 | 14.7 | % | ||||||||||||||
| Used vehicle retail | 32,242 | 28,715 | 12.3 | 129,913 | 113,498 | 14.5 | ||||||||||||||||
| Total retail units sold | 77,444 | 67,262 | 15.1 | 297,059 | 259,270 | 14.6 | ||||||||||||||||
| Average selling price | ||||||||||||||||||||||
| New vehicle retail | $ | 35,744 | $ | 34,655 | 3.1 | % | $ | 34,482 | $ | 33,878 | 1.8 | % | ||||||||||
| Used vehicle retail | 19,519 | 19,491 | 0.1 | 19,585 | 19,621 | (0.2 | ) | |||||||||||||||
| Average gross profit per unit | ||||||||||||||||||||||
| New vehicle retail | $ | 2,238 | $ | 1,918 | 16.7 | % | $ | 2,033 | $ | 1,985 | 2.4 | % | ||||||||||
| Used vehicle retail | 2,013 | 2,207 | (8.8 | ) | 2,208 | 2,323 | (5.0 | ) | ||||||||||||||
| Finance and insurance | 1,332 | 1,257 | 6.0 | 1,299 | 1,276 | 1.8 | ||||||||||||||||
| Total vehicle(1) | 3,481 | 3,299 | 5.5 | 3,425 | 3,426 | — | ||||||||||||||||
| Revenue mix | ||||||||||||||||||||||
| New vehicle retail | 59.8 | % | 58.3 | % | 57.1 | % | 56.9 | % | ||||||||||||||
| Used vehicle retail | 23.3 | 24.4 | 25.2 | 25.7 | ||||||||||||||||||
| Used vehicle wholesale | 2.6 | 3.0 | 2.8 | 3.2 | ||||||||||||||||||
| Finance and insurance, net | 3.8 | 3.7 | 3.8 | 3.8 | ||||||||||||||||||
| Service, body and parts | 10.0 | 10.0 | 10.1 | 9.7 | ||||||||||||||||||
| Fleet and other | 0.5 | 0.6 | 1.0 | 0.7 | ||||||||||||||||||
| Adjusted | As reported | Adjusted | As reported | |||||||||||||||||||||
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| Other metrics | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||
| SG&A as a % of revenue | 10.1 | % | 10.2 | % | 9.9 |
% |
10.3 | % | 10.3 | % | 10.3 | % | 10.4 | % | 10.4 | % | ||||||||
| SG&A as a % of gross profit | 68.7 | 70.1 | 67.4 | 70.7 | 68.8 | 68.9 | 69.2 | 69.1 | ||||||||||||||||
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Operating profit as a % of |
4.0 | 3.8 | 4.2 | 3.6 | 4.1 | 4.1 | 4.1 | 3.9 | ||||||||||||||||
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Operating profit as a % of |
27.2 | 26.0 | 28.5 | 24.3 | 27.4 | 27.3 | 27.0 | 26.0 | ||||||||||||||||
| Pretax margin | 3.2 | 3.2 | 3.4 | 2.9 | 3.4 | 3.6 | 3.4 | 3.3 | ||||||||||||||||
| Net profit margin | 2.0 | 2.0 | 3.3 | 2.2 | 2.1 | 2.2 | 2.4 | 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 |
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Same Store Operating Highlights (Unaudited) |
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| Increase | Increase | ||||||||||||||||||||||
| 2017 | 2016 | (Decrease) | 2017 | 2016 | (Decrease) | ||||||||||||||||||
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Revenues |
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| New vehicle retail | $ | 1,369,616 | $ | 1,326,611 | 3.2 | % | $ | 4,959,751 | $ | 4,898,292 | 1.3 | % | |||||||||||
| Used vehicle retail | 567,055 | 554,555 | 2.3 | 2,288,290 | 2,204,795 | 3.8 | |||||||||||||||||
| Finance and insurance | 91,158 | 84,091 | 8.4 | 347,583 | 329,031 | 5.6 | |||||||||||||||||
| Service, body and parts | 233,835 | 225,841 | 3.5 | 877,222 | 835,002 | 5.1 | |||||||||||||||||
| Total revenues | 2,332,960 | 2,274,020 | 2.6 | 8,791,044 | 8,600,716 | 2.2 | |||||||||||||||||
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Gross profit |
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| New vehicle retail | $ | 84,379 | $ | 73,250 | 15.2 | % | $ | 290,309 | $ | 286,519 | 1.3 | % | |||||||||||
| Used vehicle retail | 58,637 | 62,918 | (6.8 | ) | 263,119 | 261,589 | 0.6 | ||||||||||||||||
| Finance and insurance | 91,158 | 84,091 | 8.4 | 347,583 | 329,031 | 5.6 | |||||||||||||||||
| Service, body and parts | 110,336 | 110,022 | 0.3 | 428,169 | 405,661 | 5.5 | |||||||||||||||||
| Total gross profit | 346,223 | 332,064 | 4.3 | 1,337,976 | 1,289,862 | 3.7 | |||||||||||||||||
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Gross margin |
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| New vehicle retail | 6.2 | % | 5.5 | % | 70 | bps | 5.9 | % | 5.8 | % | 10 | bps | |||||||||||
| Used vehicle retail | 10.3 | 11.3 | (100 | )bps | 11.5 | 11.9 | (40 | )bps | |||||||||||||||
| Finance and insurance | 100.0 | 100.0 | — | bps | 100.0 | 100.0 | — | bps | |||||||||||||||
| Service, body and parts | 47.2 | 48.7 | (150 | )bps | 48.8 | 48.6 | 20 | bps | |||||||||||||||
| Gross profit margin | 14.8 | 14.6 | 20 | bps | 15.2 | 15.0 | 20 | bps | |||||||||||||||
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Unit sales |
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| New vehicle retail | 38,669 | 38,351 | 0.8 | % | 144,308 | 144,728 | (0.3 | )% | |||||||||||||||
| Used vehicle retail | 29,273 | 28,489 | 2.8 | 116,359 | 112,387 | 3.5 | |||||||||||||||||
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Average selling price |
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| New vehicle retail | $ | 35,419 | $ | 34,591 | 2.4 | % | $ | 34,369 | $ | 33,845 | 1.5 | % | |||||||||||
| Used vehicle retail | 19,371 | 19,466 | (0.5 | ) | 19,666 | 19,618 | 0.2 | ||||||||||||||||
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Average gross profit per unit |
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| New vehicle retail | $ | 2,182 | $ | 1,910 | 14.2 | % | $ | 2,012 | $ | 1,980 | 1.6 | % | |||||||||||
| Used vehicle retail | 2,003 | 2,209 | (9.3 | ) | 2,261 | 2,328 | (2.9 | ) | |||||||||||||||
| Finance and insurance | 1,342 | 1,258 | 6.7 | 1,333 | 1,280 | 4.1 | |||||||||||||||||
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Total vehicle(1) |
3,451 | 3,297 | 4.7 | 3,472 | 3,429 | 1.3 | |||||||||||||||||
| (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 |
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Segment Operating Highlights (Unaudited) |
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| 2017 | 2016 | 2017 | 2016 | |||||||||||||||||||
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Revenues |
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| Domestic | $ | 982,812 | $ | 886,247 | 10.9 | % | $ | 3,845,830 | $ | 3,381,715 | 13.7 | % | ||||||||||
| Import | 1,156,093 | 987,248 | 17.1 | 4,432,760 | 3,764,255 | 17.8 | ||||||||||||||||
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Luxury |
563,601 | 417,544 | 35.0 | 1,810,085 | 1,528,760 | 18.4 | ||||||||||||||||
| Total segment revenues | 2,702,506 | 2,291,039 | 18.0 | 10,088,675 | 8,674,730 | 16.3 | ||||||||||||||||
| Corporate and other | 524 | 951 | (44.9 | ) | (2,165 | ) | 3,427 | NM | ||||||||||||||
| Total revenues | $ | 2,703,030 | $ | 2,291,990 | 17.9 | $ | 10,086,510 | $ | 8,678,157 | 16.2 | ||||||||||||
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Segment Income(1) |
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| Domestic | $ | 20,768 | $ | 21,790 | (4.7 | )% | $ | 105,208 | $ | 106,210 | (0.9 | )% | ||||||||||
| Import | 26,411 | 23,326 | 13.2 | 117,776 | 110,204 | 6.9 | ||||||||||||||||
| Luxury | 14,480 | 9,731 | 48.8 | 37,022 | 31,467 | 17.7 | ||||||||||||||||
| Total segment income | 61,659 | 54,847 | 12.4 | 260,006 | 247,881 | 4.9 | ||||||||||||||||
| Corporate and other | 56,084 | 32,440 | 72.9 | 167,366 | 114,321 | 46.4 | ||||||||||||||||
| Depreciation and amortization | (16,124 | ) | (12,997 | ) | 24.1 | (57,722 | ) | (49,369 | ) | 16.9 | ||||||||||||
| Other interest expense | (11,031 | ) | (6,599 | ) | 67.2 | (34,776 | ) | (23,207 | ) | 49.9 | ||||||||||||
| Other income (expense), net | 839 | (1,569 | ) | NM | 12,195 | (6,103 | ) | NM | ||||||||||||||
| Income before income taxes | $ | 91,427 | $ | 66,122 | 38.3 | $ | 347,069 | $ | 283,523 | 22.4 | ||||||||||||
| (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 |
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| Increase | Increase | |||||||||||||||||
| 2017 | 2016 | (Decrease) | 2017 | 2016 | (Decrease) | |||||||||||||
| Domestic | 13,881 | 12,531 | 10.8 | % | 53,288 | 47,707 | 11.7 | % | ||||||||||
| Import | 24,991 | 21,188 | 17.9 | 94,634 | 80,769 | 17.2 | ||||||||||||
| Luxury | 6,429 | 4,924 | 30.6 | 19,597 | 17,591 | 11.4 | ||||||||||||
| Total | 45,301 | 38,643 | 17.2 | 167,519 | 146,067 | 14.7 | ||||||||||||
| Allocated to management | (99 | ) | (96 | ) | 3.1 | (373 | ) | (295 | ) | 26.4 | ||||||||
| Total new retail unit sales | 45,202 | 38,547 | 17.3 | 167,146 | 145,772 | 14.7 | ||||||||||||
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Other Highlights (Unaudited) |
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| As of | |||||
| December 31, | December 31, | December 31, | |||
| 2017 | 2016 | 2015 | |||
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Days Supply(1) |
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| New vehicle inventory | 69 | 68 | 67 | ||
| Used vehicle inventory | 67 | 56 | 55 | ||
| (1) | Days supply calculated based on current inventory levels, excluding in-transit vehicles, and a 30-day historical cost of sales | ||
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Financial covenants |
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| Requirement | As of December 31, 2017 | ||||
| Current ratio | Not less than 1.10 to 1 |
1.21 to 1 |
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| Fixed charge coverage ratio | Not less than 1.20 to 1 |
2.82 to 1 |
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| Leverage ratio | Not more than 5.00 to 1 |
2.59 to 1 |
|
Lithia Motors, Inc. |
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|
Condensed Consolidated Balance Sheets (Unaudited) |
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|
(In thousands) |
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| December 31, 2017 | December 31, 2016 | ||||||
| Cash and cash equivalents | $ | 57,253 | $ | 50,282 | |||
| Trade receivables, net | 521,938 | 417,714 | |||||
| Inventories, net | 2,132,744 | 1,772,587 | |||||
| Other current assets | 70,847 | 46,611 | |||||
| Total current assets | $ | 2,782,782 | $ | 2,287,194 | |||
| Property and equipment, net | 1,185,169 | 1,006,130 | |||||
| Intangibles | 443,297 | 443,667 | |||||
| Other non-current assets | 271,818 | 107,159 | |||||
| Total assets | $ | 4,683,066 | $ | 3,844,150 | |||
| Floor plan notes payable | 1,919,026 | 1,601,497 | |||||
| Other current liabilities | 381,955 | 320,497 | |||||
| Total current liabilities | $ | 2,300,981 | $ | 1,921,994 | |||
| Long-term debt | 1,028,476 | 769,916 | |||||
| Other long-term liabilities and deferred revenue | 270,391 | 241,464 | |||||
| Total liabilities | $ | 3,599,848 | $ | 2,933,374 | |||
| Stockholder's Equity | 1,083,218 | 910,776 | |||||
| Total liabilities & stockholders' equity | $ | 4,683,066 | $ | 3,844,150 | |||
|
Lithia Motors, Inc. |
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|
Summarized Cash Flow from Operations (Unaudited) |
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|
(In thousands) |
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| Twelve months ended December 31, | ||||||||
| 2017 | 2016 | |||||||
| Net income | $ | 245,217 | $ | 197,058 | ||||
|
Adjustments to reconcile net income to net cash provided by operating |
||||||||
| Asset impairments | — | 13,992 | ||||||
| Depreciation and amortization | 57,722 | 49,369 | ||||||
| Stock-based compensation | 11,272 | 11,047 | ||||||
| (Gain) loss on disposal of assets | (438 | ) | (4,343 | ) | ||||
| Gain on sale of franchise | (5,110 | ) | (1,102 | ) | ||||
| Deferred income taxes | (2,798 | ) | 10,138 | |||||
| (Increase) decrease: | ||||||||
| Trade receivables, net | (57,360 | ) | (105,961 | ) | ||||
| Inventories | (193,099 | ) | (168,847 | ) | ||||
| Other assets | (2,682 | ) | (13,305 | ) | ||||
| Increase (decrease): | ||||||||
| Floor plan notes payable, net | 20,273 | 16,385 | ||||||
| Trade payables | 20,008 | 16,449 | ||||||
| Accrued liabilities | 37,227 | 42,852 | ||||||
| Other long-term liabilities and deferred revenue | 19,062 | 27,173 | ||||||
| Net cash provided by operating activities | $ | 149,294 | $ | 90,905 | ||||
|
Lithia Motors, Inc. |
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|
Reconciliation of Non-GAAP Cash Flow from Operations (Unaudited) |
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|
(In thousands) |
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| Twelve months ended December 31, | ||||||||
|
Net cash provided by operating activities |
2017 | 2016 | ||||||
| As reported | $ | 149,294 | $ | 90,905 | ||||
| Floor plan notes payable, non-trade, net | 241,479 | 252,893 | ||||||
|
Less: Borrowings on floor plan notes payable, non-trade associated with |
(111,017 | ) | (94,550 | ) | ||||
| Adjusted | $ | 279,756 | $ | 249,248 | ||||
|
Lithia Motors, Inc. |
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|
Reconciliation of Certain Non-GAAP Financial Measures (Unaudited) |
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|
(In thousands, except for per share data) |
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| Three Months Ended December 31, 2017 | |||||||||||||||||
| As reported |
Disposal |
Tax act | Adjusted | ||||||||||||||
| Selling, general and administrative | $ | 267,075 | 5,104 | — | $ | 272,179 | |||||||||||
| Income from operations | 112,942 | (5,104 | ) | — | 107,838 | ||||||||||||
| Other income (expense), net | 839 | — | — | 839 | |||||||||||||
| Income before income taxes | $ | 91,427 | $ | (5,104 | ) | $ | — | $ | 86,323 | ||||||||
| Income tax benefit (expense) | (2,023 | ) | 2,482 | (32,901 | ) | (32,443 | ) | ||||||||||
| Net income | $ | 89,404 | $ | (2,622 | ) | $ | (32,901 | ) | $ | 53,880 | |||||||
| Diluted earnings per share | $ | 3.56 | $ | (0.10 | ) | $ | (1.31 | ) | $ | 2.15 | |||||||
| Diluted share count | 25,103 | ||||||||||||||||
| Three Months Ended December 31, 2016 | |||||||||||||||||||||
| As reported |
Equity |
Tax |
Legal |
Adjusted | |||||||||||||||||
| Asset impairments | $ | 3,498 | $ | (3,498 | ) | $ | — | $ | — | $ | — | ||||||||||
| Selling, general and administrative | 236,824 | — | — | (2,030 | ) | 234,794 | |||||||||||||||
| Income from operations | 81,517 | 3,498 | — | 2,030 | 87,045 | ||||||||||||||||
| Other income (expense), net | (1,569 | ) | 2,065 | — | — | 496 | |||||||||||||||
| Income before income taxes | $ | 66,122 | $ | 5,563 | $ | — | $ | 2,030 | $ | 73,715 | |||||||||||
| Income tax expense | (14,803 | ) | (8,155 | ) | (1,320 | ) | (2,503 | ) | (26,782 | ) | |||||||||||
| Net income | $ | 51,319 | $ | (2,593 | ) | $ | (1,320 | ) | $ | (473 | ) | $ | 46,933 | ||||||||
| Diluted earnings per share | $ | 2.03 | $ | (0.10 | ) | $ | (0.05 | ) | $ | (0.02 | ) | $ | 1.86 | ||||||||
| Diluted share count | 25,294 | ||||||||||||||||||||
|
Lithia Motors, Inc. |
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|
Reconciliation of Certain Non-GAAP Financial Measures (Unaudited) |
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|
(In thousands, except for per share data) |
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| Twelve Months Ended December 31, 2017 | ||||||||||||||||||||||||||||
|
As |
Insurance |
Acquisition |
OEM |
Disposal |
Tax act | Adjusted | ||||||||||||||||||||||
| Selling, general and administrative | $ | 1,049,378 | $ | (5,582 | ) | $ | (5,653 | ) | $ | — | 5,104 | $ | — | $ | 1,043,247 | |||||||||||||
| Income from operations | 408,986 | 5,582 | 5,653 | — | (5,104 | ) | — | 415,117 | ||||||||||||||||||||
| Other income (expense), net | 12,195 | — | — | (9,111 | ) | — | — | 3,084 | ||||||||||||||||||||
| Income before income taxes | $ | 347,069 | 5,582 | $ | 5,653 | $ | (9,111 | ) | $ | (5,104 | ) | $ | — | $ | 344,089 | |||||||||||||
| Income tax benefit (expense) | (101,852 | ) | (2,174 | ) | (2,202 | ) | 3,423 | 2,482 | (32,901 | ) | (133,224 | ) | ||||||||||||||||
| Net income | $ | 245,217 | 3,408 | $ | 3,451 | $ | (5,688 | ) | $ | (2,622 | ) | $ | (32,901 | ) | $ | 210,865 | ||||||||||||
| Diluted earnings per share | $ | 9.75 | 0.14 | $ | 0.14 | $ | (0.23 | ) | $ | (0.10 | ) | $ | (1.31 | ) | $ | 8.39 | ||||||||||||
| Diluted share count | 25,145 | |||||||||||||||||||||||||||
| Twelve Months Ended December 31, 2016 | ||||||||||||||||||||||||
| As reported |
Disposal |
Equity |
Legal reserve | Tax attribute | Adjusted | |||||||||||||||||||
| Asset impairments | $ | 13,992 | $ | — | $ | (13,992 | ) | $ | — | $ | — | $ | — | |||||||||||
| Selling, general and administrative | 899,590 | 1,087 | — | (3,936 | ) | — | 896,741 | |||||||||||||||||
| Income from operations | 338,364 | (1,087 | ) | 13,992 | 3,936 | — | 355,205 | |||||||||||||||||
| Other income (expense), net | (6,103 | ) | — | 8,262 | — | — | 2,159 | |||||||||||||||||
| Income before income taxes | $ | 283,523 | $ | (1,087 | ) | $ | 22,254 | $ | 3,936 | $ | — | $ | 308,626 | |||||||||||
| Income tax benefit (expense) | (86,465 | ) | 426 | (28,530 | ) | (3,250 | ) | (1,320 | ) | (119,139 | ) | |||||||||||||
| Net income | $ | 197,058 | $ | (661 | ) | $ | (6,276 | ) | $ | 686 | $ | (1,320 | ) | $ | 189,487 | |||||||||
| Diluted earnings per share | $ | 7.72 | $ | (0.03 | ) | $ | (0.25 | ) | $ | 0.03 | $ | (0.05 | ) | $ | 7.42 | |||||||||
| Diluted share count | 25,521 | |||||||||||||||||||||||
|
Lithia Motors, Inc. |
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|
Adjusted EBITDA and Leveraged Free Cash Flow (Unaudited) |
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| Three months ended December 31, | % | Twelve months ended December 31, | % | |||||||||||||||||||
| Increase | Increase | |||||||||||||||||||||
| 2017 | 2016 | (Decrease) | 2017 | 2016 | (Decrease) | |||||||||||||||||
|
EBITDA and Adjusted EBITDA |
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| Net income | $ | 89,404 | $ | 51,319 | 74.2 | % | $ | 245,217 | $ | 197,058 | 24.4 | % | ||||||||||
| Other interest expense | 11,031 | 6,599 | 67.2 | 34,776 | 23,207 | 49.9 | ||||||||||||||||
| Income tax expense | 2,023 | 14,803 | NM | 101,852 | 86,465 | 17.8 | ||||||||||||||||
| Depreciation and amortization | 16,124 | 12,997 | 24.1 | 57,722 | 49,369 | 16.9 | ||||||||||||||||
| EBITDA | $ | 118,582 | $ | 85,718 | 38.3 | % | $ | 439,567 | $ | 356,099 | 23.4 | % | ||||||||||
| Other adjustments: | ||||||||||||||||||||||
|
Less: used vehicle line of credit interest |
(218 | ) | (1,127 | ) | (80.7 | ) | (2,740 | ) | (3,732 | ) | (26.6 | ) | ||||||||||
| Add: equity investment fair value adjustment | — | 5,563 | NM | — | 22,254 | NM | ||||||||||||||||
| Add: insurance reserve | — | — | NM | 5,582 | — | NM | ||||||||||||||||
| Add. legal reserve | — | 2,030 | NM | — | 3,936 | NM | ||||||||||||||||
| Add: acquisition expenses | — | — | NM | 5,653 | — | NM | ||||||||||||||||
| Less: OEM legal settlements | — | — | NM | (9,111 | ) | — | NM | |||||||||||||||
| Less: disposal gain on sale of store | (5,104 | ) | — | NM | (5,104 | ) | (1,087 | ) | NM | |||||||||||||
| Adjusted EBITDA | $ | 113,260 | $ | 92,184 | 22.9 | % | $ | 433,847 | $ | 377,470 | 14.9 | % | ||||||||||
|
Leveraged EBITDA |
||||||||||||||||||||||
| Adjusted EBITDA | $ | 113,260 | $ | 92,184 | 22.9 | % | $ | 433,847 | $ | 377,470 | 14.9 | % | ||||||||||
| Less: Capital expenditures | (33,642 | ) | (19,398 | ) | 73.4 | (105,816 | ) | (100,761 | ) | 5.0 | ||||||||||||
| Leveraged EBITDA | $ | 79,618 | $ | 72,786 | 9.4 | % | $ | 328,031 | $ | 276,709 | 18.5 | % | ||||||||||
Contacts
Lithia Motors, Inc.
John North, (541) 618-5748
Senior Vice President and Chief Financial Officer