Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - LITHIA MOTORS INC | lad20140722_8k.htm |
Exhibit 99.1
LITHIA MOTORS REPORTS ADJUSTED EPS OF $1.34 FOR THE SECOND QUARTER OF 2014, AN INCREASE OF 28% OVER THE PRIOR YEAR
LITHIA MOTORS DECLARES $0.16 PER SHARE DIVIDEND FOR SECOND QUARTER
Medford, Oregon, July 23, 2014 – Lithia Motors, Inc. (NYSE: LAD) reported the highest quarterly adjusted net income in Company history and an increase in adjusted net income from continuing operations of 29% for the second quarter 2014 over the prior year period.
2014 second quarter adjusted net income from continuing operations was $35.2 million, or $1.34 per diluted share. This compares to 2013 second quarter adjusted net income from continuing operations of $27.4 million, or $1.05 per diluted share.
Unadjusted net income from continuing operations for the second quarter of 2014 was $35.2 million, or $1.34 per diluted share, compared to $25.3 million or $0.97 per diluted share for the second quarter of 2013. As shown in the attached non-GAAP reconciliation tables, the 2014 second quarter adjusted results from continuing operations exclude non-core charges related to acquisition expenses for the pending DCH combination offset by non-core gains resulting from a tax attribute, resulting in no change to earnings per share. The 2013 second quarter adjusted results from continuing operations exclude a $0.09 per share expense related to non-core legal reserve related to a case filed in 2006, partially offset by a $0.01 per share benefit from a tax attribute.
Second quarter 2014 revenue from continuing operations increased $213 million, or 21%, to $1.2 billion from $1.0 billion for the second quarter of 2013.
Second Quarter-over-Quarter Operating Highlights:
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● |
Total same store sales increased 11% |
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● |
New vehicle same store sales increased 12% |
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● |
Used vehicle retail same store sales increased 11% |
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● |
Service, body and parts same store sales increased 10% |
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● |
Same store F&I per unit increased $104 to $1,206 |
|
● |
Adjusted SG&A expense as a percentage of gross profit decreased 80 basis points to 65.2% |
“For the first time in our history, same store sales experienced double digit increases in all four business lines,” said Bryan DeBoer, President and CEO. “Notably, we saw a record quarterly increase in service, body and parts sales, at 10%, driven by a 10% improvement in customer pay work and a 15% increase in warranty activity. The monthly SAAR accelerated throughout the second quarter, reaching a level of 16.9 million in June, the highest level since July 2006.”
For the first six months of 2014, adjusted net income per diluted share from continuing operations increased 25% to $2.36 from $1.89 for the first six months of 2013. Unadjusted net income from continuing operations was $2.27 per diluted share for the first six months of 2014, compared to $1.81 per diluted share for the first six months of 2013.
Chris Holzshu, SVP and CFO, said, “Our same store F&I per unit was $1,206, an increase of $104 per unit over the second quarter of 2013. Our adjusted SG&A as a percentage of gross profit improved by 80 basis points to a record result of 65.2% for the second quarter of 2014. Our incremental throughput, or the percentage of incremental gross profit remaining after deducting incremental SG&A expense, was 51% on a same store basis in the second quarter of 2014. We continue to target incremental throughput of 50% on a same store basis.”
Corporate Development
In April 2014, we acquired Access Ford Lincoln in Corpus Christi, Texas and opened Lithia Chrysler Jeep Dodge Ram of Wasilla in Wasilla, Alaska with $105 million in estimated total annual revenues. In June 2014, we acquired Vic Alfonso Cadillac and Braley & Graham Buick GMC in Portland, Oregon with $60 million in estimated total annual revenues.
In June 2014, we also entered into a definitive agreement with DCH Auto Group Limited to acquire 100 percent of the outstanding shares of DCH Auto Group Inc., one of the 10 largest dealer groups in the country. The DCH stores are estimated to generate approximately $2.3 billion in annualized revenue. The transaction is expected to be funded through the expansion of Lithia's existing credit facility by $600 million, mortgage financing of $200 million, and available cash flows from operations. The transaction is subject to customary closing conditions and expected to close in the fourth quarter.
Bryan DeBoer, President and CEO, stated, “The acquisition market remains robust. We purchased another three stores in the second quarter of 2014, bringing the total number of stores purchased or opened this year to eight. Last month we announced an agreement to combine the DCH Auto Group and Lithia, which will add their 27 locations and approximately $2.3 billion in annual revenue to our organization. The transaction with DCH remains on track to be completed in the fourth quarter of 2014. Additionally we continue to seek stores reflecting Lithia’s exclusive market strategy and believe the potential remains for more acquisitions in 2014.”
Balance Sheet Update
We ended the second quarter with $28 million in cash and $84 million in available credit on our credit facilities. Additionally, approximately $216 million of our operating real estate is currently unfinanced, which could provide an estimated additional $162 million in available liquidity, for total potential liquidity of $274 million.
Dividend Payment and Share Repurchase
Lithia announced that the Board of Directors has approved a dividend of $0.16 per share related to second quarter 2014 financial results. Lithia will pay the dividend August 22, 2014 to shareholders of record on August 8, 2014.
Lithia repurchased 30,000 shares in the second quarter of 2014 at a weighted average price of $75.36 per share.
Outlook for Third Quarter 2014
We project 2014 third quarter earnings of $1.36 to $1.38 per diluted share. These projections are based on the following assumptions around third quarter 2014 performance:
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Total revenues of $1.2 to $1.3 billion |
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New vehicle same store sales increasing 13.0% |
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New vehicle gross margin of 6.4% to 6.6% |
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Used vehicle same store sales increasing 7.5% |
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Used vehicle gross margin of 14.0% to 14.2% |
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Service body and parts same store sales increasing 8.0% |
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Service body and parts gross margin of 48.8% to 49.0% |
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Finance and insurance gross profit of $1,200 per unit |
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Tax rate of 39.5% |
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Average diluted shares outstanding of 26.4 million |
Outlook for Fourth Quarter 2014
We project 2014 fourth quarter earnings for the combined Lithia / DCH organization of $1.23 to $1.26 per diluted share and full-year 2014 earnings of $4.95 to $5.00 per diluted share. These projections include $1.10 to 1.12 per share in earnings related to Lithia and $0.13 to $0.14 per share in earnings related to the DCH organization assuming an October 1 closing date. Additionally, these projections exclude $0.04 to $0.06 per share in acquisition expenses and are based on the following assumptions around fourth quarter 2014 performance:
Combined Results
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Total revenues of $1.6 to $1.7 billion |
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New vehicle sales increasing 65.0% |
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New vehicle gross margin of 6.4% to 6.6% |
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Used vehicle sales increasing 54.0% |
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Used vehicle gross margin of 13.1% to 13.3% |
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Service body and parts sales increasing 59.0% |
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Service body and parts gross margin of 47.1% to 47.3% |
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Finance and insurance gross profit of $1,145 per unit |
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Tax rate of 40.0% |
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Average diluted shares outstanding of 26.6 million |
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Full year capital expenditures of $110 million |
Same Store
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Total revenues of $1.1 to $1.2 billion |
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New vehicle same store sales increasing 11.0% |
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Used vehicle same store sales increasing 6.0% |
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Service body and parts same store sales increasing 8.0% |
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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.
Second Quarter Earnings Conference Call and Updated Presentation
The second quarter conference call may be accessed at 10:00 a.m. ET today by telephone at 877-407-8029. An updated presentation highlighting the second quarter results has been added to www.lithiainvestorrelations.com.
To listen live on our website or for replay, visit www.lithiainvestorrelations.com and click on webcasts.
About Lithia
Lithia Motors, Inc. is the eighth largest automotive retailer in the United States. Lithia sells 29 brands of new vehicles and all brands of used vehicles at 101 stores in 12 states. Lithia also arranges finance, warranty, and credit insurance contracts; and provides vehicle parts, maintenance, and repair services at all of its locations.
Sites
www.lithia.com
www.lithiainvestorrelations.com
www.lithiacareers.com
www.assuredservice.com
Lithia Motors on Facebook
http://www.facebook.com/LithiaMotors
Lithia Motors on Twitter
http://twitter.com/lithiamotors
Contact:
John North
VP Finance and Controller
(541) 618-5748
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:
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Expected operating results, such as improved store performance, maintaining incremental throughput above 50%, increasing same store F&I per unit and all projections set forth under the heading “Outlook for Third Quarter 2014” and “Outlook for Fourth Quarter 2014”; and |
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The increase in our annual revenues that we estimate will result from the dealerships that we acquired and from the DCH Auto Group transaction as set forth under the heading “Corporate Development”; |
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Our belief that the DCH Auto Group transaction will close in the fourth quarter; and |
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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), risks associated with the DCH Auto Group transaction (including the risk that we may incur significant liabilities as a result of the transaction and the risk that the transaction may not close), government regulations, legislation and others set forth throughout Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations and in Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2013, in particular, the risks and uncertainties described threin under the heading “Our ability to increase revenues through acquisitions depends on our ability to acquire and successfully integrate additional stores” 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)
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Three months ended |
% |
|||||||||||||||
|
June 30, |
Increase |
Increase |
||||||||||||||
|
2014 |
2013 |
(Decrease) |
(Decrease) |
|||||||||||||
|
Revenues: |
||||||||||||||||
|
New vehicle retail |
$ | 694,484 | $ | 569,487 | $ | 124,997 | 21.9 |
% | ||||||||
|
Used vehicle retail |
310,475 | 258,465 | 52,010 | 20.1 | ||||||||||||
|
Used vehicle wholesale |
44,286 | 37,691 | 6,595 | 17.5 | ||||||||||||
|
Finance and insurance |
43,838 | 34,218 | 9,620 | 28.1 | ||||||||||||
|
Service, body and parts |
114,337 | 94,462 | 19,875 | 21.0 | ||||||||||||
|
Fleet and other |
14,382 | 14,182 | 200 | 1.4 | ||||||||||||
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Total revenues |
1,221,802 | 1,008,505 | 213,297 | 21.1 | ||||||||||||
|
Cost of sales: |
||||||||||||||||
|
New vehicle retail |
648,490 | 530,699 | 117,791 | 22.2 | ||||||||||||
|
Used vehicle retail |
266,408 | 219,572 | 46,836 | 21.3 | ||||||||||||
|
Used vehicle wholesale |
42,782 | 36,996 | 5,786 | 15.6 | ||||||||||||
|
Service, body and parts |
58,155 | 47,769 | 10,386 | 21.7 | ||||||||||||
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Fleet and other |
13,667 | 13,636 | 31 | 0.2 | ||||||||||||
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Total cost of sales |
1,029,502 | 848,672 | 180,830 | 21.3 | ||||||||||||
|
Gross profit |
192,300 | 159,833 | 32,467 | 20.3 | ||||||||||||
|
SG&A expense |
125,463 | 109,283 | 16,180 | 14.8 | ||||||||||||
|
Depreciation and amortization |
5,825 | 4,899 | 926 | 18.9 | ||||||||||||
|
Income from operations |
61,012 | 45,651 | 15,361 | 33.6 | ||||||||||||
|
Floor plan interest expense |
(3,215 | ) | (3,036 | ) | 179 | 5.9 | ||||||||||
|
Other interest expense |
(1,869 | ) | (1,941 | ) | (72 | ) | (3.7 | ) | ||||||||
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Other income, net |
1,146 | 584 | 562 | 96.2 | ||||||||||||
|
Income from continuing operations before income taxes |
57,074 | 41,258 | 15,816 | 38.3 | ||||||||||||
|
Income tax expense |
(21,904 | ) | (15,977 | ) | 5,927 | 37.1 | ||||||||||
|
Income tax rate |
38.4 | % | 38.7 | % | ||||||||||||
|
Income from continuing operations |
$ | 35,170 | $ | 25,281 | $ | 9,889 | 39.1 |
% | ||||||||
|
Income from discontinued operations, net of tax |
3,139 | 274 | 2,865 |
NM |
||||||||||||
|
Net income |
$ | 38,309 | $ | 25,555 | $ | 12,754 | 49.9 |
% | ||||||||
|
Diluted net income per share: |
||||||||||||||||
|
Continuing operations |
$ | 1.34 | $ | 0.97 | $ | 0.37 | 38.1 |
% | ||||||||
|
Discontinued operations |
0.11 | 0.01 | 0.10 |
NM |
||||||||||||
|
Net income per share |
$ | 1.45 | $ | 0.98 | $ | 0.47 | 48.0 |
% | ||||||||
|
Diluted shares outstanding |
26,331 | 26,134 | 197 | 0.8 |
% | |||||||||||
NM – not meaningful
Lithia Motors, Inc.
Key Performance Metrics (Unaudited)
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Three months ended |
% |
|||||||||||||||
|
June 30, |
Increase |
Increase |
||||||||||||||
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2014 |
2013 |
(Decrease) |
(Decrease) |
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|
Gross margin |
||||||||||||||||
|
New vehicle retail |
6.6 |
% |
6.8 |
% |
(20) bps |
|||||||||||
|
Used vehicle retail |
14.2 | 15.0 |
(80) bps |
|||||||||||||
|
Used vehicle wholesale |
3.4 | 1.8 |
160 bps |
|||||||||||||
|
Finance and insurance |
100.0 | 100.0 |
- bps |
|||||||||||||
|
Service, body and parts |
49.1 | 49.4 |
(30) bps |
|||||||||||||
|
Fleet and other |
5.0 | 3.8 |
120 bps |
|||||||||||||
|
Gross profit margin |
15.7 | 15.8 |
(10) bps |
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|
Unit sales |
||||||||||||||||
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New vehicle retail |
20,446 | 17,024 | 3,422 | 20.1 |
% | |||||||||||
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Used vehicle retail |
16,086 | 14,074 | 2,012 | 14.3 | ||||||||||||
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Total retail units sold |
36,532 | 31,098 | 5,434 | 17.5 | ||||||||||||
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Used vehicle wholesale |
6,047 | 5,241 | 806 | 15.4 | ||||||||||||
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Average selling price |
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|
New vehicle retail |
$ | 33,967 | $ | 33,452 | 515 | 1.5 |
% | |||||||||
|
Used vehicle retail |
19,301 | 18,365 | 936 | 5.1 | ||||||||||||
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Used vehicle wholesale |
7,324 | 7,192 | 132 | 1.8 | ||||||||||||
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Average gross profit per unit |
||||||||||||||||
|
New vehicle retail |
$ | 2,250 | $ | 2,278 | $ | (28 | ) | (1.2 |
)% | |||||||
|
Used vehicle retail |
2,739 | 2,763 | (24 | ) | (0.9 | ) | ||||||||||
|
Used vehicle wholesale |
249 | 133 | 116 | 87.2 | ||||||||||||
|
Finance and insurance |
1,200 | 1,100 | 100 | 9.1 | ||||||||||||
|
Total vehicle(1) |
3,706 | 3,621 | 85 | 2.3 | ||||||||||||
|
Revenue mix |
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|
New vehicle retail |
56.8 |
% |
56.5 |
% |
||||||||||||
|
Used vehicle retail |
25.4 | 25.6 | ||||||||||||||
|
Used vehicle wholesale |
3.6 | 3.7 | ||||||||||||||
|
Finance and insurance, net |
3.6 | 3.4 | ||||||||||||||
|
Service, body and parts |
9.4 | 9.4 | ||||||||||||||
|
Fleet and other |
1.2 | 1.4 | ||||||||||||||
|
Adjusted |
As reported |
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|
Three months ended June 30, |
Three months ended June 30, |
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|
2014 |
2013 |
2014 |
2013 |
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| Other metrics | ||||||||||||||||
|
SG&A as a % of revenue |
10.2 |
% |
10.5 |
% |
10.3 |
% |
10.8 |
% | ||||||||
|
SG&A as a % of gross profit |
65.2 | 66.0 | 65.2 | 68.4 | ||||||||||||
|
Operating profit as a % of revenue |
5.0 | 4.9 | 5.0 | 4.5 | ||||||||||||
|
Operating profit as a % of gross profit |
31.8 | 30.9 | 31.7 | 28.6 | ||||||||||||
|
Pretax margin |
4.7 | 4.5 | 4.7 | 4.1 | ||||||||||||
|
Net profit margin |
2.9 | 2.7 | 2.9 | 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)
|
Three months ended |
% |
|||||||||||||||
|
June 30, |
Increase |
Increase |
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|
2014 |
2013 |
(Decrease) |
(Decrease) |
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|
Revenues |
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|
New vehicle retail |
$ | 632,785 | $ | 566,862 | $ | 65,923 | 11.6 |
% | ||||||||
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Used vehicle retail |
285,555 | 257,754 | 27,801 | 10.8 | ||||||||||||
|
Used vehicle wholesale |
41,937 | 37,692 | 4,245 | 11.3 | ||||||||||||
|
Finance and insurance |
39,892 | 34,139 | 5,753 | 16.9 | ||||||||||||
|
Service, body and parts |
103,770 | 94,034 | 9,736 | 10.4 | ||||||||||||
|
Fleet and other |
12,663 | 14,182 | (1,519 | ) | (10.7 | ) | ||||||||||
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Total revenues |
$ | 1,116,602 | $ | 1,004,663 | $ | 111,939 | 11.1 | |||||||||
|
Gross profit |
||||||||||||||||
|
New vehicle retail |
$ | 41,711 | $ | 38,588 | $ | 3,123 | 8.1 |
% | ||||||||
|
Used vehicle retail |
41,011 | 38,799 | 2,212 | 5.7 | ||||||||||||
|
Used vehicle wholesale |
1,444 | 748 | 696 | 93.0 | ||||||||||||
|
Finance and insurance |
39,892 | 34,139 | 5,753 | 16.9 | ||||||||||||
|
Service, body and parts |
50,988 | 46,452 | 4,536 | 9.8 | ||||||||||||
|
Fleet and other |
639 | 546 | 93 | 17.0 | ||||||||||||
|
Total gross profit |
$ | 175,685 | $ | 159,272 | $ | 16,413 | 10.3 | |||||||||
|
Gross margin |
||||||||||||||||
|
New vehicle retail |
6.6 | % | 6.8 |
% |
(20) bps |
|||||||||||
|
Used vehicle retail |
14.4 | 15.1 |
(70) bps |
|||||||||||||
|
Used vehicle wholesale |
3.4 | 2.0 |
140 bps |
|||||||||||||
|
Finance and insurance |
100.0 | 100.0 |
- bps |
|||||||||||||
|
Service, body and parts |
49.1 | 49.4 |
(30) bps |
|||||||||||||
|
Fleet and other |
5.0 | 3.8 |
120 bps |
|||||||||||||
|
Gross profit margin |
15.7 | 15.9 |
(20) bps |
|||||||||||||
|
Unit sales |
||||||||||||||||
|
New vehicle retail |
18,379 | 16,937 | 1,442 | 8.5 |
% | |||||||||||
|
Used vehicle retail |
14,709 | 14,033 | 676 | 4.8 | ||||||||||||
|
Total retail units sold |
33,088 | 30,970 | 2,118 | 6.8 | ||||||||||||
|
Used vehicle wholesale |
5,649 | 5,241 | 408 | 7.8 | ||||||||||||
|
Average selling price |
||||||||||||||||
|
New vehicle retail |
$ | 34,430 | $ | 33,469 | $ | 961 | 2.9 |
% | ||||||||
|
Used vehicle retail |
19,414 | 18,368 | 1,046 | 5.7 | ||||||||||||
|
Used vehicle wholesale |
7,424 | 7,192 | 232 | 3.2 | ||||||||||||
|
Average gross profit per unit |
||||||||||||||||
|
New vehicle retail |
$ | 2,269 | $ | 2,278 | $ | (9 | ) | (0.4 |
)% | |||||||
|
Used vehicle retail |
2,788 | 2,765 | 23 | 0.8 | ||||||||||||
|
Used vehicle wholesale |
256 | 143 | 113 | 79.0 | ||||||||||||
|
Finance and insurance |
1,206 | 1,102 | 104 | 9.4 | ||||||||||||
|
Total vehicle(1) |
3,749 | 3,625 | 124 | 3.4 | ||||||||||||
(1) – includes the sales and gross profit related to new, used retail, used wholesale and finance and insurance and unit sales for new and used retail
Lithia Motors, Inc.
Consolidated Statements of Operations (Unaudited)
(In thousands except per share data)
|
Six months ended |
% |
|||||||||||||||
|
June 30, |
Increase |
Increase |
||||||||||||||
|
2014 |
2013 |
(Decrease) |
(Decrease) |
|||||||||||||
|
Revenues: |
||||||||||||||||
|
New vehicle retail |
$ | 1,274,006 | $ | 1,062,928 | $ | 211,078 | 19.9 |
% | ||||||||
|
Used vehicle retail |
612,368 | 497,693 | 114,675 | 23.0 | ||||||||||||
|
Used vehicle wholesale |
86,979 | 77,197 | 9,782 | 12.7 | ||||||||||||
|
Finance and insurance |
83,469 | 65,881 | 17,588 | 26.7 | ||||||||||||
|
Service, body and parts |
218,954 | 184,902 | 34,052 | 18.4 | ||||||||||||
|
Fleet and other |
24,132 | 22,984 | 1,148 | 5.0 | ||||||||||||
|
Total revenues |
2,299,908 | 1,911,585 | 388,323 | 20.3 | ||||||||||||
|
Cost of sales: |
||||||||||||||||
|
New vehicle retail |
1,188,988 | 989,493 | 199,495 | 20.2 | ||||||||||||
|
Used vehicle retail |
527,505 | 423,827 | 103,678 | 24.5 | ||||||||||||
|
Used vehicle wholesale |
84,144 | 75,528 | 8,616 | 11.4 | ||||||||||||
|
Service, body and parts |
111,940 | 94,430 | 17,510 | 18.5 | ||||||||||||
|
Fleet and other |
22,970 | 22,036 | 934 | 4.2 | ||||||||||||
|
Total cost of sales |
1,935,547 | 1,605,314 | 330,233 | 20.6 | ||||||||||||
|
Gross profit |
364,361 | 306,271 | 58,090 | 19.0 | ||||||||||||
|
SG&A expense |
247,292 | 210,414 | 36,878 | 17.5 | ||||||||||||
|
Depreciation and amortization |
11,332 | 9,620 | 1,712 | 17.8 | ||||||||||||
|
Income from operations |
105,737 | 86,237 | 19,500 | 22.6 | ||||||||||||
|
Floor plan interest expense |
(6,199 | ) | (6,485 | ) | (286 | ) | (4.4 | ) | ||||||||
|
Other interest expense |
(3,843 | ) | (4,302 | ) | (459 | ) | (10.7 | ) | ||||||||
|
Other income, net |
2,083 | 1,385 | 698 | 50.4 | ||||||||||||
|
Income from continuing operations before income taxes |
97,778 | 76,835 | 20,943 | 27.3 | ||||||||||||
|
Income tax expense |
(37,914 | ) | (29,672 | ) | 8,242 | 27.8 | ||||||||||
|
Income tax rate |
38.8 | % | 38.6 | % | ||||||||||||
|
Income from continuing operations |
$ | 59,864 | $ | 47,163 | $ | 12,701 | 26.9 |
% | ||||||||
|
Income from discontinued operations, net of tax |
3,179 | 447 | 2,702 |
NM |
||||||||||||
|
Net income |
$ | 63,043 | $ | 47,610 | $ | 15,433 | 32.4 |
% | ||||||||
|
Diluted net income per share: |
||||||||||||||||
|
Continuing operations |
$ | 2.27 | $ | 1.81 | $ | 0.46 | 25.4 |
% | ||||||||
|
Discontinued operations |
0.12 | 0.01 | 0.11 |
NM |
||||||||||||
|
Net income per share |
$ | 2.39 | $ | 1.82 | $ | 0.57 | 31.3 |
% | ||||||||
|
Diluted shares outstanding |
26,326 | 26,120 | 206 | 0.8 |
% | |||||||||||
NM – not meaningful
Lithia Motors, Inc.
Key Performance Metrics (Unaudited)
|
Six months ended |
% |
|||||||||||||||
|
June 30, |
Increase |
Increase |
||||||||||||||
|
2014 |
2013 |
(Decrease) |
(Decrease) |
|||||||||||||
|
Gross margin |
||||||||||||||||
|
New vehicle retail |
6.7 |
% |
6.9 |
% |
(20) bps |
|||||||||||
|
Used vehicle retail |
13.9 | 14.8 |
(90) bps |
|||||||||||||
|
Used vehicle wholesale |
3.3 | 2.2 |
110 bps |
|||||||||||||
|
Finance and insurance |
100.0 | 100.0 |
- bps |
|||||||||||||
|
Service, body and parts |
48.9 | 48.9 |
- bps |
|||||||||||||
|
Fleet and other |
4.8 | 4.1 |
70 bps |
|||||||||||||
|
Gross profit margin |
15.8 | 16.0 |
(20) bps |
|||||||||||||
|
Unit sales |
||||||||||||||||
|
New vehicle retail |
37,720 | 31,744 | 5,976 | 18.8 |
% | |||||||||||
|
Used vehicle retail |
32,402 | 27,735 | 4,667 | 16.8 | ||||||||||||
|
Total retail units sold |
70,122 | 59,479 | 10,643 | 17.9 | ||||||||||||
|
Used vehicle wholesale |
11,900 | 10,565 | 1,335 | 12.6 | ||||||||||||
|
Average selling price |
||||||||||||||||
|
New vehicle retail |
$ | 33,775 | $ | 33,484 | $ | 291 | 0.9 |
% | ||||||||
|
Used vehicle retail |
18,899 | 17,945 | 954 | 5.3 | ||||||||||||
|
Used vehicle wholesale |
7,309 | 7,307 | 2 | - | ||||||||||||
|
Average gross profit per unit |
||||||||||||||||
|
New vehicle retail |
$ | 2,254 | $ | 2,313 | $ | (59 | ) | (2.6 |
)% | |||||||
|
Used vehicle retail |
2,619 | 2,663 | (44 | ) | (1.7 | ) | ||||||||||
|
Used vehicle wholesale |
238 | 158 | 80 | 50.6 | ||||||||||||
|
Finance and insurance |
1,190 | 1,108 | 82 | 7.4 | ||||||||||||
|
Revenue mix |
||||||||||||||||
|
New vehicle retail |
55.4 |
% |
55.6 |
% |
||||||||||||
|
Used vehicle retail |
26.6 | 26.0 | ||||||||||||||
|
Used vehicle wholesale |
3.8 | 4.0 | ||||||||||||||
|
Finance and insurance, net |
3.6 | 3.5 | ||||||||||||||
|
Service, body and parts |
9.5 | 9.7 | ||||||||||||||
|
Fleet and other |
1.1 | 1.2 | ||||||||||||||
|
Adjusted |
As reported |
|||||||||||||||
|
Six months ended June 30, |
Six months ended June 30, |
|||||||||||||||
|
|
2014 |
2013 |
2014 |
2013 |
||||||||||||
| Other metrics | ||||||||||||||||
|
SG&A as a % of revenue |
10.6 |
% |
10.8 |
% |
10.7 |
% |
11.0 |
% | ||||||||
|
SG&A as a % of gross profit |
66.7 | 67.5 | 67.9 | 68.7 | ||||||||||||
|
Operating profit as a % of revenue |
4.8 | 4.7 | 4.6 | 4.5 | ||||||||||||
|
Operating profit as a % of gross profit |
30.1 | 29.4 | 29.0 | 28.2 | ||||||||||||
|
Pretax margin |
4.4 | 4.2 | 4.3 | 4.0 | ||||||||||||
|
Net profit margin |
2.7 | 2.6 | 2.6 | 2.5 | ||||||||||||
Lithia Motors, Inc.
Same Store Operating Highlights (Unaudited)
|
Six months ended |
% |
|||||||||||||||
|
June 30, |
Increase |
Increase |
||||||||||||||
|
2014 |
2013 |
(Decrease) |
(Decrease) |
|||||||||||||
|
Revenues |
||||||||||||||||
|
New vehicle retail |
$ | 1,175,760 | $ | 1,060,303 | $ | 115,457 | 10.9 |
% | ||||||||
|
Used vehicle retail |
570,759 | 496,982 | 73,777 | 14.8 | ||||||||||||
|
Used vehicle wholesale |
83,060 | 77,172 | 5,888 | 7.6 | ||||||||||||
|
Finance and insurance |
77,322 | 65,810 | 11,512 | 17.5 | ||||||||||||
|
Service, body and parts |
202,699 | 184,477 | 18,222 | 9.9 | ||||||||||||
|
Fleet and other |
22,413 | 22,984 | (571 | ) | (2.5 | ) | ||||||||||
|
Total revenues |
$ | 2,132,013 | $ | 1,907,728 | $ | 224,285 | 11.8 | |||||||||
|
Gross profit |
||||||||||||||||
|
New vehicle retail |
$ | 78,404 | $ | 73,235 | $ | 5,169 | 7.1 |
% | ||||||||
|
Used vehicle retail |
79,820 | 73,765 | 6,055 | 8.2 | ||||||||||||
|
Used vehicle wholesale |
2,758 | 1,781 | 977 | 54.9 | ||||||||||||
|
Finance and insurance |
77,322 | 65,810 | 11,512 | 17.5 | ||||||||||||
|
Service, body and parts |
98,906 | 90,277 | 8,629 | 9.6 | ||||||||||||
|
Fleet and other |
1,086 | 947 | 139 | 14.7 | ||||||||||||
|
Total gross profit |
$ | 338,296 | $ | 305,815 | $ | 32,481 | 10.6 | |||||||||
|
Gross margin |
||||||||||||||||
|
New vehicle retail |
6.7 |
% |
6.9 |
% |
(20) bps |
|||||||||||
|
Used vehicle retail |
14.0 | 14.8 |
(80) bps |
|||||||||||||
|
Used vehicle wholesale |
3.3 | 2.3 |
100 bps |
|||||||||||||
|
Finance and insurance |
100.0 | 100.0 |
- bps |
|||||||||||||
|
Service, body and parts |
48.8 | 48.9 |
(10) bps |
|||||||||||||
|
Fleet and other |
4.8 | 4.1 |
70 bps |
|||||||||||||
|
Total gross profit |
15.9 | 16.0 |
(10 bps) |
|||||||||||||
|
Unit sales |
||||||||||||||||
|
New vehicle retail |
34,323 | 31,657 | 2,666 | 8.4 |
% | |||||||||||
|
Used vehicle retail |
29,964 | 27,694 | 2,270 | 8.2 | ||||||||||||
|
Total retail units sold |
64,287 | 59,351 | 4,936 | 8.3 | ||||||||||||
|
Used vehicle wholesale |
11,200 | 10,564 | 636 | 6.0 | ||||||||||||
|
Average selling price |
||||||||||||||||
|
New vehicle retail |
$ | 34,256 | $ | 33,493 | $ | 763 | 2.3 |
% | ||||||||
|
Used vehicle retail |
19,048 | 17,945 | 1,103 | 6.1 | ||||||||||||
|
Used vehicle wholesale |
7,416 | 7,305 | 111 | 1.5 | ||||||||||||
|
Average gross profit per unit |
||||||||||||||||
|
New vehicle retail |
$ | 2,284 | $ | 2,313 | $ | (29 | ) | (1.3 |
)% | |||||||
|
Used vehicle retail |
2,664 | 2,664 | - | - | ||||||||||||
|
Used vehicle wholesale |
246 | 169 | 77 | 45.6 | ||||||||||||
|
Finance and insurance |
1,203 | 1,109 | 94 | 8.5 | ||||||||||||
|
Total vehicle(1) |
3,707 | 3,616 | 91 | 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.
Other Highlights (Unaudited)
|
As of |
||||||||||||
|
June 30, |
December 31, |
June 30, |
||||||||||
|
2014 |
2013 |
2013 |
||||||||||
|
Days Supply(1) |
||||||||||||
|
New vehicle inventory |
71 | 74 | 76 | |||||||||
|
Used vehicle inventory |
60 | 63 | 51 | |||||||||
(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 June 30, 2014 |
||||
|
Current ratio |
Not less than 1.20 to 1 |
1.29 to 1 | |||
|
Fixed charge coverage ratio |
Not less than 1.20 to 1 |
4.22 to 1 | |||
|
Leverage ratio |
Not more than 5.00 to 1 |
1.29 to 1 | |||
|
Funded debt restriction |
Not more than $375 million |
$172.4 million |
|||
Lithia Motors, Inc.
Other Highlights (Unaudited)
| Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
|
New vehicle unit sales brand mix |
||||||||||||||||
|
Chrysler |
27.6 |
% |
29.9 |
% |
28.5 |
% |
30.5 |
% | ||||||||
|
General Motors |
14.5 | 16.2 | 14.3 | 16.1 | ||||||||||||
|
Toyota |
13.8 | 14.6 | 13.7 | 14.7 | ||||||||||||
|
Subaru |
9.2 | 7.6 | 9.4 | 7.6 | ||||||||||||
|
Honda, Acura |
8.3 | 7.2 | 8.0 | 7.0 | ||||||||||||
|
BMW, MINI |
6.5 | 6.4 | 6.3 | 6.4 | ||||||||||||
|
Ford |
6.7 | 6.0 | 6.3 | 6.0 | ||||||||||||
|
Nissan |
3.6 | 2.9 | 3.7 | 2.8 | ||||||||||||
|
Hyundai |
3.1 | 2.7 | 3.1 | 2.8 | ||||||||||||
|
Volkswagen, Audi |
2.8 | 2.3 | 2.6 | 2.1 | ||||||||||||
|
Mercedes |
2.2 | 2.7 | 2.3 | 2.5 | ||||||||||||
|
Kia |
1.0 | 0.5 | 0.9 | 0.6 | ||||||||||||
|
Mazda |
0.4 | 0.5 | 0.4 | 0.5 | ||||||||||||
|
Other |
0.3 | 0.5 | 0.5 | 0.4 | ||||||||||||
| Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
|
Revenue geographic mix |
||||||||||||||||
|
Texas |
24.0 |
% |
25.0 |
% |
24.0 |
% |
25.3 |
% | ||||||||
|
Oregon |
21.9 | 20.5 | 22.0 | 20.7 | ||||||||||||
|
California |
13.1 | 10.5 | 13.2 | 10.6 | ||||||||||||
|
Montana |
8.0 | 8.8 | 8.2 | 8.9 | ||||||||||||
|
Alaska |
7.5 | 8.2 | 7.1 | 7.7 | ||||||||||||
|
Washington |
7.0 | 8.1 | 7.2 | 8.1 | ||||||||||||
|
Nevada |
4.4 | 4.7 | 4.6 | 4.7 | ||||||||||||
|
Iowa |
4.3 | 5.0 | 4.3 | 4.8 | ||||||||||||
|
Idaho |
4.2 | 5.0 | 4.4 | 5.1 | ||||||||||||
|
North Dakota |
2.3 | 2.6 | 2.2 | 2.5 | ||||||||||||
|
Hawaii |
2.0 | 0.0 | 1.4 | 0.0 | ||||||||||||
|
New Mexico |
1.3 | 1.6 | 1.4 | 1.6 | ||||||||||||
|
As of July 23, 2014 |
||||||||||||||||
|
|
# of stores |
% of total |
||||||||||||||
| Current store count mix | ||||||||||||||||
|
Chrysler |
24 | 23.6 |
% |
|||||||||||||
|
General Motors |
16 | 15.8 | ||||||||||||||
|
Honda, Acura |
11 | 10.9 | ||||||||||||||
|
Toyota |
10 | 9.9 | ||||||||||||||
|
BMW, MINI |
9 | 8.9 | ||||||||||||||
|
Ford |
6 | 5.9 | ||||||||||||||
|
Subaru |
5 | 5.0 | ||||||||||||||
|
Hyundai |
5 | 5.0 | ||||||||||||||
|
Volkswagen, Audi |
5 | 5.0 | ||||||||||||||
|
Nissan |
4 | 4.0 | ||||||||||||||
|
Mercedes |
3 | 3.0 | ||||||||||||||
|
Other |
3 | 3.0 | ||||||||||||||
Lithia Motors, Inc.
Consolidated Balance Sheets (Unaudited)
(In thousands)
|
June 30, 2014 |
December 31, 2013 |
|||||||
|
Cash and cash equivalents |
$ | 28,203 | $ | 23,686 | ||||
|
Trade receivables, net |
191,228 | 170,519 | ||||||
|
Inventories, net |
981,223 | 859,019 | ||||||
|
Deferred income taxes |
222 | 1,548 | ||||||
|
Other current assets |
12,028 | 15,251 | ||||||
|
Assets held for sale |
- | 11,526 | ||||||
|
Total current assets |
$ | 1,212,904 | $ | 1,081,549 | ||||
|
Property and equipment, net |
528,254 | 481,212 | ||||||
|
Goodwill |
65,004 | 49,511 | ||||||
|
Franchise value |
77,728 | 71,199 | ||||||
|
Deferred income taxes |
14,624 | 10,256 | ||||||
|
Other non-current assets |
41,613 | 31,394 | ||||||
|
Total assets |
$ | 1,940,127 | $ | 1,725,121 | ||||
|
Floor plan notes payable |
$ | 20,598 | $ | 18,789 | ||||
|
Floor plan notes payable: non trade |
806,684 | 695,066 | ||||||
|
Current maturities of long-term debt |
7,578 | 7,083 | ||||||
|
Trade payables |
56,384 | 51,159 | ||||||
|
Accrued liabilities |
112,742 | 94,143 | ||||||
|
Liabilities related to assets held for sale |
- | 6,271 | ||||||
|
Total current liabilities |
$ | 1,003,986 | $ | 872,511 | ||||
|
Long-term debt |
260,835 | 245,471 | ||||||
|
Deferred revenue |
48,918 | 44,005 | ||||||
|
Other long-term liabilities |
34,537 | 28,412 | ||||||
|
Total liabilities |
$ | 1,348,276 | $ | 1,190,399 | ||||
|
Class A common stock |
266,172 | 268,255 | ||||||
|
Class B common stock |
319 | 319 | ||||||
|
Additional paid-in capital |
26,045 | 22,598 | ||||||
|
Accumulated other comprehensive loss |
(1,259 | ) | (1,538 | ) | ||||
|
Retained earnings |
300,574 | 245,088 | ||||||
|
Total liabilities & stockholders' equity |
$ | 1,940,127 | $ | 1,725,121 | ||||
Lithia Motors, Inc.
Summarized Cash Flow from Operations (Unaudited)
(In thousands)
|
Six months ended |
||||||||
|
June 30, |
||||||||
|
2014 |
2013 |
|||||||
|
Net income |
$ | 63,043 | $ | 47,610 | ||||
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
||||||||
|
Depreciation and amortization |
11,332 | 9,620 | ||||||
|
Stock-based compensation |
3,259 | 2,603 | ||||||
|
Loss on disposal of assets |
62 | 33 | ||||||
|
Gain on sale of franchise |
(5,744 | ) | - | |||||
|
Deferred income taxes |
2,840 | 825 | ||||||
|
Excess tax benefit from share-based payment arrangements |
(6,058 | ) | (5,408 | ) | ||||
|
(Increase) decrease: |
||||||||
|
Trade receivables, net |
(20,709 | ) | (10,684 | ) | ||||
|
Inventories |
(77,300 | ) | (48,899 | ) | ||||
|
Other current assets |
1,360 | 5,980 | ||||||
|
Other non-current assets |
(7,311 | ) | (3,394 | ) | ||||
|
Increase (decrease): |
||||||||
|
Floor plan notes payable, net |
368 | 3,384 | ||||||
|
Trade payables |
1,411 | 2,078 | ||||||
|
Accrued liabilities |
17,594 | 8,812 | ||||||
|
Other long-term liabilities and deferred revenue |
11,659 | 11,889 | ||||||
|
Net cash provided by (used in) operating activities |
$ | (4,194 | ) | $ | 24,449 | |||
Lithia Motors, Inc.
Reconciliation of Non-GAAP Cash Flow from Operations (Unaudited)
(In thousands)
|
Six months ended |
||||||||
|
June 30, |
||||||||
|
|
2014 |
2013 |
||||||
| Net cash provided by (used in) operating activities | ||||||||
|
As reported |
$ | (4,194 | ) | $ | 24,449 | |||
|
Floor plan notes payable, non-trade, net |
112,910 | 5,989 | ||||||
|
Adjusted |
$ | 108,716 | $ | 30,438 | ||||
Lithia Motors, Inc.
Reconciliation of Certain Non-GAAP Financial Measures (Unaudited)
(In thousands, except for per share data)
|
Three Months Ended June 30, 2014 |
||||||||||||||||
|
As reported |
Acquisition expenses |
Tax attributes |
Adjusted |
|||||||||||||
|
Selling, general and administrative |
$ | 125,463 | $ | (163 | ) | $ | - | $ | 125,300 | |||||||
|
Income from operations |
61,012 | 163 | - | 61,175 | ||||||||||||
|
Income from continuing operations before income taxes |
$ | 57,074 | $ | 163 | $ | - | $ | 57,237 | ||||||||
|
Income tax expense |
(21,904 | ) | (63 | ) | (73 | ) | (22,040 | ) | ||||||||
|
Net income from continuing operations |
$ | 35,170 | $ | 100 | $ | (73 | ) | $ | 35,197 | |||||||
|
Diluted earnings per share from continuing operations |
$ | 1.34 | $ | - | $ | - | $ | 1.34 | ||||||||
|
Diluted share count |
26,331 | |||||||||||||||
|
Three Months Ended June 30, 2013 |
||||||||||||||||
|
As reported |
Legal accrual adjustment |
Tax attribute |
Adjusted |
|||||||||||||
|
Selling, general and administrative |
$ | 109,283 | $ | (3,813 | ) | $ | - | $ | 105,470 | |||||||
|
Income from operations |
$ | 45,651 | $ | 3,813 | $ | - | $ | 49,464 | ||||||||
|
Income from continuing operations before income taxes |
$ | 41,258 | $ | 3,813 | $ | - | $ | 45,071 | ||||||||
|
Income tax expense |
(15,977 | ) | (1,484 | ) | (228 | ) | (17,689 | ) | ||||||||
|
Net income from continuing operations |
$ | 25,281 | $ | 2,329 | $ | (228 | ) | $ | 27,382 | |||||||
|
Diluted earnings per share from continuing operations |
$ | 0.97 | $ | 0.09 | $ | (0.01 | ) | $ | 1.05 | |||||||
|
Diluted share count |
26,134 | |||||||||||||||
Lithia Motors, Inc.
Reconciliation of Certain Non-GAAP Financial Measures (Unaudited)
(In thousands, except for per share data)
|
Six Months Ended June 30, 2014 |
||||||||||||||||||||
|
As reported |
Reserve adjustments |
Acquisition expenses |
Tax attribute |
Adjusted |
||||||||||||||||
|
Selling, general and administrative |
$ | 247,292 | $ | (3,931 | ) | $ | (163 | ) | $ | - | $ | 243,198 | ||||||||
|
Income from operations |
105,737 | 3,931 | 163 | - | 109,831 | |||||||||||||||
|
Income from continuing operations before income taxes |
$ | 97,778 | $ | 3,931 | $ | 163 | $ | - | $ | 101,872 | ||||||||||
|
Income tax expense |
(37,914 | ) | (1,545 | ) | (63 | ) | (73 | ) | (39,595 | ) | ||||||||||
|
Net income from continuing operations |
$ | 59,864 | $ | 2,386 | $ | 100 | $ | (73 | ) | $ | 62,277 | |||||||||
|
Diluted earnings per share from continuing operations |
$ | 2.27 | $ | 0.09 | $ | - | $ | - | $ | 2.36 | ||||||||||
|
Diluted share count |
26,326 | |||||||||||||||||||
|
Six months ended June 30, 2013 |
||||||||||||||||
|
As reported |
Legal accrual adjustment |
Tax attribute |
Adjusted |
|||||||||||||
|
Selling, general and administrative |
$ | 210,414 | $ | (3,813 | ) | $ | - | $ | 206,601 | |||||||
|
Income from operations |
$ | 86,237 | $ | 3,813 | $ | - | $ | 90,050 | ||||||||
|
Income from continuing operations before income taxes |
$ | 76,835 | $ | 3,813 | $ | - | $ | 80,648 | ||||||||
|
Income tax expense |
(29,672 | ) | (1,484 | ) | (228 | ) | (31,384 | ) | ||||||||
|
Net income from continuing operations |
$ | 47,163 | $ | 2,329 | $ | (228 | ) | $ | 49,264 | |||||||
|
Diluted earnings per share from continuing operations |
$ | 1.81 | $ | 0.09 | $ | (0.01 | ) | $ | 1.89 | |||||||
|
Diluted share count |
26,120 | |||||||||||||||