Lithia Motors Reports Adjusted EPS of $1.03 for the First Quarter of 2014, an Increase of 23% Over the Prior Year
MEDFORD, OR -- (Marketwired) -- 04/24/14 -- Lithia Motors, Inc. (NYSE: LAD) reported the highest first quarter adjusted net income in Company history and increased adjusted net income from continuing operations 24% for the first quarter 2014 over the prior year period.
2014 first quarter adjusted net income from continuing operations was $27.1 million, or $1.03 per diluted share. This compares to 2013 first quarter net income from continuing operations of $21.9 million, or $0.84 per diluted share.
Unadjusted net income from continuing operations for the first quarter of 2014 was $24.7 million, or $0.94 per diluted share, compared to $21.9 million or $0.84 per diluted share for the first quarter of 2013. As shown in the attached non-GAAP reconciliation tables, the 2014 first quarter adjusted income from continuing operations excluded non-core charges of $0.09 per share related to an adjustment to a reserve associated with a lawsuit filed in 2006 and settled in 2013, a loss reserve for a hailstorm in Texas and a reserve for a contract assumed in an acquistion.
First quarter 2014 revenue from continuing operations increased $175 million, or 19%, to $1.1 billion from $903 million for the first quarter of 2013.
First Quarter-over-Quarter Operating Highlights:
- Total same store sales increased 12%
- New vehicle same store sales increased 10%
- Used vehicle retail same store sales increased 19%
- Service, body and parts same store sales increased 9%
- Same store F&I per unit increased $84 to $1,200
- Adjusted SG&A expense as a percentage of gross profit decreased 60 basis points to 68.5%
"We grew same store sales in all four business lines in the first quarter," said Bryan DeBoer, President and CEO. "Notably, we saw a 9% increase in service, body and parts sales driven by an 8% improvement in customer pay work and a 17% increase in warranty activity. March was a solid month for national new car sales with a SAAR of 16.3 million, the highest level since November 2007. March was also the best month in our Company's history in both revenue and pre-tax profit. Our store leaders increased same store used unit volume 12% in the quarter as we continue our objective to sell 75 used units per store per month. We believe opportunities remain for continued improvement and are optimistic for 2014."
Chris Holzshu, SVP and CFO, said, "Our same store F&I per unit was $1,200. While this is an improvement over 2013, we believe opportunity remains, as we continue to emphasize training and adjust pricing on certain products. Our adjusted SG&A as a percentage of gross profit improved by 60 basis points to 68.5% for the first quarter of 2014. Our incremental throughput, or the percentage of incremental gross profit remaining after deducting incremental SG&A expense, was 40.8% on a same store basis in the first quarter of 2014. We continue to target incremental throughput of 50% on a same store basis and believe this remains achievable on a full year basis."
Corporate Development
In January 2014, we acquired Island Honda in Kahului, Hawaii and, in February 2014, we acquired Stockton Volkswagen in Stockton, California, with estimated total annual revenues of $50 million. In March 2014, we acquired Honolulu GMC Buick Cadillac and Honolulu Volkswagen in Honolulu, Hawaii, with estimated total annual revenues of $75 million.
In April 2014, we acquired Access Ford Lincoln in Corpus Christi, Texas and opened Lithia Chrysler Jeep Dodge Ram of Wasilla in Wasilla, Alaska with $105 million in estimated total annual revenues.
Bryan DeBoer, President and CEO, stated, "We've purchased eight stores and opened one location since October 2013, with total estimated annual revenues of $380 million. This represents an increase of 9% over our full year 2013 total revenues. With our most recent activity we now operate 100 stores in 12 states.'"
Balance Sheet Update
We ended the first quarter with $22 million in cash and $133 million in available credit on our credit facilities. Additionally, approximately $193 million of our operating real estate is currently unfinanced, which could provide an estimated additional $145 million in available liquidity, for total potential liquidity of $300 million.
Dividend Payment
Lithia announced that the Board of Directors has approved a dividend of $0.16 per share related to first quarter 2014 financial results, an increase of $0.03 from the dividend paid related to fourth quarter 2013 results. Lithia will pay the dividend May 23, 2014 to shareholders of record on May 9, 2014.
Outlook for 2014
We project 2014 second quarter earnings of $1.18 to $1.20 per diluted share and full-year 2014 earnings of $4.57 to $4.65 per diluted share. These projections are based on the following annual assumptions about 2014 performance:
- Total revenues of $4.6 to $4.7 billion
- New vehicle same store sales increasing 8.0%
- New vehicle gross margin of 6.5% to 6.7%
- Used vehicle same store sales increasing 9.5%
- Used vehicle gross margin of 13.3% to 13.5%
- Service body and parts same store sales increasing 7.5%
- Service body and parts gross margin of 48.4% to 48.6%
- Finance and insurance gross profit of $1,175 per unit
- Tax rate of 39.5%
- Average diluted shares outstanding of 26.2 million
- Capital expenditures of $92 million
These projections exclude the impact of future acquisitions, dispositions and non-core items. Actual results may be affected by items described under Forward-Looking Statements below.
First Quarter Earnings Conference Call and Updated Presentation
The first quarter conference call may be accessed at 11:00 a.m. ET today by telephone at 877-407-8029. An updated presentation highlighting the first quarter results has been added to www.lithiainvestorrelations.com.
To listen live on our website or for replay, visit www.lithiainvestorrelations.com and click on webcasts.
About Lithia
Lithia Motors, Inc. is the eighth largest automotive retailer in the United States. Lithia sells 28 brands of new vehicles and all brands of used vehicles at 100 stores in 12 states. Lithia also arranges finance, warranty, and credit insurance contracts; and provides vehicle parts, maintenance, and repair services at all of its locations.
Sites
www.lithia.com
www.lithiainvestorrelations.com
www.lithiacareers.com
www.assuredservice.com
Lithia Motors on Facebook
http://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" 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 performance, maintaining incremental throughput above 50%, strategy for customer retention, growth and financial results and all projections set forth under the heading "Outlook for 2014"; and
- Anticipated availability of liquidity from our 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 Annual Report on Form 10-K for the year ended December 31, 2013 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 from continuing operations, adjusted SG&A as a percentage of revenues and gross profit, adjusted operating margin, adjusted operating profit as a percentage of gross profit, and adjusted pre-tax margin. 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 %
March 31, Increase Increase
----------------------
2014 2013 (Decrease) (Decrease)
---------- ---------- ---------- ----------
Revenues:
New vehicle retail $ 579,522 $ 493,441 $ 86,081 17.4%
Used vehicle retail 301,893 239,228 62,665 26.2
Used vehicle wholesale 42,693 39,506 3,187 8.1
Finance and insurance 39,631 31,663 7,968 25.2
Service, body and parts 104,617 90,440 14,177 15.7
Fleet and other 9,750 8,802 948 10.8
---------- ---------- ---------- ----------
Total revenues 1,078,106 903,080 175,026 19.4
Cost of sales:
New vehicle retail 540,498 458,794 81,704 17.8
Used vehicle retail 261,097 204,255 56,842 27.8
Used vehicle wholesale 41,362 38,532 2,830 7.3
Service, body and parts 53,785 46,661 7,124 15.3
Fleet and other 9,303 8,400 903 10.8
---------- ---------- ---------- ----------
Total cost of sales 906,045 756,642 149,403 19.7
---------- ---------- ---------- ----------
Gross profit 172,061 146,438 25,623 17.5
SG&A expense 121,829 101,131 20,698 20.5
Depreciation and
amortization 5,507 4,721 786 16.6
---------- ---------- ---------- ----------
Income from operations 44,725 40,586 4,139 10.2
Floor plan interest expense (2,984) (3,449) (465) (13.5)
Other interest expense (1,974) (2,361) (387) (16.4)
Other income, net 937 801 136 17.0
---------- ---------- ---------- ----------
Income from continuing
operations before income
taxes 40,704 35,577 5,127 14.4
Income tax expense (16,010) (13,695) 2,315 16.9
Income tax rate 39.3% 38.5%
---------- ---------- ---------- ----------
Income from continuing
operations $ 24,694 $ 21,882 $ 2,812 12.9%
Income from discontinued
operations, net of tax 40 173 (133) (76.9)
---------- ---------- ---------- ----------
Net income $ 24,734 $ 22,055 $ 2,679 12.1%
Diluted net income per
share:
Continuing operations $ 0.94 $ 0.84 $ 0.10 11.9%
Discontinued operations - 0.01 (0.01) (100.0)
---------- ---------- ---------- ----------
Net income per share $ 0.94 $ 0.85 $ 0.09 10.6%
========== ========== ========== ==========
Diluted shares outstanding 26,320 26,054 266 1.0%
Lithia Motors, Inc.
Key Performance Metrics (Unaudited)
Three months ended %
March 31, Increase Increase
----------------------
2014 2013 (Decrease) (Decrease)
---------- ---------- ----------- ----------
Gross margin
New vehicle retail 6.7% 7.0% (30) bps
Used vehicle retail 13.5 14.6 (110) bps
Used vehicle wholesale 3.1 2.5 60 bps
Finance and insurance 100.0 100.0 - bps
Service, body and parts 48.6 48.4 20 bps
Fleet and Other 4.6 4.6 - bps
Gross profit margin 16.0 16.2 (20) bps
Unit sales
New vehicle retail 17,274 14,720 2,554 17.4%
Used vehicle retail 16,316 13,661 2,655 19.4
Total retail units sold 33,590 28,381 5,209 18.4
Used vehicle wholesale 5,853 5,324 529 9.9
Average selling price
New vehicle retail $ 33,549 $ 33,522 $ 27 0.1%
Used vehicle retail 18,503 17,512 991 5.7
Used vehicle wholesale 7,294 7,420 (126) (1.7)
Average gross profit per
unit
New vehicle retail $ 2,259 $ 2,354 $ (95) (4.0)%
Used vehicle retail 2,500 2,560 (60) (2.3)
Used vehicle wholesale 227 183 44 24.0
Finance and insurance 1,180 1,116 64 5.7
Total vehicle(1) 3,596 3,603 (7) (0.2)
Revenue mix
New vehicle retail 53.8% 54.6%
Used vehicle retail 28.0 26.5
Used vehicle wholesale 4.0 4.4
Finance and insurance, net 3.7 3.5
Service, body and parts 9.7 10.0
Fleet and other 0.8 1.0
Adjusted As reported
---------------------- -----------------------
Three months ended Three months ended
March 31, March 31,
---------------------- -----------------------
Other metrics 2014 2013 2014 2013
---------- ---------- ----------- ----------
SG&A as a % of revenue 10.9% 11.2% 11.3% 11.2%
SG&A as a % of gross profit 68.5 69.1 70.8 69.1
Operating profit as a % of
revenue 4.5 4.5 4.1 4.5
Operating profit as a % of
gross profit 28.3 27.7 26.0 27.7
Pretax margin 4.1 3.9 3.8 3.9
Net profit margin 2.5 2.4 2.3 2.4
(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 %
March 31, Increase Increase
----------------------
2014 2013 (Decrease) (Decrease)
---------- ---------- ----------- ----------
Revenues
New vehicle retail $ 542,975 $ 493,441 $ 49,534 10.0%
Used vehicle retail 285,204 239,228 45,976 19.2
Used vehicle wholesale 41,122 39,481 1,641 4.2
Finance and insurance 37,430 31,670 5,760 18.2
Service, body and parts 98,929 90,443 8,486 9.4
Fleet and other 9,751 8,802 949 10.8
---------- ---------- -----------
Total revenues $1,015,411 $ 903,065 $ 112,346 12.4
Gross profit
New vehicle retail $ 36,693 $ 34,647 $ 2,046 5.9%
Used vehicle retail 38,809 34,966 3,843 11.0
Used vehicle wholesale 1,313 1,032 281 27.2
Finance and insurance 37,430 31,670 5,760 18.2
Service, body and parts 47,918 43,825 4,093 9.3
Fleet and other 449 403 46 11.4
---------- ---------- -----------
Total gross profit $ 162,612 $ 146,543 $ 16,069 11.0
Gross margin
New vehicle retail 6.8% 7.0% (20) bps
Used vehicle retail 13.6 14.6 (100) bps
Used vehicle wholesale 3.2 2.6 60 bps
Finance and insurance 100.0 100.0 - bps
Service, body and parts 48.4 48.5 (10) bps
Fleet and Other 4.6 4.6 - bps
Gross profit margin 16.0 16.2 (20) bps
Unit sales
New vehicle retail 15,944 14,720 1,224 8.3%
Used vehicle retail 15,255 13,661 1,594 11.7
Total retail units sold 31,199 28,381 2,818 9.9
Used vehicle wholesale 5,551 5,323 228 4.3
Average selling price
New vehicle retail $ 34,055 $ 33,522 $ 533 1.6%
Used vehicle retail 18,696 17,512 1,184 6.8
Used vehicle wholesale 7,408 7,417 (9) (0.1)
Average gross profit per
unit
New vehicle retail $ 2,301 $ 2,354 $ (53) (2.3)%
Used vehicle retail 2,544 2,560 (16) (0.6)
Used vehicle wholesale 237 194 43 22.2
Finance and insurance 1,200 1,116 84 7.5
Total vehicle(1) 3,662 3,605 57 1.6
(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.
Other Highlights (Unaudited)
As of
March 31, December 31, March 31,
------------ ------------ ------------
2014 2013 2013
------------ ------------ ------------
Days Supply(1)
New vehicle inventory 69 74 71
Used vehicle inventory 46 63 46
(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 March 31, 2014
-------------------------- --------------------
Current ratio Not less than 1.20 to 1 1.37 to 1
Fixed charge coverage ratio Not less than 1.20 to 1 4.09 to 1
Leverage ratio Not more than 5.00 to 1 1.39 to 1
Funded debt restriction Not more than $375 million $168.8 million
Lithia Motors, Inc.
Other Highlights (Unaudited)
Three months ended
March 31,
--------------------------
2014 2013
------------ ------------
New vehicle unit sales brand mix
Chrysler 29.5% 31.3%
General Motors 14.0 15.9
Toyota 13.7 14.9
Subaru 9.8 7.7
Honda, Acura 7.8 6.8
BMW, MINI 6.0 6.3
Ford 5.9 5.9
Nissan 3.8 2.7
Hyundai 3.0 2.9
Mercedes 2.3 2.2
Volkswagen, Audi 2.3 1.8
Kia 0.9 0.6
Mazda 0.4 0.5
Other 0.6 0.5
Three months ended
March 31,
--------------------------
2014 2013
------------ ------------
Revenue geographic mix
Texas 23.9% 25.7%
Oregon 22.2 20.8
California 13.3 10.7
Montana 8.3 9.0
Washington 7.3 8.2
Alaska 6.7 7.1
Nevada 4.8 4.7
Idaho 4.7 5.2
Iowa 4.3 4.5
North Dakota 2.2 2.4
New Mexico 1.6 1.7
Hawaii 0.7 0.0
As of April 24, 2014
--------------------------
Current store count mix # of stores % of total
------------ ------------
Chrysler 24 24.0%
General Motors 14 14.0
Honda, Acura 11 11.0
Toyota 10 10.0
BMW, MINI 9 9.0
Ford 6 6.0
Subaru 5 5.0
Hyundai 5 5.0
Volkswagen, Audi 5 5.0
Nissan 4 4.0
Mercedes 4 4.0
Other 3 3.0
Lithia Motors, Inc.
Consolidated Balance Sheets (Unaudited)
(In thousands)
March 31, December 31,
2014 2013
------------- -------------
Cash and cash equivalents $ 22,340 $ 23,686
Trade receivables, net 182,777 170,519
Inventories, net 935,850 859,019
Deferred income taxes 1,316 1,548
Other current assets 12,564 15,251
Assets held for sale 12,703 11,526
------------- -------------
Total current assets $ 1,167,550 $ 1,081,549
Property and equipment, net 493,171 481,212
Goodwill 56,787 49,511
Franchise value 73,502 71,199
Deferred income taxes 14,374 10,256
Other non-current assets 38,892 31,394
------------- -------------
Total assets $ 1,844,276 $ 1,725,121
============= =============
Floor plan notes payable $ 19,978 $ 18,789
Floor plan notes payable: non trade 744,786 695,066
Current maturities of long-term debt 7,340 7,083
Trade payables 54,052 51,159
Accrued liabilities 107,130 94,143
Liabilities related to assets held for sale 7,142 6,271
------------- -------------
Total current liabilities $ 940,428 $ 872,511
Long-term debt 269,760 245,471
Deferred revenue 46,238 44,005
Other long-term liabilities 31,013 28,412
------------- -------------
Total liabilities $ 1,287,439 $ 1,190,399
------------- -------------
Class A common stock 267,071 268,255
Class B common stock 319 319
Additional paid-in capital 24,392 22,598
Accumulated other comprehensive loss (1,389) (1,538)
Retained earnings 266,444 245,088
------------- -------------
Total liabilities & stockholders' equity $ 1,844,276 $ 1,725,121
============= =============
Lithia Motors, Inc.
Summarized Cash Flow from Operations (Unaudited)
(In thousands)
Three months ended
March 31,
----------------------------
2014 2013
------------- -------------
Net income $ 24,734 $ 22,055
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Depreciation and amortization 5,507 4,721
Stock-based compensation 1,538 1,140
Loss (gain) on disposal of assets 20 (19)
Deferred income taxes 1,866 (206)
Excess tax benefit from share-based payment
arrangements (5,846) (2,937)
(Increase) decrease:
Trade receivables, net (12,259) (960)
Inventories (56,748) 7,890
Other current assets 1,660 5,757
Other non-current assets (3,950) (424)
Increase (decrease):
Floor plan notes payable, net 1,675 2,257
Trade payables 1,774 (410)
Accrued liabilities 12,521 6,188
Other long-term liabilities and deferred
revenue 5,121 4,705
------------- -------------
Net cash provided by (used in) operating
activities $ (22,387) $ 49,757
============= =============
Lithia Motors, Inc.
Reconciliation of Non-GAAP Cash Flow from Operations (Unaudited)
(In thousands)
Three months ended
March 31,
----------------------------
Net cash provided by (used in) operating
activities 2014 2013
------------- -------------
As reported $ (22,387) $ 49,757
Floor plan notes payable, non-trade, net 51,783 953
------------- -------------
Adjusted $ 29,396 $ 50,710
============= =============
Lithia Motors, Inc.
Reconciliation of Certain Non-GAAP Financial Measures (Unaudited)
(In thousands, except for per share data)
Three Months Ended March 31, 2014
----------------------------------------
Reserve
As reported adjustments Adjusted
------------ ------------ ------------
Selling, general and
administrative 121,829 (3,931) 117,898
Income from operations 44,725 3,931 48,656
Income from continuing operations
before income taxes $ 40,704 $ 3,931 $ 44,635
Income tax expense (16,010) (1,546) (17,556)
------------ ------------ ------------
Net income from continuing
operations $ 24,694 $ 2,385 $ 27,079
============ ============ ============
Diluted earnings per share from
continuing operations $ 0.94 $ 0.09 $ 1.03
Diluted share count 26,320
Contact:
John North
VP Finance and Controller
(541) 618-5748
