Lithia Reports Adjusted EPS of $2.03 for Third Quarter of 2015; Revenues Increase 61%

MEDFORD, OR--(Marketwired - Oct 21, 2015) - Lithia Motors, Inc. (NYSE: LAD) reported adjusted net income of $53.6 million for the third quarter of 2015, the highest quarterly net income in company history and a 54% increase over the prior year period.

2015 third quarter adjusted net income was $2.03 per diluted share. This compares to 2014 third quarter adjusted net income of $34.9 million, or $1.32 per diluted share.

Unadjusted net income for the third quarter of 2015 was $43.4 million, or $1.64 per diluted share, compared to $34.5 million, or $1.31 per diluted share, for the third quarter of 2014. As shown in the attached non-GAAP reconciliation tables, the 2015 third quarter adjusted results exclude a $0.39 non-core net charge related to a previously announced employee transition agreement partially offset by an equity investment. The 2014 third quarter adjusted results exclude a $0.01 non-core net charge related to acquisition expenses partially offset by a non-core benefit resulting from a tax attribute.

Third quarter 2015 revenue increased $788 million, or 61%, to $2.1 billion from $1.3 billion for the third quarter of 2014.

Third Quarter-over-Quarter Operating Highlights:

• Total same store sales increased 12%
• New vehicle same store sales increased 11%
• Used vehicle retail same store sales increased 13%
• Service, body and parts same store sales increased 10%
• Same store F&I per unit increased $71 to $1,274
• Adjusted SG&A expense as a percentage of gross profit was 66.0%

"Our third quarter earnings were the highest in company history," said Bryan DeBoer, President and CEO. "Same store sales in all four business lines grew by double digits, led by a 13% increase in used vehicle sales. Total revenues increased 61% and adjusted earnings per share increased 54% over the prior year period. A robust new vehicle sales environment, improving supply of late model used vehicles, and the continued growth in our service, body and parts business is allowing our store leaders to unlock new opportunities to improve performance across our company. We remain positive on the overall outlook for both organic and acquisition growth in 2016."

For the first nine months of 2015, revenue from continuing operations increased 63% to $5.9 billion from $3.6 billion in 2014.

For the first nine months of 2015, adjusted net income per diluted share increased 43% to $5.28 from $3.69 for the first nine months of 2014. Unadjusted net income from continuing operations was $5.10 per diluted share for the first nine months of 2015, compared to $3.58 per diluted share for the first nine months of 2014.

Chris Holzshu, SVP and CFO, said, "Adjusted SG&A as a percentage of gross profit was 66.0% in the third quarter of 2015, bringing the first nine months of the year down to 67.8%, thanks to strong performance from both Lithia and DCH. For the third quarter, incremental throughput, or the percentage of additional same store gross profit dollars that we retain after deducting incremental selling costs, was 49.3% We are targeting consolidated SG&A as a percentage of gross profit in the mid-60s on a full year basis. Additionally, same store F&I per unit was $1,274 per unit, an increase of $71 over the prior year. We still believe opportunity remains to improve this number given continued focus by our store personnel."

Corporate Development
As previously announced, in the third quarter of 2015 we acquired a Ford store in Missoula, Montana, an Acura store in Honolulu, Hawaii, and a Subaru Hyundai GMC store in Great Falls, Montana. Also as previously announced, in October, 2015 we acquired a Chrysler Jeep Dodge Ram Fiat store in Concord, California. We estimate these stores will contribute approximately $175 million in annual revenues.

Bryan DeBoer, President and CEO, stated, "We have purchased or opened six stores in 2015 which will add cumulative annual revenues of approximately $220 million. We are actively seeking stores in both our Lithia exclusive market strategy and in our DCH metropolitan market strategy. The acquisition market remains robust and we anticipate further transactions for both Lithia and DCH in the near term."

Balance Sheet Update
We ended the second quarter with $33 million in cash and $163 million in availability on our credit facilities. Additionally, approximately $144 million of our operating real estate is currently unfinanced, which could provide an estimated additional $108 million in available liquidity, for total potential liquidity of $304 million.

Dividend Payment
Our Board of Directors has approved a dividend of $0.20 per share related to third quarter 2015 financial results. We will pay the dividend November 20, 2015 to shareholders of record on November 6, 2015.

2015 Outlook
We project 2015 fourth quarter earnings of $1.61 to $1.65 per diluted share and 2015 full year earnings of $6.89 to $6.93 per diluted share. Both projections are based on the following annual assumptions:

Continuing Operations Projections

• Total revenues of $7.8 to $7.9 billion
• New vehicle sales increasing 48%
• New vehicle gross margin of 6.0% to 6.2%
• Used vehicle sales increasing 41%
• Used vehicle gross margin of 12.4% to 12.6%
• Service body and parts sales increasing 44%
• Service body and parts gross margin of 48.8% to 49.2%
• Finance and insurance gross profit of $1,190 per unit
• Tax rate of 39.0%
• Average diluted shares outstanding of 26.5 million 

Same Store Projections

• Total revenues of $5.7 to $5.9 billion
• New vehicle same store sales increasing 9%
• Used vehicle same store sales increasing 12.5%
• Service body and parts same store sales increasing 10%
• Finance and insurance gross profit of $1,230 per unit

2016 Earnings Guidance
We project 2016 first quarter earnings of $1.46 to $1.50 per diluted share and 2016 full year earnings of $7.15 to $7.35 per diluted share. Both projections are based on the following annual assumptions:

• Total revenues of $8.3 to $8.4 billion
• New vehicle sales increasing 5.5%
• New vehicle gross margin of 5.9% to 6.1%
• Used vehicle sales increasing 6%
• Used vehicle gross margin of 12.4% to 12.6%
• Service body and parts sales increasing 5%
• 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 26.6 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.

Third Quarter Earnings Conference Call and Updated Presentation
The third quarter conference call may be accessed at 11:00 a.m. ET today by telephone at 877-407-8029. An updated presentation highlighting the third 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 135 stores in 14 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
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," "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:

• Future market conditions;
• Expected operating results, such as improved store performance; continued improvement of SG&A as a percentage of gross profit; generating 2015 fourth quarter earnings per share of $1.61 to $1.65 per diluted share and 2015 full year earnings of $6.89 to $6.93 per diluted share; generating 2016 first quarter earnings per share of $1.46 to $1.50 per diluted share and 2016 full year earnings of $7.15 to $7.35 per diluted share and all projections set forth under the headings "2015 Outlook", "Continuing Operations Projections", "Same Store Projections" and "2016 Earnings Guidance";
• Anticipated continued success and growth of DCH;
• Anticipated ability to improve store performance; ability to find accretive acquisitions; and additions of dealership locations to the company's portfolio in the future; 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 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											%
				September 30,								Increase			Increase
				2015				2014				(Decrease)			(Decrease)
Revenues:
New vehicle retail			$	1,227,080			$	732,121			$	494,959			67.6	%
Used vehicle retail				505,885				340,522				165,363			48.6
Used vehicle wholesale				69,472				48,853				20,619			42.2
Finance and insurance				76,633				46,855				29,778			63.6
Service, body and parts				189,796				120,772				69,024			57.2
Fleet and other				15,979				7,988				7,991			100.0
	Total revenues			2,084,845				1,297,111				787,734			60.7
Cost of sales:
New vehicle retail				1,149,923				684,473				465,450			68.0
Used vehicle retail				443,598				296,624				146,974			49.5
Used vehicle wholesale				68,892				48,349				20,543			42.5
Service, body and parts				95,846				62,351				33,495			53.7
Fleet and other				15,399				7,474				7,925			106.0
	Total cost of sales			1,773,658				1,099,271				674,387			61.3
Gross profit				311,187				197,840				113,347			57.3
Asset impairments				4,131				-				4,131			NM
SG&A expense				223,728				131,627				92,101			70.0
Depreciation and amortization				10,531				6,067				4,464			73.6
Income from operations				72,797				60,146				12,651			21.0
Floor plan interest expense				(4,951	)			(3,127	)			1,824			58.3
Other interest expense				(4,900	)			(2,051	)			2,849			138.9
Other (expense) income, net				(307	)			1,027				(1,334	)		NM
Income before income taxes				62,639				55,995				6,644			11.9
Income tax expense				(19,248	)			(21,458	)			2,210			10.3
Income tax rate				30.7	%			38.3	%
Net income			$	43,391			$	34,537			$	8,854			25.6	%
Diluted net income per share:
Net income per share			$	1.64			$	1.31			$	0.33			25.2	%
Diluted shares outstanding				26,480				26,359				121			0.5	%
NM - not meaningful

Lithia Motors, Inc.
Key Performance Metrics (Unaudited)
		Three months ended												%
		September 30,								Increase				Increase
		2015				2014				(Decrease)				(Decrease)
Gross margin
New vehicle retail			6.3	%			6.5	%			(20) bps
Used vehicle retail			12.3				12.9				(60) bps
Used vehicle wholesale			0.8				1.0				(20) bps
Finance and insurance			100.0				100.0				- bps
Service, body and parts			49.5				48.4				110 bps
Fleet and other			3.6				6.4				(280) bps
Gross profit margin			14.9				15.3				(40) bps
Unit sales
New vehicle retail			37,401				21,320				16,081			75.4	%
Used vehicle retail			26,206				17,710				8,496			48.0
Total retail units sold			63,607				39,030				24,577			63.0
Used vehicle wholesale			10,239				6,989				3,250			46.5
Average selling price
New vehicle retail		$	32,809			$	34,340			$	(1,531	)		(4.5	)%
Used vehicle retail			19,304				19,228				76			0.4
Used vehicle wholesale			6,785				6,990				(205	)		(2.9	)
Average gross profit per unit
New vehicle retail		$	2,063			$	2,235			$	(172	)		(7.7	)%
Used vehicle retail			2,377				2,479				(102	)		(4.1	)
Used vehicle wholesale			57				72				(15	)		(20.8	)
Finance and insurance			1,205				1,200				5			0.4
Total vehicle(1)			3,406				3,559				(153	)		(4.3	)
Revenue mix
New vehicle retail			58.8	%			56.4	%
Used vehicle retail			24.3				26.3
Used vehicle wholesale			3.3				3.8
Finance and insurance, net			3.7				3.6
Service, body and parts			9.1				9.3
Fleet and other			0.8				0.6
		Adjusted								As reported
		Three months ended September 30,								Three months ended September 30,
Other metrics			2015				2014				2015			2014
SG&A as a % of revenue			9.9	%			10.1	%			10.7	%		10.1	%
SG&A as a % of gross profit			66.0				66.1				71.9			66.5
Operating profit as a % of revenue			4.6				4.7				3.5			4.6
Operating profit as a % of gross profit			30.6				30.8				23.4			30.4
Pretax margin			4.2				4.4				3.0			4.3
Net profit margin			2.6				2.7				2.1			2.7

(1) - includes the sales and gross profit related to new, used retail, used wholesale and finance and insurance and unit sales for new and used retail

Lithia Motors, Inc.
Same Store Operating Highlights (Unaudited)
			Three months ended											%
			September 30,								Increase			Increase
			2015				2014				(Decrease)			(Decrease)
Revenues
New vehicle retail		$	810,720			$	727,924			$	82,796			11.4	%
Used vehicle retail			381,773				338,400				43,373			12.8
Used vehicle wholesale			54,088				48,600				5,488			11.3
Finance and insurance			54,099				46,607				7,492			16.1
Service, body and parts			132,331				120,099				12,232			10.2
Fleet and other			8,137				7,990				147			1.8
Total revenues		$	1,441,148			$	1,289,620			$	151,528			11.7
Gross profit
New vehicle retail		$	50,730			$	47,211			$	3,519			7.5	%
Used vehicle retail			49,016				43,716				5,300			12.1
Used vehicle wholesale			690				544				146			26.8
Finance and insurance			54,099				46,607				7,492			16.1
Service, body and parts			64,822				58,100				6,722			11.6
Fleet and other			563				516				47			9.1
Total gross profit		$	219,920			$	196,694			$	23,226			11.8
Gross margin
New vehicle retail			6.3	%			6.5	%			(20) bps
Used vehicle retail			12.8				12.9				(10) bps
Used vehicle wholesale			1.3				1.1				20 bps
Finance and insurance			100.0				100.0				- bps
Service, body and parts			49.0				48.4				60 bps
Fleet and other			6.9				6.5				40 bps
Gross profit margin			15.3				15.3				- bps
Unit sales
New vehicle retail			23,219				21,163				2,056			9.7	%
Used vehicle retail			19,255				17,566				1,689			9.6
Total retail units sold			42,474				38,729				3,745			9.7
Used vehicle wholesale			7,226				6,916				310			4.5
Average selling price
New vehicle retail		$	34,916			$	34,396			$	520			1.5	%
Used vehicle retail			19,827				19,265				562			2.9
Used vehicle wholesale			7,485				7,027				458			6.5
Average gross profit per unit
New vehicle retail		$	2,185			$	2,231			$	(46	)		(2.1	)%
Used vehicle retail			2,546				2,489				57			2.3
Used vehicle wholesale			96				79				17			21.5
Finance and insurance			1,274				1,203				71			5.9
Total vehicle(1)			3,638				3,565				73			2.0
(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)
			Nine months ended															%
			September 30,										Increase					Increase
			2015					2014					(Decrease)					(Decrease)
Revenues:
New vehicle retail			$	3,384,408				$	2,006,127				$	1,378,281				68.7	%
Used vehicle retail				1,457,617					952,890					504,727				53.0
Used vehicle wholesale				198,476					135,832					62,644				46.1
Finance and insurance				213,700					130,324					83,376				64.0
Service, body and parts				545,966					339,726					206,240				60.7
Fleet and other				70,803					32,120					38,683				120.4
	Total revenues			5,870,970					3,597,019					2,273,951				63.2
Cost of sales:
New vehicle retail				3,176,135					1,873,461					1,302,674				69.5
Used vehicle retail				1,273,195					824,129					449,066				54.5
Used vehicle wholesale				194,329					132,493					61,836				46.7
Service, body and parts				276,828					174,291					102,537				58.8
Fleet and other				68,272					30,444					37,828				124.3
	Total cost of sales			4,988,759					3,034,818					1,953,941				64.4
Gross profit				882,211					562,201					320,010				56.9
Asset impairments				14,391					-					14,391				NM
SG&A expense				610,956					378,919					232,037				61.2
Depreciation and amortization				30,544					17,399					13,145				75.6
Income from operations				226,320					165,883					60,437				36.4
Floor plan interest expense				(14,255	)				(9,326	)				4,929				52.9
Other interest expense				(14,700	)				(5,894	)				8,806				149.4
Other (expense) income, net				(1,030	)				3,110					(4,140	)			NM
Income from continuing operations before income taxes				196,334					153,773					42,561				27.7
Income tax expense				(61,067	)				(59,372	)				1,695				2.9
Income tax rate				31.1	%				38.6	%
Income from continuing operations			$	135,267				$	94,401				$	40,866				43.3	%
Income from discontinued operations, net of tax				-					3,179					(3,179	)			NM
Net income			$	135,267				$	97,580				$	37,687				38.6	%
Diluted net income per share:
Continuing operations			$	5.10				$	3.58				$	1.52				42.5	%
Discontinued operations				-					0.13					(0.13	)			NM
Net income per share			$	5.10				$	3.71				$	1.39				37.5	%
Diluted shares outstanding				26,500					26,337					163				0.6	%
NM - not meaningful

Lithia Motors, Inc.
Key Performance Metrics (Unaudited)
		Nine months ended												%
		September 30,								Increase				Increase
		2015				2014				(Decrease)				(Decrease)
Gross margin
New vehicle retail			6.2				% 6.6				% (40) bps
Used vehicle retail			12.7				13.5				(80) bps
Used vehicle wholesale			2.1				2.5				(40) bps
Finance and insurance			100.0				100.0				- bps
Service, body and parts			49.3				48.7				60 bps
Fleet and other			3.6				5.2				(160) bps
Gross profit margin			15.0				15.6				(60) bps
Unit sales
New vehicle retail			103,136				59,040				44,096			74.7	%
Used vehicle retail			75,099				50,112				24,987			49.9
Total retail units sold			178,235				109,152				69,083			63.3
Used vehicle wholesale			28,822				18,889				9,933			52.6
Average selling price
New vehicle retail		$	32,815			$	33,979			$	(1,164	)		(3.4)	%
Used vehicle retail			19,409				19,015				394			2.1
Used vehicle wholesale			6,886				7,191				(305	)		(4.2	)
Average gross profit per unit
New vehicle retail		$	2,019			$	2,247			$	(228	)		(10.1)	%
Used vehicle retail			2,456				2,569				(113	)		(4.4	)
Used vehicle wholesale			144				177				(33	)		(18.6	)
Finance and insurance			1,199				1,194				5			0.4
Revenue mix
New vehicle retail			57.6	%			55.8	%
Used vehicle retail			24.8				26.5
Used vehicle wholesale			3.4				3.8
Finance and insurance, net			3.6				3.6
Service, body and parts			9.3				9.4
Fleet and other			1.3				0.9
		Adjusted								As reported
		Nine months ended September 30,								Nine months ended September 30,
Other metrics			2015				2014				2015			2014
SG&A as a % of revenue			10.2	%			10.4	%			10.4	%		10.5	%
SG&A as a % of gross profit			67.8				66.5				69.3			67.4
Operating profit as a % of revenue			4.3				4.8				3.9			4.6
Operating profit as a % of gross profit			28.7				30.4				25.7			29.5
Pretax margin			3.9				4.4				3.3			4.3
Net profit margin			2.4				2.7				2.3			2.6

Lithia Motors, Inc.
Same Store Operating Highlights (Unaudited)
			Nine months ended											%
			September 30,								Increase			Increase
			2015				2014				(Decrease)			(Decrease)
Revenues
New vehicle retail		$	2,190,337			$	1,988,665			$	201,672			10.1	%
Used vehicle retail			1,071,691				943,360				128,331			13.6
Used vehicle wholesale			148,249				135,173				13,076			9.7
Finance and insurance			148,232				129,155				19,077			14.8
Service, body and parts			371,432				336,881				34,551			10.3
Fleet and other			42,480				32,120				10,360			32.3
Total revenues		$	3,972,421			$	3,565,354			$	407,067			11.4
Gross profit
New vehicle retail		$	136,224			$	131,168			$	5,056			3.9	%
Used vehicle retail			141,666				127,768				13,898			10.9
Used vehicle wholesale			3,741				3,446				295			8.6
Finance and insurance			148,232				129,155				19,077			14.8
Service, body and parts			181,850				163,944				17,906			10.9
Fleet and other			2,177				1,676				501			29.9
Total gross profit		$	613,890			$	557,157			$	56,733			10.2
Gross margin
New vehicle retail			6.2	%			6.6	%			(40) bps
Used vehicle retail			13.2				13.5				(30) bps
Used vehicle wholesale			2.5				2.5				- bps
Finance and insurance			100.0				100.0				- bps
Service, body and parts			49.0				48.7				30 bps
Fleet and other			5.1				5.2				(10) bps
Total gross profit			15.5				15.6				(10) bps
Unit sales
New vehicle retail			63,113				58,431				4,682			8.0	%
Used vehicle retail			54,197				49,537				4,660			9.4
Total retail units sold			117,310				107,968				9,342			8.7
Used vehicle wholesale			19,437				18,701				736			3.9
Average selling price
New vehicle retail		$	34,705			$	34,034			$	671			2.0	%
Used vehicle retail			19,774				19,044				730			3.8
Used vehicle wholesale			7,627				7,228				399			5.5
Average gross profit per unit
New vehicle retail		$	2,158			$	2,245			$	(87	)		(3.9	)%
Used vehicle retail			2,614				2,579				35			1.4
Used vehicle wholesale			192				184				8			4.3
Finance and insurance			1,264				1,196				68			5.7
Total vehicle(1)			3,664				3,626				38			1.0
(1) - includes the sales and gross profit related to new, used retail, used wholesale and finance and insurance and unit sales for new and used retail

Lithia Motors, Inc.
Segment Operating Highlights (Unaudited)
	Three months ended									%
	September 30,						Increase			Increase
	2015			2014			(Decrease)			(Decrease)
Revenues
Domestic	$	814,155		$	684,835		$	129,320		18.9	%
Import		893,465			412,136			481,329		116.8
Luxury		374,390			196,646			177,744		90.4
Total segment revenues		2,082,010			1,293,617			788,393		60.9
Corporate and other		2,835			3,494			(659	)	(18.9	)
Total revenues	$	2,084,845		$	1,297,111		$	787,734		60.7
Segment Income(1)
Domestic	$	33,176		$	26,659		$	6,517		24.4	%
Import		30,506			13,407			17,099		127.5
Luxury		8,140			6,227			1,913		30.7
		71,822			46,293			25,529		55.1
Corporate and other		6,555			16,793			(10,238	)	(61.0	)
Depreciation and amortization		(10,531	)		(6,067	)		4,464		73.6
Other interest expense		(4,900	)		(2,051	)		2,849		138.9
Other (expense) income, net		(307	)		1,027			1,334		NM
Income from continuing operations before income taxes	$	62,639		$	55,995		$	6,644		11.9
(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		12,361			10,398			1,963		18.9	%
Import		20,658			8,921			11,737		131.6
Luxury		4,455			2,006			2,449		122.1
Total		37,474			21,325			16,149		75.7
Allocated to management		(73	)		(5	)		(68	)	NM
Total retail new vehicle unit sales		37,401			21,320			16,081		75.4
NM - not meaningful

Lithia Motors, Inc.
Segment Operating Highlights (Unaudited)
	Nine months ended									%
	September 30,							Increase		Increase
	2015				2014			(Decrease)		(Decrease)
Revenues
Domestic	$	2,272,914			$1,893,014			$379,900		20.1	%
Import		2,507,181			1,160,250			1,346,931		116.1
Luxury		1,083,680			541,082			542,598		100.3
Total segment revenues		5,863,775			3,594,346			2,269,429		63.1
Corporate and other		7,195			2,673			4,522		169.2
Total revenues	$	5,870,970			$3,597,019			$2,273,951		63.2
Segment Income(1)
Domestic	$	91,691			$			17,163		23.0	%
Import		73,963			37,351			36,612		98.0
Luxury		25,360			14,246			11,114		78.0
Total segment income		191,014			126,125			64,889		51.4
Corporate and other		51,594			47,831			3,764		7.9
Depreciation and amortization		(30,544	)		(17,399	)		13,145		75.6
Other interest expense		(14,700	)		(5,894	)		8,806		149.4
Other (expense) income, net		(1,030	)		3,110			4,140		(133.1	)
Income from continuing operations before income taxes	$	196,334			$153,773			$42,562		27.7
(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		33,852			28,989			4,863		16.8	%
Import		56,814			24,632			32,182		130.7
Luxury		12,650			5,583			7,067		126.6
Total		103,316			59,204			44,112		74.5
Allocated to management		(180	)		(164	)		(16	)	9.8
Total retail new vehicle unit sales		103,136			59,040			44,096		74.7
NM - not meaningful

Lithia Motors, Inc.
Other Highlights (Unaudited)
	As of
	September 30,		December 31,		September 30,
	2015		2014		2014
Days Supply(1)
New vehicle inventory	64		62		72
Used vehicle inventory	54		53		54
(1) Days supply calculated based on current inventory levels, excluding in-transit vehicles, and a 30-day historical cost of sales level.

Financial covenants
		Requirement		As of September 30, 2015
Current ratio		Not less than 1.10 to 1		1.25 to 1
Fixed charge coverage ratio		Not less than 1.20 to 1		3.38 to 1
Leverage ratio		Not more than 5.00 to 1		1.84 to 1
Funded debt restriction		Not more than $600 million		$424.0 million

Lithia Motors, Inc.
Other Highlights (Unaudited)
	Three months ended September 30,				Nine months ended September 30,
	2015		2014		2015		2014
New vehicle unit sales brand mix
Honda Acura	22.5	%	8.0	%	22.5	%	8.0	%
Chrysler	18.5		28.1		18.9		28.3
Toyota	18.8		13.4		18.9		13.7
General Motors	9.5		14.2		9.3		14.2
Subaru	6.7		9.9		6.8		9.6
BMW, MINI	5.5		6.1		5.6		6.2
Ford	5.2		6.5		4.6		6.4
Nissan	4.0		3.5		3.8		3.6
Volkswagen, Audi	3.1		2.8		3.1		2.6
Hyundai	2.1		3.0		2.1		3.1
Mercedes	1.4		2.4		1.5		2.3
Kia	1.3		1.3		1.3		1.1
Lexus	0.9		-		1.0		-
Other	0.5		0.8		0.6		0.9
	Three months ended September 30,				Nine months ended September 30,
	2015		2014		2015		2014
Revenue geographic mix
California	21.3	%	12.8	%	21.4	%	13.0	%
Oregon	16.9		22.7		16.7		22.3
Texas	14.9		22.8		15.4		23.5
New Jersey	14.4		-		14.4		-
Montana	6.3		8.2		6.0		8.2
Alaska	5.4		7.5		5.4		7.3
Washington	5.1		7.2		5.1		7.2
Nevada	3.1		4.6		3.0		4.6
New York	2.9		-		3.0		-
Idaho	2.9		4.4		2.9		4.4
Iowa	3.0		4.3		2.9		4.3
North Dakota	1.4		2.1		1.5		2.2
Hawaii	1.5		2.0		1.4		1.6
New Mexico	0.9		1.4		0.9		1.4
	As of October 21, 2015
Current store count mix	# of stores		% of total
Chrysler	26		19.2	%
Honda, Acura	21		15.6
Toyota	19		14.1
General Motors	17		12.6
BMW, MINI	11		8.1
Volkswagen, Audi	8		5.9
Ford	7		5.2
Subaru	7		5.2
Nissan	6		4.4
Hyundai	5		3.7
Mercedes	4		3.0
Other	4		3.0

Lithia Motors, Inc.
Consolidated Balance Sheets (Unaudited)
(In thousands)
	September 30, 2015			December 31, 2014
Cash and cash equivalents	$	32,707		$	29,898
Trade receivables, net		285,730			295,379
Inventories, net		1,386,960			1,249,659
Other current assets		32,640			32,010
Assets held for sale		-			8,563
Total current assets	$	1,738,037		$	1,615,509
Property and equipment, net		854,077			816,745
Goodwill		210,627			199,375
Franchise value		155,187			150,892
Other non-current assets		101,901			98,411
Total assets	$	3,059,829		$	2,880,932
Floor plan notes payable	$	46,651		$	41,047
Floor plan notes payable: non trade		1,168,223			1,137,632
Current maturities of long-term debt		38,745			31,912
Trade payables		77,723			70,853
Accrued liabilities		167,135			153,661
Deferred income taxes		3,792			2,603
Liabilities related to assets held for sale		-			4,892
Total current liabilities	$	1,502,269		$	1,442,600
Long-term debt		591,231			609,066
Deferred revenue		63,238			54,403
Deferred income taxes		29,013			42,795
Other long-term liabilities		86,365			58,963
Total liabilities	$	2,272,116		$	2,207,827
Class A common stock		263,531			276,058
Class B common stock		319			319
Additional paid-in capital		35,917			29,775
Accumulated other comprehensive loss		(461	)		(926	)
Retained earnings		488,407			367,879
Total liabilities & stockholders' equity	$	3,059,829		$	2,880,932

Lithia Motors, Inc.
Summarized Cash Flow from Operations (Unaudited)
(In thousands)
		Nine months ended
		September 30,
		2015			2014
Net income		$	135,267		$	97,580
Adjustments to reconcile net income to net cash provided by operating activities:
Asset Impairment			14,391			-
Depreciation and amortization			30,544			17,399
Stock-based compensation			8,579			5,054
Loss on disposal of assets			27			307
Gain on sale of franchise			(5,919	)		(5,744	)
Deferred income taxes			(7,955	)		4,725
Excess tax benefit from share-based payment arrangements			(4,923	)		(6,160	)
(Increase) decrease:
	Trade receivables, net		9,685			(11,336	)
	Inventories		(132,407	)		(44,349	)
	Other assets		(5,339	)		(13,700	)
Increase (decrease):
	Floor plan notes payable, net		5,604			1,132
	Trade payables		7,768			4,246
	Accrued liabilities		16,949			21,914
	Other long-term liabilities and deferred revenue		34,651			16,634
Net cash provided by operating activities		$	106,922		$	87,702

Lithia Motors, Inc.
Reconciliation of Non-GAAP Cash Flow from Operations (Unaudited)
(In thousands)
		Nine months ended
		September 30,
Net cash provided by operating activities		2015			2014
As reported		$	106,922		$	87,702
	Floor plan notes payable, non-trade, net		36,204			30,375
Adjusted		$	143,126		$	118,077

Lithia Motors, Inc.
Reconciliation of Certain Non-GAAP Financial Measures (Unaudited)
(In thousands, except for per share data)
	Three Months Ended September 30, 2015
	As reported			Transition agreement			Equity investment fair value adjustment			Adjusted
Other asset impairments	$	4,131		$	-		$	(4,131	)	$	-
Selling, general and administrative		223,728			(18,296	)		-			205,432
Income from operations		72,797			18,296			4,131			95,224
Other (expense) income, net		(307	)		-			1,732			1,425
Income from continuing operations before income taxes	$	62,639		$	18,296		$	5,862		$	86,797
Income tax expense		(19,248	)		(6,507	)		(7,414	)		(33,169	)
Net income from continuing operations	$	43,391		$	11,789		$	(1,552	)	$	53,628
Diluted earnings per share from continuing operations	$	1.64		$	0.45		$	(0.06	)	$	2.03
Diluted share count		26,480

		Three Months Ended September 30, 2014
		As reported				Acquisition expenses			Tax attributes			Adjusted
Selling, general and administrative		$	131,627		$	(883	)		$	-		$	130,744
Income from operations			60,146			883				-			61,029
Income from continuing operations before income taxes		$	55,995		$	883			$	-		$	56,878
Income tax expense			(21,458	)		(318	)			(194	)		(21,971	)
Net income from continuing operations		$	34,537		$	565			$	(194	)	$	34,908
Diluted earnings per share from continuing operations		$	1.31		$	0.02			$	(0.01	)	$	1.32
Diluted share count			26,359

Lithia Motors, Inc.
Reconciliation of Certain Non-GAAP Financial Measures (Unaudited)
(In thousands, except for per share data)
		Nine Months Ended September 30, 2015
		As reported				Disposal (gain)/ loss on sale of stores		Asset impairments				Transition agreement					Equity investment fair value adjustment					Adjusted
Other asset impairments		$	14,391			$	-			$	(2,000	)		$	-			$	(12,391	)		$	-
Selling, general and administrative			610,956				5,919				-				(18,296	)			-				598,579
Income from operations			226,320				(5,919	)			2,000				18,296				12,391				253,088
Other (expense) income, net			(1,031	)			-				-				-				5,196				4,165
Income from continuing operations before income taxes		$	196,334			$	(5,919	)		$	2,000			$	18,296			$	17,587			$	228,298
Income tax expense			(61,067	)			2,309				(780	)			(6,507	)			(22,316	)			(88,361	)
Net income from continuing operations		$	135,267			$	(3,610	)		$	1,220			$	11,789			$	(4,729	)		$	139,937
Diluted earnings per share from continuing operations		$	5.10			$	(0.14	)		$	0.05			$	0.45			$	(0.18	)		$	5.28
Diluted share count			26,500

		Nine Months Ended September 30, 2014
		As reported			Reserve adjustments			Acquisition expenses			Tax attribute			Adjusted
Selling, general and administrative		$	378,919		$	(3,931	)	$	(1,046	)	$	-		$	373,942
Income from operations			165,883			3,931			1,046			-			170,860
Income from continuing operations before income taxes		$	153,773		$	3,931		$	1,046		$	-		$	158,750
Income tax expense			(59,372	)		(1,545	)		(382	)		(267	)		(61,566	)
Net income from continuing operations		$	94,401		$	2,386		$	664		$	(267	)	$	97,184
Diluted earnings per share from continuing operations		$	3.58		$	0.09		$	0.03		$	(0.01	)	$	3.69
Diluted share count			26,337