Lithia Reports Adjusted EPS of $1.74 for Fourth Quarter 2015 and $7.02 for Full Year 2015; Fourth Quarter Adjusted Net Income Increases 23%

MEDFORD, OR--(Marketwired - Feb 24, 2016) - Lithia Motors, Inc. (NYSE: LAD) reported the highest fourth quarter and full year adjusted net income in company history and increased adjusted net income 23% for the fourth quarter 2015 over the prior year period.

2015 fourth quarter adjusted net income was $46.1 million or $1.74 per diluted share, compared to 2014 fourth quarter adjusted net income of $37.5 million, or $1.42 per diluted share.

Unadjusted net income for the fourth quarter 2015 was $47.7 million, or $1.80 per diluted share, compared to $41.1 million, or $1.55 per diluted share, for the fourth quarter of 2014. As shown in the attached non-GAAP reconciliation tables, the 2015 fourth quarter adjusted results exclude a $0.06 net non-core benefit related to an equity investment offset by an asset impairment charge. The 2014 fourth quarter adjusted results exclude a $0.13 non-core net benefit from an equity investment and a non-core tax attribute offset by a charge related to acquisition expenses.

Fourth quarter 2015 revenue increased $200.0 million, or 11%, to $2.0 billion from $1.8 billion for the fourth quarter 2014.

Fourth Quarter-over-Quarter Operating Highlights:

• Total same store sales increased 9%
• New vehicle same store sales increased 7%
• Used vehicle retail same store sales increased 12%
• Service, body and parts same store sales increased 10%
• Same store F&I per unit increased $69 to $1,189
• SG&A expense as a percentage of gross profit was 68.2%
  
  

For the full year 2015, revenues increased 46% to $7.9 billion from $5.4 billion in 2014.

Full Year-over-Year Operating Highlights:

• Total same store sales increased 11%
• New vehicle same store sales increased 9%
• Used vehicle retail same store sales increased 13%
• Service, body and parts same store sales increased 10%
• Same store F&I per unit increased $73 to $1,244
• Adjusted SG&A expense as a percentage of gross profit was 67.9%
  
  

"2015 finished ahead of our expectations," said Bryan DeBoer, President and CEO. "Despite significant headwinds reported by some in the industry, our store leaders successfully responded to their local market conditions. As a result of their efforts, we achieved our third and fourth EPS milestones by exceeding $7.00 per share in 2015. Our entrepreneurial culture, where each store has the autonomy to make individual decisions, will drive continued operational improvement. This improvement, along with growth through acquisitions, will be critical to achieving our next milestone of $8.00 per share."

For 2015, adjusted net income per diluted share increased 37% to $7.02 from $5.11 for 2014. Unadjusted net income from continuing operations was $6.91 per diluted share for 2015 compared to $5.14 per diluted share for 2014.

Chris Holzshu, SVP and CFO, said, "We are focused on two primary objectives: efficiently operating our stores and prudently allocating capital. We finished 2015 with adjusted SG&A as a percentage of gross profit at 67.9% and incremental same store throughput of 50%. We also allocated over $46 million in capital to repurchase shares since January 1, 2016. Our preferred use of capital will be growth through acquisitions, but we will look for opportunities to repurchase stock when we deem it to be an attractive use of funds."

Corporate Development
As previously announced, since October 2015 we acquired a Chrysler Jeep Dodge Ram Fiat store in Concord, California; a Chrysler Jeep Dodge Ram Alpha Fiat in Spokane, Washington; a Subaru store in Riverside, California and a Toyota store in Milford, Massachusetts. We estimate these stores will contribute approximately $200 million in annual revenues.

Bryan DeBoer, President and CEO, stated, "We acquired over $2.7 billion in annual revenues in 2014, and followed that by adding nine stores over the last 14 months with an estimated $380 million in annual revenues. We are excited to have acquired our first stores within the DCH metropolitan strategy on both the east and west coasts of the United States. We are continuing to actively seek acquisitions and anticipate further transactions in both rural and metropolitan markets."

Balance Sheet Update
We ended 2015 with $45 million in cash and $134 million in availability under our credit facilities. Additionally, approximately $211 million of our operating real estate is currently unfinanced, which we estimate could provide an additional $159 million in available liquidity, for total potential liquidity of $338 million.

Dividend Payment and Share Repurchase
Our Board of Directors has approved a dividend of $0.20 per share related to fourth quarter 2015 financial results. We expect to pay the dividend March 25, 2016 to shareholders of record on March 11, 2016.

Since the fourth quarter 2015, we have repurchased approximately 595,000 shares at a weighted average price of $79.11 per share. Under our existing share repurchase authorization, approximately 676,000 shares remain available for purchase.

2016 Outlook
We project 2016 first quarter earnings of $1.47 to $1.51 per diluted share and 2016 full year earnings of $7.30 to $7.50 per diluted share. Both projections are based on the following annual assumptions:

• Total revenues of $8.4 to $8.5 billion
• New vehicle sales increasing 5.5%
• New vehicle gross margin of 5.8% to 6.0%
• Used vehicle sales increasing 6.0%
• Used vehicle gross margin of 12.4% to 12.6%
• Service body and parts sales increasing 5.0%
• Service body and parts gross margin of 49.0% to 49.4%
• Finance and insurance gross profit of $1,210 per unit
• Tax rate of 40.0%
• Average diluted shares outstanding of 26.0 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.

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 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 one of the largest automotive retailers in the United States. Lithia sells 31 brands of new vehicles and all brands of used vehicles at 139 stores in 15 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

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 2016 first quarter earnings per share of $1.47 to $1.51 per diluted share and 2016 full year earnings of $7.30 to $7.50 per diluted share and all projections set forth under the headings "2016 Outlook"; 
• The increase in our annual revenues that we estimate will result from dealerships that we acquired;
• Anticipated ability to improve store performance;
• Anticipated additions of dealership locations to our portfolio in the future; 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 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												%
			December 31,								Increase				Increase
			2015				2014				(Decrease)				(Decrease)
Revenues:
New vehicle retail			$	1,167,893			$	1,071,543			$	96,350			9.0	%
Used vehicle retail				469,399				409,591				59,808			14.6
Used vehicle wholesale				63,054				59,867				3,187			5.3
Finance and insurance				69,318				60,057				9,261			15.4
Service, body and parts				193,024				172,398				20,626			12.0
Fleet and other				30,594				19,851				10,743			54.1
	Total revenues			1,993,282				1,793,307				199,975			11.2
Cost of sales:
New vehicle retail				1,095,796				1,006,025				89,771			8.9
Used vehicle retail				412,572				359,099				53,473			14.9
Used vehicle wholesale				62,744				59,560				3,184			5.3
Service, body and parts				98,241				88,097				10,144			11.5
Fleet and other				30,506				19,405				11,101			57.2
	Total cost of sales			1,699,859				1,532,186				167,673			10.9
Gross profit				293,423				261,121				32,302			12.4
Asset impairments				5,733				1,853				3,880			NM
SG&A expense				200,219				184,288				15,931			8.6
Depreciation and amortization				11,056				8,964				2,092			23.3
Income from operations				76,415				66,016				10,399			15.8
Floor plan interest expense				(5,279	)			(4,535	)			744			16.4
Other interest expense				(4,791	)			(4,848	)			(57	)		(1.2	)
Other income, net				25				89				(64	)		(71.9	)
Income before income taxes				66,370				56,722				9,648			17.0
Income tax expense				(18,638	)			(15,582	)			3,056			19.6
Income tax rate				28.1	%			27.5	%
Net income			$	47,732			$	41,140			$	6,592			16.0	%
Diluted net income per share:
Net income per share			$	1.80			$	1.55			$	0.25			16.1	%
Diluted shares outstanding				26,462				26,517				(55	)		(0.2	)%

NM - not meaningful

Lithia Motors, Inc.
Key Performance Metrics (Unaudited)
		Three months ended												%
		December 31,								Increase				Increase
		2015				2014				(Decrease)				(Decrease)
Gross margin
New vehicle retail			6.2	%			6.1	%			10 bps
Used vehicle retail			12.1				12.3				(20) bps
Used vehicle wholesale			0.5				0.5				- bps
Finance and insurance			100.0				100.0				- bps
Service, body and parts			49.1				48.9				20 bps
Fleet and other			0.3				2.2				(190) bps
Gross profit margin			14.7				14.6				10 bps
Unit sales
New vehicle retail			34,350				32,064				2,286			7.1	%
Used vehicle retail			24,010				21,562				2,448			11.4
Total retail units sold			58,360				53,626				4,734			8.8
Used vehicle wholesale			9,345				9,029				316			3.5
Average selling price
New vehicle retail		$	34,000			$	33,419			$	581			1.7	%
Used vehicle retail			19,550				18,996				554			2.9
Used vehicle wholesale			6,747				6,631				116			1.7
Average gross profit per unit
New vehicle retail		$	2,099			$	2,043			$	56			2.7	%
Used vehicle retail			2,367				2,342				25			1.1
Used vehicle wholesale			33				34				(1	)		(2.9	)
Finance and insurance			1,188				1,120				68			6.1
Total vehicle(1)			3,402				3,289				113			3.4
Revenue mix
New vehicle retail			58.6	%			59.8	%
Used vehicle retail			23.5				22.8
Used vehicle wholesale			3.2				3.3
Finance and insurance, net			3.5				3.3
Service, body and parts			9.7				9.6
Fleet and other			1.5				1.2

		Adjusted						As reported
		Three months ended  December 31,						Three months ended  December 31,
Other metrics		2015			2014			2015			2014
SG&A as a % of revenue		10.0	%		10.2	%		10.0	%		10.3	%
SG&A as a % of gross profit		68.2			70.3			68.2			70.6
Operating profit as a % of revenue		4.1			3.8			3.8			3.7
Operating profit as a % of gross profit		28.0			26.3			26.0			25.3
Pretax margin		3.7			3.4			3.3			3.2
Net profit margin		2.3			2.1			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 used retail

Lithia Motors, Inc.
Same Store Operating Highlights (Unaudited)
		Three Months Ended												%
		December 31,								Increase				Increase
		2015				2014				(Decrease)				(Decrease)
Revenues
New vehicle retail		$	1,137,113			$	1,067,701			$	69,412			6.5	%
Used vehicle retail			457,112				407,453				49,659			12.2
Used vehicle wholesale			62,219				59,753				2,466			4.1
Finance and insurance			67,521				59,758				7,763			13.0
Service, body and parts			189,285				171,704				17,581			10.2
Fleet and other			30,504				19,851				10,653			53.7
Total revenues		$	1,943,754			$	1,786,220			$	157,534			8.8
Gross profit
New vehicle retail		$	70,076			$	65,186			$	4,890			7.5	%
Used vehicle retail			55,683				50,231				5,452			10.9
Used vehicle wholesale			281				336				(55	)		(16.4	)
Finance and insurance			67,521				59,758				7,763			13.0
Service, body and parts			92,999				83,956				9,043			10.8
Fleet and other			83				445				(362	)		(81.3	)
Total gross profit		$	286,643			$	259,912			$	26,731			10.3
Gross margin
New vehicle retail			6.2	%			6.1	%			10 bps
Used vehicle retail			12.2				12.3				(10) bps
Used vehicle wholesale			0.5				0.6				(10) bps
Finance and insurance			100.0				100.0				- bps
Service, body and parts			49.1				48.9				20 bps
Fleet and other			0.3				2.2				(190) bps
Gross profit margin			14.7				14.6				10 bps
Unit sales
New vehicle retail			33,443				31,921				1,522			4.8	%
Used vehicle retail			23,355				21,430				1,925			9.0
Total retail units sold			56,798				53,351				3,447			6.5
Used vehicle wholesale			9,176				8,995				181			2.0
Average selling price
New vehicle retail		$	34,002			$	33,448			$	554			1.7	%
Used vehicle retail			19,572				19,013				559			2.9
Used vehicle wholesale			6,781				6,643				138			2.1
Average gross profit per unit
New vehicle retail		$	2,095			$	2,042			$	53			2.6	%
Used vehicle retail			2,384				2,344				40			1.7
Used vehicle wholesale			31				37				(6	)		(16.2	)
Finance and insurance			1,189				1,120				69			6.2
Total vehicle(1)			3,408				3,290				118			3.6

(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.
Consolidated Statements of Operations (Unaudited)
(In thousands except per share data)
			Twelve months ended												%
			December 31,								Increase				Increase
			2015				2014				(Decrease)				(Decrease)
Revenues:
New vehicle retail			$	4,552,301			$	3,077,670			$	1,474,631			47.9	%
Used vehicle retail				1,927,016				1,362,481				564,535			41.4
Used vehicle wholesale				261,530				195,699				65,831			33.6
Finance and insurance				283,018				190,381				92,637			48.7
Service, body and parts				738,990				512,124				226,866			44.3
Fleet and other				101,397				51,971				49,426			95.1
	Total revenues			7,864,252				5,390,326				2,473,926			45.9
Cost of sales:
New vehicle retail				4,271,931				2,879,486				1,392,445			48.4
Used vehicle retail				1,685,767				1,183,228				502,539			42.5
Used vehicle wholesale				257,073				192,053				65,020			33.9
Service, body and parts				375,069				262,388				112,681			42.9
Fleet and other				98,778				49,849				48,929			98.2
	Total cost of sales			6,688,618				4,567,004				2,121,614			46.5
Gross profit				1,175,634				823,322				352,312			42.8
Asset impairments				20,124				1,853				18,271			NM
SG&A expense				811,175				563,207				247,968			44.0
Depreciation and amortization				41,600				26,363				15,237			57.8
Income from operations				302,735				231,899				70,836			30.5
Floor plan interest expense				(19,534	)			(13,861	)			5,673			40.9
Other interest expense				(19,491	)			(10,742	)			8,749			81.4
Other (expense) income, net				(1,006	)			3,199				(4,205	)		NM
Income from continuing operations before income taxes				262,704				210,495				52,209			24.8
Income tax expense				(79,705	)			(74,955	)			4,750			6.3
Income tax rate				30.3	%			35.6	%
Income from continuing operations			$	182,999			$	135,540			$	47,459			35.0	%
Income from discontinued operations, net of tax				--				3,180				(3,180	)		NM
Net income			$	182,999			$	138,720			$	44,279			31.9	%
Diluted net income per share:
Continuing operations			$	6.91			$	5.14			$	1.77			34.4	%
Discontinued operations				--				0.12				(0.12	)		NM
Net income per share			$	6.91			$	5.26			$	1.65			31.4	%
Diluted shares outstanding				26,490				26,382				108			0.4	%

NM - not meaningful

Lithia Motors, Inc.
Key Performance Metrics (Unaudited)
		Twelve months ended												%
		December 31,								Increase				Increase
		2015				2014				(Decrease)				(Decrease)
Gross margin
New vehicle retail			6.2	%			6.4	%			(20) bps
Used vehicle retail			12.5				13.2				(70) bps
Used vehicle wholesale			1.7				1.9				(20) bps
Finance and insurance			100.0				100.0				- bps
Service, body and parts			49.2				48.8				40 bps
Fleet and other			2.6				4.1				(150) bps
Gross profit margin			14.9				15.3				(40) bps
Unit sales
New vehicle retail			137,486				91,104				46,382			50.9	%
Used vehicle retail			99,109				71,674				27,435			38.3
Total retail units sold			236,595				162,778				73,817			45.3
Used vehicle wholesale			38,167				27,918				10,249			36.7
Average selling price
New vehicle retail		$	33,111			$	33,782			$	(671	)		(2.0	)%
Used vehicle retail			19,443				19,009				434			2.3
Used vehicle wholesale			6,852				7,010				(158	)		(2.3	)
Average gross profit per unit
New vehicle retail		$	2,039			$	2,175			$	(136	)		(6.3	)%
Used vehicle retail			2,434				2,501				(67	)		(2.7	)
Used vehicle wholesale			117				131				(14	)		(10.7	)
Finance and insurance			1,196				1,170				26			2.2
Total vehicle(1)			3,420				3,511				(91	)		(2.6	)
Revenue mix
New vehicle retail			57.9	%			57.1	%
Used vehicle retail			24.5				25.3
Used vehicle wholesale			3.3				3.6
Finance and insurance, net			3.6				3.5
Service, body and parts			9.4				9.5
Fleet and other			1.3				1.0

		Adjusted						As reported
		Twelve months ended December 31,						Twelve months ended December 31,
Other metrics		2015			2014			2015			2014
SG&A as a % of revenue		10.2	%		10.3	%		10.3	%		10.4	%
SG&A as a % of gross profit		67.9			67.7			69.0			68.4
Operating profit as a % of revenue		4.3			4.4			3.8			4.3
Operating profit as a % of gross profit		28.5			29.1			25.8			28.2
Pretax margin		3.8			4.1			3.3			3.9
Net profit margin		2.4			2.5			2.3			2.5

(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)
		Twelve months ended												%
		December 31,								Increase				Increase
		2015				2014				(Decrease)				(Decrease)
Revenues
New vehicle retail		$	3,327,450			$	3,056,366			$	271,084			8.9	%
Used vehicle retail			1,528,803				1,350,813				177,990			13.2
Used vehicle wholesale			210,468				194,926				15,542			8.0
Finance and insurance			216,590				188,913				27,677			14.7
Service, body and parts			560,717				508,585				52,132			10.3
Fleet and other			72,984				51,971				21,013			40.4
Total revenues		$	5,917,012			$	5,351,574			$	565,438			10.6	%
Gross profit
New vehicle retail		$	205,802			$	196,354			$	9,448			4.8	%
Used vehicle retail			197,380				177,999				19,381			10.9
Used vehicle wholesale			4,022				3,782				240			6.3
Finance and insurance			216,590				188,913				27,677			14.7
Service, body and parts			274,855				247,900				26,955			10.9
Fleet and other			2,261				2,121				140			6.6
Total gross profit		$	900,910			$	817,069			$	83,841			10.3	%
Gross margin
New vehicle retail			6.2	%			6.4	%			(20) bps
Used vehicle retail			12.9				13.2				(30) bps
Used vehicle wholesale			1.9				1.9				- bps
Finance and insurance			100.0				100.0				- bps
Service, body and parts			49.0				48.7				30 bps
Fleet and other			3.1				4.1				(100) bps
Total gross profit			15.2				15.3				(10) bps
Unit sales
New vehicle retail			96,556				90,352				6,204			6.9	%
Used vehicle retail			77,552				70,967				6,585			9.3
Total retail units sold			174,108				161,319				12,789			7.9
Used vehicle wholesale			28,613				27,696				917			3.3
Average selling price
New vehicle retail		$	34,461			$	33,827			$	634			1.9	%
Used vehicle retail			19,713				19,034				679			3.6
Used vehicle wholesale			7,356				7,038				318			4.5
Average gross profit per unit
New vehicle retail		$	2,131			$	2,173			$	(42	)		(1.9	)%
Used vehicle retail			2,545				2,508				37			1.5
Used vehicle wholesale			141				137				4			2.9
Finance and insurance			1,244				1,171				73			6.2
Total vehicle(1)			3,583				3,515				68			1.9

(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												%
		December 31,								Increase				Increase
		2015				2014				(Decrease)				(Decrease)
Revenues
Domestic		$	761,780			$	673,459			$	88,321			13.1	%
Import			825,227				732,784				92,443			12.6
Luxury			406,581				385,774				20,807			5.4
Total segment revenues			1,993,588				1,792,017				201,571			11.2
Corporate and other			(306	)			1,290				(1,596	)		NM
Total revenues		$	1,993,282			$	1,793,307			$	199,975			11.2
Segment Income(1)
Domestic		$	23,672			$	22,360			$	1,312			5.9	%
Import			21,706				13,518				8,188			60.6
Luxury			10,627				11,202				(575	)		(5.1	)
			56,005				47,080				8,925			19.0
Corporate and other			26,187				23,365				2,822			12.1
Depreciation and amortization			(11,056	)			(8,964	)			(2,092	)		23.3
Other interest expense			(4,791	)			(4,848	)			57			(1.2	)
Other (expense) income, net			25				89				(64	)		(71.9	)
Income from continuing operations before income taxes		$	66,370			$	56,722			$	9,648			17.0

(1) Segment income for each of the segments is defined as Income from continuing operations before income taxes, less Depreciation and amortization, Other interest expense and Other income, net.

Retail New Vehicle Unit Sales
Domestic		11,074			10,017			1,057			10.6	%
Import		18,431			17,090			1,341			7.8
Luxury		4,906			4,987			(81	)		(1.6	)
Total		34,411			32,094			2,317			7.2
Allocated to management		(61	)		(30	)		(31	)		NM
Total retail new vehicle unit sales		34,350			32,064			2,286			7.1

NM - not meaningful

Lithia Motors, Inc.
Segment Operating Highlights (Unaudited)
		Twelve months ended												%
		December 31,								Increase				Increase
		2015				2014				(Decrease)				(Decrease)
Revenues
Domestic		$	3,034,849			$	2,566,473			$	468,376			18.2	%
Import			3,334,983				1,893,034				1,441,949			76.2
Luxury			1,490,632				926,856				563,776			60.8
Total segment revenues			7,860,464				5,386,363				2,474,101			45.9
Corporate and other			3,788				3,963				(175	)		(4.4	)
Total revenues		$	7,864,252			$	5,390,326			$	2,473,926			45.9
Segment Income(1)
Domestic		$	115,525			$	96,888			$	18,637			19.2	%
Import			98,371				50,870				47,501			93.4
Luxury			36,391				25,448				10,943			43.0
Total segment income			250,287				173,206				77,081			44.5
Corporate and other			74,514				71,195				3,319			4.7
Depreciation and amortization			(41,600	)			(26,363	)			(15,237	)		57.8
Other interest expense			(19,491	)			(10,742	)			(8,749	)		81.4
Other (expense) income, net			(1,006	)			3,199				(4,205	)		NM
Income from continuing operations before income taxes		$	262,704			$	210,495			$	52,209			24.8

(1) Segment income for each of the segments is defined as Income from continuing operations before income taxes, less Depreciation and amortization, Other interest expense and Other income, net.

Retail New Vehicle Unit Sales
Domestic		44,926			39,006			5,920			15.2	%
Import		75,245			41,722			33,523			80.3
Luxury		17,556			10,570			6,986			66.1
Total		137,727			91,298			46,429			50.9
Allocated to management		(241	)		(194	)		(47	)		NM
Total retail new vehicle unit sales		137,486			91,104			46,382			50.9

NM - not meaningful

Lithia Motors, Inc.
Other Highlights (Unaudited)
		As of
		December 31,		December 31,
		2015		2014
Days Supply(1)
New vehicle inventory		67		62
Used vehicle inventory		55		53

(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 December 31, 2015
Current ratio		Not less than 1.10 to 1		1.26 to 1
Fixed charge coverage ratio		Not less than 1.20 to 1		3.36 to 1
Leverage ratio		Not more than 5.00 to 1		1.79 to 1
Funded debt restriction		Not more than $600 million		$413.4 million

Lithia Motors, Inc.
Other Highlights (Unaudited)
		Three months ended December 31,						Twelve months ended December 31,
		2015			2014			2015			2014
New vehicle unit sales brand mix
Honda, Acura		22.2	%		22.7	%		22.4	%		13.2	%
Toyota, Lexus		19.7			19.3			19.9			15.6
Chrysler		18.4			17.8			18.8			24.6
General Motors		8.9			9.3			9.2			12.5
Subaru		7.4			7.0			6.9			8.7
BMW, Mini		6.9			7.9			5.9			6.8
Ford		4.9			4.1			4.7			5.6
Nissan		3.5			3.8			3.7			3.7
Volkswagen, Audi		2.9			3.0			3.1			2.8
Hyundai		1.9			1.6			2.1			2.5
Mercedes Benz		1.6			1.9			1.5			2.2
Kia		1.2			1.1			1.3			1.1
Other		0.5			0.5			0.5			0.7

		Three months ended December 31,						Twelve months ended December 31,
		2015			2014			2015			2014
Revenue geographic mix
California		22.0	%		21.4	%		21.6	%		15.8	%
Oregon		16.8			16.0			16.7			20.2
Texas		13.6			14.9			15.0			20.7
New Jersey		15.1			15.2			14.6			5.0
Montana		6.2			5.5			6.0			7.3
Alaska		5.4			5.4			5.4			6.6
Washington		5.5			5.9			5.2			6.8
Nevada		3.0			3.3			3.0			4.2
New York		2.8			2.8			2.9			0.9
Idaho		2.8			2.9			2.9			3.9
Iowa		2.7			3.1			2.8			3.9
Hawaii		1.9			1.3			1.5			1.5
North Dakota		1.4			1.4			1.5			1.9
New Mexico		0.8			0.9			0.9			1.3

		As of February 24, 2016
Current store count mix		# of stores		% of total
Chrysler		27		19.4	%
Honda, Acura		21		15.1
Toyota, Lexus		20		14.4
General Motors		17		12.2
BMW, Mini		11		7.9
Volkswagen, Audi		8		5.8
Ford		7		5.0
Subaru		8		5.8
Nissan		6		4.3
Hyundai		4		2.9
Mercedes Benz		4		2.9
Other		6		4.3

Lithia Motors, Inc.
Consolidated Balance Sheets (Unaudited)
(In thousands)
		December 31, 2015				December 31, 2014
Cash and cash equivalents		$	45,008			$	29,898
Trade receivables, net			308,462				295,379
Inventories, net			1,470,987				1,249,659
Other current assets			54,408				32,010
Assets held for sale			--				8,563
Total current assets		$	1,878,865			$	1,615,509
Property and equipment, net			876,660				816,745
Goodwill			213,220				199,375
Franchise value			157,699				150,892
Other non-current assets			100,855				98,411
Total assets		$	3,227,299			$	2,880,932
Floor plan notes payable		$	48,083			$	41,047
Floor plan notes payable: non trade			1,265,872				1,137,632
Current maturities of long-term debt			38,891				31,912
Trade payables			70,871				70,853
Accrued liabilities			167,108				153,661
Deferred income taxes			--				2,603
Liabilities related to assets held for sale			--				4,892
Total current liabilities		$	1,590,825			$	1,442,600
Long-term debt			606,463				609,066
Deferred revenue			66,734				54,403
Deferred income taxes			53,129				42,795
Other long-term liabilities			81,984				58,963
Total liabilities		$	2,399,135			$	2,207,827
Class A common stock			258,410				276,058
Class B common stock			316				319
Additional paid-in capital			38,822				29,775
Accumulated other comprehensive loss			(277	)			(926	)
Retained earnings			530,893				367,879
Total liabilities & stockholders' equity		$	3,227,299			$	2,880,932

Lithia Motors, Inc.
Summarized Cash Flow from Operations (Unaudited)
(In thousands)
			Twelve months ended
			December 31,
			2015				2014
Net income			$	182,999			$	138,720
Adjustments to reconcile net income to net cash provided by operating activities:
Asset impairments				20,124				1,853
Depreciation and amortization				41,600				26,363
Stock-based compensation				11,871				7,436
Loss on disposal of assets				203				271
Gain on sale of franchise				(5,919	)			(5,744	)
Deferred income taxes				12,341				13,355
Excess tax benefit from share-based payment arrangements				(5,012	)			(6,186	)
(Increase) decrease:
	Trade receivables, net			(13,047	)			(59,474	)
	Inventories			(197,079	)			(76,002	)
	Other assets			(31,620	)			(31,182	)
Increase (decrease):
	Floor plan notes payable, net			7,035				(647	)
	Trade payables			674				(3,105	)
	Accrued liabilities			16,273				(13,472	)
	Other long-term liabilities and deferred revenue			33,766				38,133
Net cash provided by operating activities			$	74,209			$	30,319

Lithia Motors, Inc.
Reconciliation of Non-GAAP Cash Flow from Operations (Unaudited)
(In thousands)
			Twelve months ended
			December 31,
Net cash provided by operating activities			2015				2014
As reported			$	74,209			$	30,319
	Floor plan notes payable, non-trade, net			136,201				440,341
	Borrowings on floor plan notes payable associated with acquired inventory			(25,642	)			(257,363	)
Adjusted			$	184,768			$	213,297

Lithia Motors, Inc.
Reconciliation of Certain Non-GAAP Financial Measures (Unaudited)
(In thousands, except for per share data)
		Three Months Ended December 31, 2015
		As reported				Asset Impairments				Equity investment fair value adjustment				Adjusted
Asset impairments		$	5,733			$	(1,603	)		$	(4,130	)		$	--
Income from operations			76,415				1,603				4,130				82,148
Other (expense) income, net			25				--				1,733				1,758
Income from continuing operations before income taxes		$	66,370			$	1,603			$	5,864			$	73,837
Income tax expense			(18,638	)			(605	)			(8,516	)			(27,759	)
Net income from continuing operations		$	47,732			$	998			$	(2,652	)		$	46,078
Diluted earnings per share from continuing operations		$	1.80			$	0.04			$	(0.10	)		$	1.74
Diluted share count			26,462

		Three Months Ended December 31, 2014
		As reported				Acquisition expenses				Equity investment fair value adjustment				Tax attributes				Adjusted
Asset impairments		$	1,853			$	--			$	(1,853	)		$	--			$	--
Selling, general and administrative			184,288				(819	)			--				--				183,469
Income from operations			66,016				819				1,853				--				68,688
Other (expense) income, net			90				--				1,160				--				1,250
Income from continuing operations before income taxes		$	56,722			$	819			$	3,013			$	--			$	60,554
Income tax expense			(15,583	)			(338	)			(6,506	)			(600	)			(23,027	)
Net income from continuing operations		$	41,139			$	481			$	(3,493	)		$	(600	)		$	37,527
Diluted earnings per share from continuing operations		$	1.55			$	0.02			$	(0.13	)		$	(0.02	)		$	1.42
Diluted share count			26,517

Lithia Motors, Inc.
Reconciliation of Certain Non-GAAP Financial Measures (Unaudited)
(In thousands, except for per share data)
		Twelve Months Ended December 31, 2015
		As reported				Disposal (gain)/ loss on sale of stores				Asset impairments				Transition agreement				Equity investment fair value adjustment				Adjusted
Asset impairments		$	20,124			$	--			$	(3,603	)		$	--			$	(16,521	)		$	--
Selling, general and administrative			811,175				5,919				--				(18,296	)			--				798,798
Income from operations			302,735				(5,919	)			3,603				18,296				16,521				335,236
Other (expense) income, net			(1,006	)			--				--				--				6,930				5,924
Income from continuing operations before income taxes		$	262,704			$	(5,919	)		$	3,603			$	18,296			$	23,451			$	302,135
Income tax expense			(79,705	)			2,309				(1,385	)			(6,507	)			(30,832	)			(116,120	)
Net income from continuing operations		$	182,999			$	(3,610	)		$	2,218			$	11,789			$	(7,381	)		$	186,015
Diluted earnings per share from continuing operations		$	6.91			$	(0.14	)		$	0.08			$	0.45			$	(0.28	)		$	7.02
Diluted share count			26,490

		Twelve Months Ended December 31, 2014
		As reported				Reserve adjustments				Acquisition expenses				Equity investment fair value adjustment				Tax attribute				Adjusted
Asset impairments		$	1,853			$	--			$	--			$	(1,853	)		$	--			$	--
Selling, general and administrative			563,207				(3,931	)			(1,865	)			--				--				557,411
Income from operations			231,899				3,931				1,865				1,853				--				239,548
Other (expense) income, net			3,198				--				--				1,160				--				4,358
Income from continuing operations before income taxes		$	210,495			$	3,931			$	1,865			$	3,013			$	--			$	219,304
Income tax expense			(74,955	)			(1,545	)			(720	)			(6,506	)			(867	)			(84,593	)
Net income from continuing operations		$	135,540			$	2,386			$	1,145			$	(3,493	)		$	(867	)		$	134,711
Diluted earnings per share from continuing operations		$	5.14			$	0.09			$	0.04			$	(0.13	)		$	(0.03	)		$	5.11
Diluted share count			26,382