Lithia Motors Reports Adjusted EPS of $1.42 for Fourth Quarter 2014 and $5.11 for Full Year 2014; Fourth Quarter Revenue Increases 75%

MEDFORD, OR--(Marketwired - Feb 25, 2015) - Lithia Motors, Inc. (NYSE: LAD) reported the highest fourth quarter and full year adjusted net income in Company history and increased adjusted net income from continuing operations 46% for the fourth quarter 2014 over the prior year period.

2014 fourth quarter adjusted net income from continuing operations was $37.5 million, or $1.42 per diluted share. This compares to 2013 fourth quarter adjusted net income from continuing operations of $25.7 million, or $0.98 per diluted share.

Unadjusted net income from continuing operations for the fourth quarter of 2014 was $41.1 million, or $1.55 per diluted share, compared to $27.2 million, or $1.03 per diluted share, for the fourth quarter of 2013. As shown in the attached non-GAAP reconciliation tables, the 2014 fourth quarter per share adjusted results from continuing operations exclude the following non-core items: a $0.02 charge for acquisition expenses; a $0.13 benefit related to the equity investment associated with the new market tax credit transaction; and a $0.02 benefit from a tax attribute. The 2013 fourth quarter per share adjusted results from continuing operations exclude the following non-core items: a $0.06 benefit for a gain on a sale of land; a $0.05 net benefit from non-core tax attributes; and a $0.06 expense related to an adjustment to a legal reserve associated with a lawsuit filed in 2006 and settled in 2013.

Fourth quarter 2014 revenue from continuing operations increased $768 million, or 75%, to $1.8 billion from $1.0 billion for the fourth quarter of 2013.

Fourth Quarter-over-Quarter Operating Highlights:

• Total same store sales increased 14%
• New vehicle same store sales increased 12%
• Used vehicle retail same store sales increased 16%
• Service, body and parts same store sales increased 12%
• Same store F&I per unit increased $46 to $1,214
• Adjusted SG&A expense as a percentage of gross profit was 70.3% (includes DCH)

For the full year of 2014, revenue from continuing operations increased 35% to $5.4 billion from $4.0 billion in 2014.

Full Year-over-Year Operating Highlights:

• Total same store sales increased 12%
• New vehicle same store sales increased 11%
• Used vehicle retail same store sales increased 15%
• Service, body and parts same store sales increased 11%
• Same store F&I per unit increased $83 to $1,205
• Adjusted SG&A expense as a percentage of gross profit was 67.7% (includes DCH)

"We had a strong finish to 2014," said Bryan DeBoer, President and CEO. "Our store leaders responded to shifting market dynamics to deliver solid results. We grew overall revenue 35% for the year and the DCH integration is progressing well. We achieved our second earnings per share milestone by exceeding $5.00 per share in 2014 and see a clear path to achieving $6.00 per share. We also have established a fourth milestone objective of $7.00 per share."

For the full year of 2014, adjusted net income per diluted share from continuing operations increased 28% to $5.11 from $3.99 for the full year of 2013. Unadjusted, net income from continuing operations was $5.14 per diluted share for the full year of 2014, compared to $4.02 per diluted share for the full year of 2013.

Chris Holzshu, SVP and CFO, said, "We finished 2014 with adjusted SG&A as a percentage of gross profit at 67.7%. The fourth quarter of 2014 was at 70.3% due to the impact of the DCH stores on our overall result. We target SG&A as a percentage of gross profit to continue to improve as we integrate the 36 stores added in 2014. For the full year, incremental throughput, or the percentage of additional same store gross profit dollars that we retain after deducting incremental selling costs, was 42.9%. Our stores remain focused on maintaining incremental throughput of 45% to 50%, which will continue to lever our SG&A expense going forward."

Corporate Development
In January 2015, Lithia opened Subaru of Clearlake, Texas. The store is a new franchise we were awarded from Subaru. We estimate the store will contribute $45 million in annual revenues.

Bryan DeBoer, President and CEO, stated, "We significantly increased the size of Lithia in 2014, adding annualized revenues in excess of $2.7 billion. We acquired 35 stores and opened one franchise in 2014, and are pleased to have already opened a new store in the Houston, Texas market with Clearlake Subaru. The acquisition market remains active and we continue to seek domestic, import and luxury franchises in cities ranging from mid-sized regional markets to metropolitan markets across the United States."

Balance Sheet Update
We ended the fourth quarter with $30 million in cash and $70 million in available credit on our credit facilities. Additionally, approximately $146 million of our operating real estate is currently unfinanced, which could provide an estimated additional $109 million in available liquidity, for total potential liquidity of $209 million.

Dividend Payment
Our Board of Directors has approved a dividend of $0.16 per share related to fourth quarter 2014 financial results. We will pay the dividend March 27, 2015 to shareholders of record on March 13, 2015.

2015 Outlook
We project 2015 first quarter earnings of $1.18 to $1.21 per diluted share and 2015 full year earnings of $5.95 to $6.05 per diluted share. Both projections are based on the following annual assumptions:

Continuing Operations Projections

• Total revenues of $7.5 to $7.7 billion
• New vehicle sales increasing 41.5%
• New vehicle gross margin of 5.9% to 6.1%
• Used vehicle sales increasing 36.5%
• Used vehicle gross margin of 12.3% to 12.5%
• Service body and parts sales increasing 41.0%
• Service body and parts gross margin of 48.4% to 48.6%
• Finance and insurance gross profit of $1,150 per unit
• Tax rate of 40%
• Average diluted shares outstanding of 26.5 million
• Full year capital expenditures are $120 million

Same Store Projections

• Total revenues of $5.2 to $5.4 billion
• New vehicle same store sales increasing 7.0%
• Used vehicle same store sales increasing 10.5%
• Service body and parts same store sales increasing 8.5%
• Finance and insurance gross profit of $1,200 per unit

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 30 brands of new vehicles and all brands of used vehicles at 130 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, maintaining incremental throughput between 45% and 50%, generating earnings per share of $6.00 and all projections set forth under the heading "2015 Outlook";
• The increase in our annual revenues that we estimate will result from the dealership that we acquired as set forth under the heading "Corporate Development";
• Anticipated availability of liquidity from our unfinanced operating real estate; and
• Anticipated levels of capital expenditures in the future.

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
			2014				2013				(Decrease)				(Decrease)
Revenues:
New vehicle retail			$	1,071,543			$	589,535			$	482,008			81.8	%
Used vehicle retail				409,591				253,797				155,794			61.4
Used vehicle wholesale				59,867				37,642				22,225			59.0
Finance and insurance				60,057				35,994				24,063			66.9
Service, body and parts				172,398				100,797				71,601			71.0
Fleet and other				19,851				7,109				12,742			179.2
	Total revenues			1,793,307				1,024,874				768,433			75.0
Cost of sales:
New vehicle retail				1,006,025				550,438				455,587			82.8
Used vehicle retail				359,099				218,446				140,653			64.4
Used vehicle wholesale				59,560				37,310				22,250			59.6
Service, body and parts				88,097				52,690				35,407			67.2
Fleet and other				19,405				6,697				12,708			189.8
	Total cost of sales			1,532,186				865,581				666,605			77.0
Gross profit				261,121				159,293				101,828			63.9
Asset impairment				1,853				-				1,853			NM
SG&A expense				184,288				108,416				75,872			70.0
Depreciation and amortization				8,964				5,316				3,648			68.6
Income from operations				66,016				45,561				20,455			44.9
Floor plan interest expense				(4,535	)			(2,979	)			1,556			52.2
Other interest expense				(4,848	)			(2,115	)			2,733			129.2
Other income, net				89				773				(684	)		(88.5	)
Income from continuing operations before income taxes				56,722				41,240				15,482			37.5
Income tax expense				(15,582	)			(14,080	)			1,502			10.7
Income tax rate				27.5	%			34.1	%
Income from continuing operations			$	41,140			$	27,160			$	13,980			51.5	%
Income from discontinued operations, net of tax				-				212				(212	)		NM
Net income			$	41,140			$	27,372			$	13,768			50.3	%
Diluted net income per share:
Continuing operations			$	1.55			$	1.03			$	0.52			50.5	%
Discontinued operations				-				0.01				(0.01	)		NM
Net income per share			$	1.55			$	1.04			$	0.51			49.0	%
Diluted shares outstanding				26,517				26,283				234			0.9	%

NM - not meaningful

Lithia Motors, Inc.
Key Performance Metrics
(Unaudited)
		Three months ended												%
		December 31,								Increase				Increase
		2014				2013				(Decrease)				(Decrease)
Gross margin
New vehicle retail			6.1	%			6.6	%			(50) bps
Used vehicle retail			12.3				13.9				(160) bps
Used vehicle wholesale			0.5				0.9				(40) bps
Finance and insurance			100.0				100.0				- bps
Service, body and parts			48.9				47.7				120 bps
Fleet and other			2.2				5.8				(360) bps
Gross profit margin			14.6				15.5				(90) bps
Unit sales
New vehicle retail			32,064				17,004				15,060			88.6	%
Used vehicle retail			21,562				13,830				7,732			55.9
Total retail units sold			53,626				30,834				22,792			73.9
Used vehicle wholesale			9,029				5,462				3,567			65.3
Average selling price
New vehicle retail			33,419				34,670				(1,251	)		(3.6)	%
Used vehicle retail			18,996				18,351				645			3.5
Used vehicle wholesale			6,631				6,892				(261	)		(3.8	)
Average gross profit per unit
New vehicle retail		$	2,043			$	2,299			$	(256	)		(11.1)	%
Used vehicle retail			2,342				2,556				(214	)		(8.4	)
Used vehicle wholesale			34				61				(27	)		(44.3	)
Finance and insurance			1,120				1,167				(47	)		(4.0	)
Total vehicle(1)			3,289				3,593				(304	)		(8.5	)
Revenue mix
New vehicle retail			59.8	%			57.5	%
Used vehicle retail			22.8				24.8
Used vehicle wholesale			3.3				3.7
Finance and insurance, net			3.3				3.5
Service, body and parts			9.6				9.8
Fleet and other			1.2				0.7
		Adjusted								As reported
		Three months ended December 31,								Three months ended December 31,
Other metrics		2014				2013				2014				2013
SG&A as a % of revenue			10.2	%			10.6	%			10.3	%		10.6	%
SG&A as a % of gross profit			70.3				68.2				70.6			68.1
Operating profit as a % of revenue			3.8				4.4				3.7			4.4
Operating profit as a % of gross profit			26.3				28.5				25.3			28.6
Pretax margin			3.4				4.0				3.2			4.0
Net profit margin			2.1				2.5				2.3			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												%
		December 31,								Increase				Increase
		2014				2013				(Decrease)				(Decrease)
Revenues
New vehicle retail		$	657,520			$	587,804			$	69,716			11.9	%
Used vehicle retail			293,067				253,385				39,682			15.7
Used vehicle wholesale			43,192				37,641				5,551			14.7
Finance and insurance			40,842				35,900				4,942			13.8
Service, body and parts			112,786				100,467				12,319			12.3
Fleet and other			13,243				7,108				6,135			86.3
Total revenues		$	1,160,650			$	1,022,305			$	138,345			13.5
Gross profit
New vehicle retail		$	41,841			$	39,057			$	2,784			7.1	%
Used vehicle retail			36,796				35,310				1,486			4.2
Used vehicle wholesale			505				332				173			52.1
Finance and insurance			40,842				35,900				4,942			13.8
Service, body and parts			54,461				47,998				6,463			13.5
Fleet and other			668				410				258			62.9
Total gross profit		$	175,113			$	159,007			$	16,106			10.1
Gross margin
New vehicle retail			6.4	%			6.6	%			(20) bps
Used vehicle retail			12.6				13.9				(130) bps
Used vehicle wholesale			1.2				0.9				30 bps
Finance and insurance			100.0				100.0				- bps
Service, body and parts			48.3				47.8				50 bps
Fleet and other			5.0				5.8				(80) bps
Gross profit margin			15.1				15.6				(50) bps
Unit sales
New vehicle retail			18,510				16,937				1,573			9.3	%
Used vehicle retail			15,146				13,807				1,339			9.7
Total retail units sold			33,656				30,744				2,912			9.5
Used vehicle wholesale			5,814				5,462				352			6.4
Average selling price
New vehicle retail		$	35,522			$	34,705			$	817			2.4	%
Used vehicle retail			19,349				18,352				997			5.4
Used vehicle wholesale			7,429				6,891				537			7.8
Average gross profit per unit
New vehicle retail		$	2,260			$	2,306			$	(46	)		2.0	%
Used vehicle retail			2,429				2,557				(128	)		(5.0	)
Used vehicle wholesale			87				61				26			42.6
Finance and insurance			1,214				1,168				46			3.9
Total vehicle(1)			3,565				3,597				(32	)		(0.9	)

(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.
Consolidated Statements of Operations
(Unaudited)
(In thousands except per share data)
			Twelve months ended											%
			December 31,								Increase			Increase
			2014				2013				(Decrease)			(Decrease)
Revenues:
New vehicle retail			$	3,077,670			$	2,256,598			$	821,072		36.4	%
Used vehicle retail				1,362,481				1,032,224				330,257		32.0
Used vehicle wholesale				195,699				158,235				37,464		23.7
Finance and insurance				190,381				139,007				51,374		37.0
Service, body and parts				512,124				383,483				128,041		33.5
Fleet and other				51,971				36,202				15,769		43.6
	Total revenues			5,390,326				4,005,749				1,384,577		34.6
Cost of sales:
New vehicle retail				2,879,486				2,105,480				774,006		36.8
Used vehicle retail				1,183,228				881,366				301,862		34.2
Used vehicle wholesale				192,053				155,524				36,529		23.5
Service, body and parts				262,388				197,913				64,475		32.6
Fleet and other				49,849				34,513				15,336		44.4
	Total cost of sales			4,567,004				3,374,796				1,192,208		35.3
Gross profit				823,322				630,953				192,369		30.5
Asset impairments				1,853				-				1,853		NM
SG&A expense				563,207				427,400				135,807		31.8
Depreciation and amortization				26,363				20,035				6,328		31.6
Income from operations				231,899				183,518				48,381		26.4
Floor plan interest expense				(13,861	)			(12,373	)			1,488		12.0
Other interest expense				(10,742	)			(8,350	)			2,392		28.6
Other income, net				3,199				2,993				206		6.9
Income from continuing operations before income taxes				210,495				165,788				44,707		27.0
Income tax expense				(74,955	)			(60,574	)			14,381		23.7
Income tax rate				35.6	%			36.5	%
Income from continuing operations			$	135,540			$	105,214			$	30,326		28.8	%
Income from discontinued operations, net of tax				3,180				786				2,394		NM
Net income			$	138,720			$	106,000			$	32,720		30.9	%
Diluted net income per share:
Continuing operations			$	5.14			$	4.02			$	1.12		27.9	%
Discontinued operations				0.12				0.03				0.09		NM
Net income per share			$	5.26			$	4.05			$	1.21		29.9	%
Diluted shares outstanding				26,382				26,191				191		0.7	%

NM - not meaningful

Lithia Motors, Inc.
Key Performance Metrics
(Unaudited)
		Twelve months ended												%
		December 31,								Increase				Increase
		2014				2013				(Decrease)				(Decrease)
Gross margin
New vehicle retail			6.4	%			6.7	%			(30) bps
Used vehicle retail			13.2				14.6				(140) bps
Used vehicle wholesale			1.9				1.7				20 bps
Finance and insurance			100.0				100.0				- bps
Service, body and parts			48.8				48.4				40 bps
Fleet and other			4.1				4.7				(60) bps
Gross profit margin			15.3				15.8				(50) bps
Unit sales
New vehicle retail			91,104				66,857				24,247			36.3	%
Used vehicle retail			71,674				57,061				14,613			25.6
Total retail units sold			162,778				123,918				38,860			31.4
Used vehicle wholesale			27,918				22,086				5,832			26.4
Average selling price
New vehicle retail		$	33,782			$	33,753			$	29			0.1	%
Used vehicle retail			19,009				18,090				919			5.1
Used vehicle wholesale			7,010				7,164				(154	)		(2.1	)
Average gross profit per unit
New vehicle retail		$	2,175			$	2,260			$	(85	)		(3.8)	%
Used vehicle retail			2,501				2,644				(143	)		(5.4	)
Used vehicle wholesale			131				123				8			6.5
Finance and insurance			1,170				1,122				48			4.3
Total vehicle(1)			3,511				3,581				(70	)		(2.0	)
Revenue mix
New vehicle retail			57.1	%			56.3	%
Used vehicle retail			25.3				25.8
Used vehicle wholesale			3.6				4.0
Finance and insurance, net			3.5				3.5
Service, body and parts			9.5				9.6
Fleet and other			1.0				0.8
		Adjusted								As reported
		Twelve months ended December 31,								Twelve months ended December 31,
Other metrics		2014				2013				2014				2013
SG&A as a % of revenue			10.3	%			10.6	%			10.4	%		10.7	%
SG&A as a % of gross profit			67.7				67.2				68.4			67.7
Operating profit as a % of revenue			4.4				4.7				4.3			4.6
Operating profit as a % of gross profit			29.1				29.7				28.2			29.1
Pretax margin			4.1				4.2				3.9			4.1
Net profit margin			2.5				2.6				2.5			2.6

(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.
Same Store Operating Highlights
(Unaudited)
		Twelve months ended												%
		December 31,								Increase				Increase
		2014				2013				(Decrease)				(Decrease)
Revenues
New vehicle retail		$	2,501,956			$	2,252,242			$	249,714			11.1	%
Used vehicle retail			1,181,168				1,031,101				150,067			14.6
Used vehicle wholesale			172,585				158,210				14,375			9.1
Finance and insurance			161,205				138,850				22,355			16.1
Service, body and parts			425,976				382,728				43,248			11.3
Fleet and other			41,898				36,201				5,697			15.7
Total revenues		$	4,484,788			$	3,999,332			$	485,456			12.1
Gross profit
New vehicle retail		$	163,611			$	150,879			$	12,732			8.4	%
Used vehicle retail			158,350				150,715				7,635			5.1
Used vehicle wholesale			3,728				2,823				905			32.1
Finance and insurance			161,205				138,850				22,355			16.1
Service, body and parts			206,939				185,268				21,671			11.7
Fleet and other			2,168				1,687				481			28.5
Total gross profit		$	696,001			$	630,222			$	65,779			10.4
Gross margin
New vehicle retail			6.5	%			6.7	%			(20) bps
Used vehicle retail			13.4				14.6				(120) bps
Used vehicle wholesale			2.2				1.8				40 bps
Finance and insurance			100.0				100.0				- bps
Service, body and parts			48.6				48.4				20 bps
Fleet and other			5.2				4.7				50 bps
Total gross profit			15.5				15.8				(30) bps
Unit sales
New vehicle retail			72,177				66,703				5,474			8.2	%
Used vehicle retail			61,561				56,997				4,564			8.0
Total retail units sold			133,738				123,700				10,038			8.1
Used vehicle wholesale			23,582				22,085				1,497			6.8
Average selling price
New vehicle retail		$	34,664			$	33,765			$	899			2.7	%
Used vehicle retail			19,187				18,090				1,097			6.1
Used vehicle wholesale			7,319				7,164				155			2.2
Average gross profit per unit
New vehicle retail		$	2,267			$	2,262			$	5			0.2	%
Used vehicle retail			2,572				2,644				(72	)		(2.7	)
Used vehicle wholesale			158				128				30			23.4
Finance and insurance			1,205				1,122				83			7.4
Total vehicle(1)			3,641				3,583				58			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 December 31,
		2014		2013		Increase (Decrease)
Days Supply(1)
New vehicle inventory		62		74		(12)
Used vehicle inventory		53		63		(10)

(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, 2014
Current ratio(1)		Not less than 1.20 to 1		1.16 to 1
Fixed charge coverage ratio		Not less than 1.20 to 1		3.30 to 1
Leverage ratio		Not more than 5.00 to 1		2.21 to 1
Funded debt restriction		Not more than $600 million		$374.0 million

(1) In February 2015, we requested and received a waiver for the current ratio covenant as of December 31, 2014, and amended the facility to reduce the covenant to 1.10 to 1 for the first quarter of 2015 and beyond.

Lithia Motors, Inc.
Other Highlights
(Unaudited)
		Three months ended December 31,						Twelve Months ended December 31,
		2014			2013			2014			2013
New vehicle unit sales brand mix
Chrysler		17.8	%		27.6	%		24.6	%		29.5	%
Toyota		18.1			14.0			15.2			14.6
Honda, Acura		22.7			8.5			13.2			7.9
General Motors		9.3			14.2			12.5			15.2
Subaru		7.0			9.3			8.7			8.2
BMW, MINI		7.9			7.5			6.8			6.7
Ford		4.1			6.0			5.6			6.0
Nissan		3.8			3.4			3.7			3.0
Volkswagen, Audi		3.0			1.8			2.8			2.2
Hyundai		1.6			2.4			2.5			2.6
Mercedes		1.9			3.9			2.2			2.8
Kia		1.1			0.8			1.1			0.7
Lexus		1.2			-			0.4			-
Other		0.5			0.6			0.7			0.6
		Three months ended December 31,						Twelve months ended December 31,
		2014			2013			2014			2013
Revenue geographic mix
Texas		14.9	%		23.1	%		20.7	%		24.4	%
Oregon		16.0			23.0			20.2			21.6
California		21.4			11.7			15.8			10.8
Washington		5.9			8.2			6.8			8.1
Alaska		5.4			7.2			6.6			7.6
Iowa		3.1			5.0			3.9			4.9
Idaho		2.9			4.6			3.9			4.9
Montana		5.5			8.6			7.3			8.9
Nevada		3.3			4.7			4.2			4.8
North Dakota		1.4			2.3			1.9			2.4
New Mexico		0.9			1.6			1.3			1.6
New Jersey		15.2			-			5.0			-
New York		2.8			-			0.9			-
Hawaii		1.3			-			1.5			-
		As of February 25, 2014
Current store count mix		# of stores			% of total
Chrysler, Fiat		25			19.2	%
Honda, Acura		22			16.9
Toyota, Lexus		19			14.6
General Motors		16			12.3
BMW, MINI		11			8.5
Volkswagen, Audi		7			5.4
Nissan		6			4.6
Ford		6			4.6
Subaru		6			4.6
Hyundai		5			3.8
Mercedes		3			2.3
Other		4			3.2

Lithia Motors, Inc.
Consolidated Balance Sheets
(Unaudited)
(In thousands)
		December 31, 2014				December 31, 2013
Cash and cash equivalents		$	29,898			$	23,686
Trade receivables, net			295,379				170,519
Inventories, net			1,249,659				859,019
Deferred income taxes			-				1,548
Other current assets			32,010				15,251
Assets held for sale			8,563				11,526
Total current assets		$	1,615,509			$	1,081,549
Property and equipment, net			816,745				481,212
Goodwill			199,375				49,511
Franchise value			150,892				71,199
Deferred income taxes			-				10,256
Other non-current assets			98,411				31,394
Total assets		$	2,880,932			$	1,725,121
Floor plan notes payable		$	41,047			$	18,789
Floor plan notes payable: non trade			1,137,632				695,066
Current maturities of long-term debt			31,912				7,083
Trade payables			70,853				51,159
Accrued liabilities			153,661				94,143
Deferred income taxes			2,603				-
Liabilities related to assets held for sale			4,892				6,271
Total current liabilities		$	1,442,600			$	872,511
Long-term debt			609,066				245,471
Deferred revenue			54,403				44,005
Deferred income taxes			42,795				-
Other long-term liabilities			58,963				28,412
Total liabilities		$	2,207,827			$	1,190,399
Class A common stock			276,058				268,255
Class B common stock			319				319
Additional paid-in capital			29,775				22,598
Accumulated other comprehensive loss			(926	)			(1,538	)
Retained earnings			367,879				245,088
Total liabilities & stockholders' equity		$	2,880,932			$	1,725,121

Lithia Motors, Inc.
Summarized Cash Flow from Operations
(Unaudited)
(In thousands)
			Twelve months ended
			December 31,
			2014				2013
Net income			$	138,720			$	106,000
Adjustments to reconcile net income to net cash provided by operating activities:
Asset impairment				1,853				-
Depreciation and amortization				26,363				20,035
Stock-based compensation				7,436				6,565
(Gain) loss on disposal of assets				464				(2,339	)
Gain on sale of franchise				(5,937	)			-
Deferred income taxes				13,355				14,477
Excess tax benefit from share-based payment arrangements				(6,186	)			(5,994	)
(Increase) decrease:
	Trade receivables, net			(59,474	)			(37,370	)
	Inventories			(76,002	)			(106,896	)
	Other assets			(31,182	)			(5,655	)
Increase (decrease):
	Floor plan notes payable, net			(647	)			5,300
	Trade payables			(3,105	)			8,480
	Accrued liabilities			(13,472	)			12,304
	Other long-term liabilities and deferred revenue			38,133				17,152
Net cash provided by operating activities			$	30,319			$	32,059

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			2014				2013
As reported			$	30,319			$	32,059
	Floor plan notes payable, non-trade, net			440,341				128,636
	Borrowings on floor plan notes payble associated with acquired inventory			(257,363	)			(25,148	)
Adjusted			$	213,297			$	135,547

Lithia Motors, Inc.
Reconciliation of Certain Non-GAAP Financial Measures
(Unaudited)
(In thousands, except for per share data)
		Three months ended December 31, 2014
		As reported				Acquisition expenses				Equity Investment				Tax attributes				Adjusted
Asset impairments		$	1,853			$	-			$	(1,853	)		$	-			$	-
Selling, general and administrative			184,288				(819	)			-				-				183,468
Income from operations			66,016				819				1,853				-				68,689
Other income			89				-				1,160				-				1,249
Income from continuing operations before income taxes		$	56,722			$	819			$	3,013			$	-			$	60,555
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
		Three months ended December 31, 2013
		As reported				Asset disposal gain				Reserve adjustments				Tax attributes				Adjusted
Selling, general and administrative		$	108,416			$	2,531			$	(2,341	)		$	-			$	108,606
Income from operations			45,561				(2,531	)			2,341				-				45,371
Income from continuing operations before income taxes		$	41,240			$	(2,531	)		$	2,341			$	-			$	41,050
Income tax expense			(14,080	)			968				(869	)			(1,320	)			(15,301	)
Net income from continuing operations		$	27,160			$	(1,563	)		$	1,472			$	(1,320	)		$	25,749
Diluted earnings per share from continuing operations		$	1.03			$	(0.06	)		$	0.06			$	(0.05	)		$	0.98
Diluted share count			26,283

Lithia Motors, Inc.
Reconciliation of Certain Non-GAAP Financial Measures
(Unaudited)
(In thousands, except for per share data)
						Twelve months ended December 31, 2014
		As reported				Reserve Adjustments				Acquisition expenses				Equity Investment				Tax attributes				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 income			3,199				-				-				1,160				-				4,359
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

			Twelve months ended December 31, 2013
			As reported				Asset disposal gain				Reserve adjustments				Tax attributes				Adjusted
Selling, general and administrative		$	427,400			$	2,531			$	(6,153	)		$	-			$	423,778
Income from operations			183,518				(2,531	)			6,153				-				187,140
Income from continuing operations before income taxes		$	165,788			$	(2,531	)		$	6,153			$	-			$	169,410
Income tax expense			(60,574	)			968				(2,353	)			(2,832	)			(64,791	)
Net income from continuing operations		$	105,214			$	(1,563	)		$	3,800			$	(2,832	)		$	104,619
Diluted earnings per share from continuing operations		$	4.02			$	(0.06	)		$	0.14			$	(0.11	)		$	3.99
Diluted share count			26,191