Lithia Motors, Inc. Reports A 59% Increase In Earnings Per Share
28 October 1998
Lithia Motors, Inc. Reports A 59% Increase In Earnings Per Share To 35 Cents For The Third Quarter Of 1998; 15.9% Same-Store Growth
MEDFORD, Ore., Oct. 28 -- Lithia Motors, Inc.
today announced that revenues increased 128.9% to $195.9 million, in the third
quarter of 1998 from $85.6 million in the third quarter of 1997. Net earnings
rose 131.6% to $3.66 million compared to $1.58 million in the third quarter of
1997 or $0.35 per share on 10.5 million diluted shares outstanding vs. $0.22
per share on 7.3 million diluted shares in the same quarter of 1997. This
represents a 59% increase in earnings per share on 44% more shares
outstanding. The additional shares are the result of the follow-on equity
offering of 3.15 million shares of Class A Common Stock completed in May 1998.
For the first nine months of 1998, Lithia reported that revenues increased
149.5% to $515.7 million from $206.7 million in the first nine months of 1997.
Net earnings rose 80.9% to $7.40 million in the first nine months of 1998
compared to $4.09 million in the first nine months of 1997 or $0.81 per share
on a weighted average of 9.1 million diluted shares outstanding vs. $0.56 per
share on 7.3 million diluted shares in 1997.
Chairman and Chief Executive Officer, Sidney B. DeBoer, stated, "We are
pleased to announce these results which exceed the consensus Wall Street
estimates even with the 3.15 million new shares factored in. The current
estimates are even higher than the pre-offering level, so Lithia is actually
posting results far in excess of what was expected at the start of the year.
Lithia is the only pure auto retailer in the nation that has exceeded analyst
estimates for eight consecutive quarters. Lithia is also the only one to have
successfully completed a secondary equity offering. Third quarter same-store
sales growth of 15.9% and same-store pre-tax profit growth of 39.0% attests to
our ability to improve the operations of newly acquired stores within the
first year of operation. As a group, the first six stores acquired since
going public had combined year-on-year same-store revenue growth of 25.1% in
the third quarter of 1998 and a 93.9% combined increase in pre-tax income for
the same period. Furthermore, Lithia's annualized after-tax return on
investment for this same group of six dealerships was 23.5% after just one
year. The stores are expected to continue to improve to Lithia's targeted
levels over the coming two to three years."
New vehicle sales increased by 177.3%, used vehicle sales increased by
109.7%, and other operating revenue increased 158.8% in the first nine months
of 1998. Lithia sold 12,926 new vehicles and 9,959 retail used vehicles
during the first nine months compared to 4,768 and 4,779 respectively during
the first nine months of 1997. This represents year-on-year unit increases of
171.1% and 108.4%, respectively. The average price of a new vehicle increased
year-on-year by 2.3% to $21,670 and by 3.5% to $12,763 for retail used
vehicles. Revenue for the first nine months of 1998 benefited from a
combination of 15.1% in-store growth and the inclusion of 13 locations
acquired since September 1997.
Total gross margin was 16.1% in the third quarter of 1998 vs. 15.5% in the
first half of 1998 and 16.6% in the third quarter of 1997. According to the
National Auto Dealer's Association (NADA), the average US dealership posted a
12.7% gross profit margin in 1997.
Sales and general administration expense as a percentage of sales improved
from 12.7% to 11.9% of sales versus last year's third quarter, resulting in a
4.2% EBITDA margin which compares favorably with the EBITDA margin of 3.9%
posted in the third quarter of 1997 and 3.6% posted in the first half of 1998.
Lithia currently has a strong balance sheet with a 26% long-term debt/equity
ratio and $88 million in shareholder's equity. Net interest expense for the
quarter improved from 1.3% to 0.8% of sales versus the first six months of
1998, resulting in a better than expected pre-tax margin of 3.0% vs. 1.9% in
the first six months of this year. Lithia's 3.0% pre-tax margin is the
highest of all publicly-traded pure auto retailers which range from 1.6% to
2.6% in the most recently released quarters, according to SEC filings.
Sid DeBoer commented, "We continue to be reassured by the number of
attractive dealerships available for purchase in our target acquisition areas.
With the new $75 million acquisition facility from Ford Credit, current free
cash resources in excess of $30 million and expected future internal cash
generation from operations, Lithia has the ability to conservatively acquire
$1 billion of revenue and continue its current disciplined growth plan well
into the year 2000 without accessing the capital markets. Our current revenue
run-rate is $820 million. I am confident that Lithia's operational support
teams are ready to integrate a larger platform group."
Since the end of the second quarter of 1998, Lithia completed the
acquisitions of Rodway Chevrolet and Boyland Toyota in Redding, California.
Lithia also completed the acquisition of Camp Automotive in Spokane,
Washington on October 15. This two-store group holds the franchises for
Chevrolet, BMW, Subaru and Volvo. Lithia also announced the pending
acquisitions of Hutchins Toyota and Hutchins Nissan in Eugene, Oregon and
expects to close on these two acquisitions in November. In October, Lithia
announced that it has entered into a strategic financial agreement with Ford
Credit to serve as Lithia's primary lender, providing $350 million in credit
lines.
This press release includes forward looking statements, 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, manufacturer approval, and others set forth from
time to time in the company's filings with the SEC.
LITHIA MOTORS, INC.
(In Thousands except per share and unit data)
Three Months Ended Nine Months Ended
September 30, September 30,
Unaudited 1997 1998 1997 1998
New Vehicle Revenue 44,562 110,498 101,018 280,109
Used Vehicle Revenue 28,965 56,604 77,382 162,299
Other Operating Revenue 12,046 28,813 28,299 73,246
Total Revenue 85,573 195,915 206,699 515,654
Cost of Sales 71,388 164,411 172,850 434,563
Gross Profit 14,185 31,504 33,849 81,091
SG&A Expense 10,848 23,241 26,039 61,343
EBITDA 3,337 8,263 7,810 19,748
Depreciation &
Amortization 313 675 704 1,751
EBIT (Operating Profit) 3,024 7,588 7,106 17,997
Interest Expense (Net) 450 1,623 443 5,937
Pre-Tax, Profit 2,574 5,965 6,663 12,060
Income Tax 994 2,307 2,573 4,661
Income Tax Rate 38.6% 38.6% 38.6% 38.6%
Net Profit 1,580 3,658 4,090 7,399
Shares Outstanding 7.312m 10.508m 7.281m 9.113m
EPS $0.22 $0.35 $0.56 $0.81
Unit Sales:
New 2,083 5,142 4,768 12,926
Used - Retail 1,793 3,493 4,779 9,959
Used - Wholesale 1,327 2,542 3,553 7,129
Average Selling Price:
New $21,393 $21,489 $21,187 $21,670
Used - Retail $12,499 $12,650 $12,327 $12,763
Used - Wholesale $4,940 $4,885 $5,199 $4,937
Key Financial Data:
Gross Profit Margin 16.6% 16.1% 16.4% 15.7%
SG&A as a % of Sales 12.7% 11.9% 12.6% 11.9%
Operating Margin 3.5% 3.9% 3.4% 3.5%
Balance Sheet Highlights:
(In Thousands of Dollars) Period Ended Period Ended
June 30, 1998 September 30, 1998
Cash & Cash Equivalents $27,136 $17,655
Inventory 138,137 117,093
Total Current Assets 182,792 153,462
Goodwill 32,844 35,532
Other Assets 36,168 35,890
Total Assets 251,804 224,884
Floorplan Notes Payable 119,963 88,185
Total Current Liabilities 138,824 107,610
Long-Term Debt & Cap. Lease 22,538 23,009
Other Liabilities 6,060 6,356
Total Liabilities 167,422 136,975
Shareholders Equity 84,382 87,909
Total Liabilities &
Shareholders Equity 251,804 224,884