f8klad2qea072910ex991.htm - Generated by SEC Publisher for SEC Filing

Selection of Chief Financial Officer

Lithia is pleased to announce that Chris Holzshu will be promoted to Senior Vice President and Chief Financial Officer upon the departure of Jeff DeBoer at the end of October. Chris has held a number of positions with increasing responsibility at Lithia over the past eight years, most recently as Vice President of Financial Planning and Analysis.

Commenting on the selection, Sid DeBoer stated, “For the last two years, Chris has been responsible for our budgeting and performance monitoring. In this role, he has been focused on identifying opportunities to improve store operations. I am pleased that Chris will continue this focus as our new CFO. Our top priority is improving store profitability, and Chris will deliver on this objective.”

Chris joined the Company in 2003 to manage the corporate accounting department, and was subsequently promoted to leadership roles in internal audit / compliance and business development. Prior to Lithia, Chris spent several years working at KPMG LLP, an independent public accounting firm. Chris is a licensed CPA.

Balance Sheet Update

Lithia ended the period with $118.2 million in immediately available funds, including $15.4 million in cash, $71.2 million in availability on its revolving credit facility, and $31.6 million in unfinanced new vehicle inventory. At June 30, 2010, Lithia was in compliance with all debt covenants. Lithia recently announced the extension of its revolving credit facility through June 2013 and has no mortgage maturities until November 2011.

Outlook for 2010

Lithia is providing 2010 third quarter earnings guidance within a range of $0.27 to $0.29 per diluted share. Full-year 2010 adjusted earnings guidance has been increased for the effect of announced acquisitions and dispositions and is projected within a range of $0.72 to $0.77 per diluted share. Both projections are based on the following revised assumptions:

· Total revenues in range of $1.95 to $2.0 billion

· New vehicle same store sales increasing 12.4%

· New vehicle gross margin ranging from 8.0% to 8.3%

· Used vehicle same store sales increasing 14.1%

· Used vehicle gross margin ranging from 14.2% to 14.5%

· Service body and parts same store sales decreasing 2.0%

· Service body and parts gross margin ranging from 48.1% to 48.7%

· Finance and insurance gross profit of $955 per unit

· Tax rate of 38.5%

· Estimated average diluted shares outstanding of 26.2 million

· Capital expenditures of approximately $3.5 million

· Chrysler market share consistent with full year 2009 levels

· Guidance excludes the impact of future acquisitions, dispositions, and any potential non-core items

Second Quarter Earnings Conference Call and Updated Presentation

The second quarter conference call may be accessed at 2:00 p.m. PT today by telephone at (877) 407-8029 (Conference ID: 352738). An updated presentation highlighting the second quarter results has been added to Investor Relations on www.lithia.com.

To listen live on our website or for replay, visit Investor Relations on www.lithia.com and click on the conference call icon. A playback of the conference call will be available after 5:00 p.m. PT on July 29, 2010 through August 5, 2010 by calling 877-660-6853 (Conference ID: 352738 Account: 305).

About Lithia

Lithia Motors, Inc. is the ninth largest automotive retailer in the United States and a Fortune 800 company. Lithia sells 26 brands of new and all brands of used vehicles at 84 stores, which are located in 12 states. Lithia also sells used vehicles; arranges finance, warranty, and credit insurance contracts; and provides vehicle parts, maintenance, and repair services at all of its locations.

For additional information on Lithia Motors, contact the Investor Relations Department at (541) 776-6591 or visit www.lithia.com and click on “Investor Relations.”

Sites

www.lithia.com

www.lithiacares.com

www.lithiajobs.com

Lithia Motors on Facebook

http://www.facebook.com/profile.php?id=1270221622&ref=ts

Lithia Life on Facebook

http://www.facebook.com/pages/Lithia-Lifecom/34360183908?ref=ts

Lithia Life on YouTube

http://www.youtube.com/user/LithiaLife

Lithia Life on Twitter

http://twitter.com/LithiaLife

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, which management believes are a benefit to shareholders. Forward-looking statements in this press release include our guidance regarding third quarter and full year 2010 results, including the effect of announced acquisitions, the timely sale of real estate held for future development, and our belief we can find accretive diversifying acquisition opportunities. 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 "expects," "anticipates," "intends," "plans," "believes," "seeks" or "will." These statements are necessarily subject to risk and uncertainty and actual results could differ materially due to certain risk factors, including without limitation, future economic conditions and others set forth from time to time in the company's filings with the SEC. We urge you to carefully consider this information. We undertake no duty to update our forward-looking statements, including our earnings outlook.

Non-GAAP Financial Measures

This press release and the attached financial tables contain certain non-GAAP financial measures as defined under SEC rules, 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 and adjusted pre-tax margin adjusted to exclude certain items disclosed in the attached financial tables. Cash flows from operations were adjusted to include the change in non-trade floorplan debt to improve the visibility of cash flows related to vehicle financing. As required by SEC rules, the Company has provided reconciliations of these measures to the most directly comparable GAAP measures, which are set forth in the attachments to this release. The Company believes that each of the foregoing non-GAAP financial measures improves the transparency of the Company's disclosure, provides a meaningful presentation of the Company's results from its core business operations excluding adjustments for items not related to the Company's ongoing core business operations or other non-cash adjustments, and improves the period-to-period comparability of the Company's results from its core business operations.

Source: Lithia Motors, Inc.

Lithia Motors, Inc.

Consolidated Statement of Operations (Unaudited)

(In thousands except per share data)


		Three Months Ended
		June 30,				Increase	% Increase
		2010		2009		(Decrease)	(Decrease)
Revenues:
New vehicle sales	$	268,721	$	211,760	$	56,961	26.9	%
Used vehicle sales		172,406		144,007		28,399	19.7
Finance and insurance		16,274		14,857		1,417	9.5
Service, body and parts		71,996		72,312		(316)	(0.4)
Fleet and other		4,704		625		4,079	652.6
Total revenues		534,101		443,561		90,540	20.4
Cost of sales:
New vehicle sales		246,626		194,373		52,253	26.9
Used vehicle sales		150,858		125,633		25,225	20.1
Service, body and parts		36,617		36,999		(382)	(1.0)
Fleet and other		4,257		267		3,990	1,494.4
Total cost of sales		438,358		357,272		81,086	22.7
Gross profit		95,743		86,289		9,454	11.0

Asset impairment charges		13,260		3,520		9,740	276.7
SG&A expense		74,813		68,854		5,959	8.7
Depreciation and amortization		4,402		3,969		433	10.9
Income from operations		3,268		9,946		(6,678)	(67.1)

Floorplan interest expense		(2,567)		(2,664)		(97)	(3.6)
Other interest expense		(3,529)		(3,367)		162	4.8
Other income, net		215		258		(43)	(16.7)
Income (loss) from continuing operations before income taxes		(2,613)		4,173		(6,786)	NM

Income tax expense (benefit)		(1,099)		1,634		(2,733)	NM
Income tax rate		42.1%		39.2%
Income (loss) from continuing operations		(1,514)		2,539		(4,053)	NM

Income (loss) from discontinued operations, net of income tax		(205)		1,124		(1,329)	NM
Net income (loss)		(1,719)		3,663		(5,382)	NM

Diluted net income (loss) per share:
Continuing operations	$	(0.06)	$	0.12	$	(0.18)	NM
Discontinued operations		(0.01)		0.05		(0.06)	NM
Net income (loss) per share	$	(0.07)	$	0.17	$	(0.24)	NM

Diluted shares outstanding		26,014		21,096		4,918	23.3	%

NM – not meaningful

Lithia Motors, Inc.

Key Performance Metrics (Unaudited)

		Three Months Ended
		June 30,				Increase		% Increase
		2010		2009		(Decrease)		(Decrease)
Gross margin
New vehicle retail		8.2	%	8.2	%	- bps
Used vehicle retail		14.5		14.5		- bps
Used vehicle wholesale		1.2		0.2		100 bps
Finance & insurance		100.0		100.0		- bps
Service, body & parts		49.1		48.8		30 bps
Gross profit margin		17.9		19.5		(160) bps

Unit sales
New vehicle retail		8,678		7,110		1,568		22.1	%
Used vehicle retail		8,667		7,761		906		11.7
Used vehicle wholesale		3,305		3,107		198		6.4
Total units sold		20,650		17,978		2,672		14.9

Average selling price
New vehicle retail	$	30,966	$	29,783	$	1,183		4.0	%
Used vehicle retail		16,942		16,268		674		4.1
Used vehicle wholesale		7,737		5,713		2,024		35.4

Average gross profit per unit
New vehicle retail	$	2,546	$	2,445	$	101		4.1	%
Used vehicle retail		2,452		2,362		90		3.8
Used vehicle wholesale		91		14		77		550.0
Finance & insurance		938		999		(61)		(6.1)

Revenue mix
New vehicle retail		50.3	%	47.7	%
Used vehicle retail		27.5		28.5
Used vehicle wholesale		4.8		4.1
Finance & insurance, net		3.0		3.3
Service, body & parts		13.5		16.3
Fleet and other		0.9		0.1

		Adjusted				As reported
		Three Months Ended				Three Months Ended
		June 30,				June 30
Other metrics		2010		2009		2010		2009
SG&A as a % of revenue		13.8	%	15.5	%	14.0	%	15.5	%
SG&A as a % of gross profit		77.0		79.8		78.1		79.8
Operating profit as a % of revenue		3.3		3.1		0.6		2.2
Operating profit as a % of gross profit		18.4		15.8		3.4		11.5
Pretax margin		2.2		1.7		(0.5)		0.9

Lithia Motors, Inc.

Key Performance Metrics (Unaudited)

	Three Months Ended
	June 30,
	2010		2009
New vehicle unit sales brand mix
Chrysler	28.8	%	30.3	%
General Motors	17.6		17.3
Toyota	12.8		14.2
Honda	8.9		9.3
Ford	5.7		4.9
Hyundai	5.6		4.6
BMW	5.4		5.1
Subaru	4.9		4.6
Volkswagen, Audi	3.5		3.2
Nissan	3.2		4.0
Kia	1.8		0.5
Mercedes	1.1		1.0
Other	0.7		1.0

Same store revenue changes
New vehicle retail	26.3	%	(35.9)	%
Used vehicle retail	15.0		2.7
Used vehicle wholesale	42.1		(30.6)
Finance & insurance	15.2		(33.6)
Service, body & parts	(0.2)		(4.5)
Total sales (excluding fleet)	19.1		(23.2)

Same store gross profit changes
New vehicle retail	25.2	%	(32.0)	%
Used vehicle retail	18.7		27.9
Used vehicle wholesale	259.5		(114.5)
Service, body & parts	0.4		(2.7)
Total gross profit (excluding fleet)	12.1		(11.7)

Current store count	# of stores		% of total
Chrysler	23		27.4	%
General Motors	12		14.3
Honda	8		9.5
Toyota	7		8.3
Hyundai	6		7.1
BMW	6		7.1
Ford	4		4.8
Volkswagen, Audi	4		4.8
Nissan	4		4.8
Subaru	2		2.4
Kia	2		2.4
Mercedes	1		1.2
Other	5		5.9
	84

Lithia Motors, Inc.

Consolidated Statement of Operations (Unaudited)

(In thousands except per share data)


		Six Months Ended
		June 30,				Increase	% Increase
		2010		2009		(Decrease)	(Decrease)
Revenues:
New vehicle sales	$	484,338	$	404,066	$	80,272	19.9	%
Used vehicle sales		331,770		269,609		62,161	23.1
Finance and insurance		30,912		28,394		2,518	8.9
Service, body and parts		140,793		145,269		(4,476)	(3.1)
Fleet and other		5,507		1,195		4,312	360.8
Total revenues		993,320		848,533		144,787	17.1
Cost of sales:
New vehicle sales		443,839		369,979		73,860	20.0
Used vehicle sales		291,257		237,214		54,043	22.8
Service, body and parts		71,868		75,289		(3,421)	(4.5)
Fleet and other		4,708		481		4,227	878.8
Total cost of sales		811,672		682,963		128,709	18.8
Gross profit		181,648		165,570		16,078	9.7

Asset impairment charges		14,751		5,197		9,554	183.8
SG&A expense		145,852		137,912		7,940	5.8
Depreciation and amortization		9,151		8,060		1,091	13.5
Income from operations		11,894		14,401		(2,507)	17.4

Floorplan interest expense		(5,318)		(5,575)		(257)	(4.6)
Other interest expense		(7,117)		(7,348)		(231)	(3.1)
Other income, net		283		1,422		(1,139)	(80.1)
Income (loss) from continuing operations before income taxes		(258)		2,900		(3,158)	NM

Income tax expense (benefit)		(187)		1,145		(1,332)	NM
Income tax rate		72.5	%	39.5	%
Income (loss) from continuing operations		(71)		1,755		(1,826)	NM

Income (loss) from discontinued operations, net of income tax		(381)		3,237		(3,618)	NM
Net income (loss)		(452)		4,992		(5,444)	NM

Diluted net income (loss) per share:
Continuing operations	$	(0.00)	$	0.08	$	(0.08)	NM
Discontinued operations		(0.02)		0.16		(0.18)	NM
Net income (loss) per share	$	(0.02)	$	0.24	$	(0.26)	NM

Diluted shares outstanding		25,955		20,960		4,995	23.8	%

NM – not meaningful

Lithia Motors, Inc.

Key Performance Metrics (Unaudited)

		Six Months Ended
		June 30,				Increase		% Increase
		2010		2009		(Decrease)		(Decrease)
Gross margin
New vehicle retail		8.4	%	8.4	%	- bps
Used vehicle retail		14.1		13.6		50 bps
Used vehicle wholesale		1.4		1.2		20 bps
Finance & insurance		100.0		100.0		- bps
Service, body & parts		49.0		48.2		80 bps
Gross profit margin		18.3		19.5		(120) bps

Unit sales
New vehicle retail		15,562		13,501		2,061		15.3		%
Used vehicle retail		16,878		14,879		1,999		13.4
Used vehicle wholesale		6,591		6,279		312		5.0
Total units sold		39,031		34,659		4,372		12.6

Average selling price
New vehicle retail	$	31,123	$	29,929	$	1,194		4.0		%
Used vehicle retail		16,752		15,817		935		5.9
Used vehicle wholesale		7,440		5,457		1,983		36.3

Average gross profit per unit
New vehicle retail	$	2,602	$	2,525	$	77		3.0		%
Used vehicle retail		2,361		2,150		211		9.8
Used vehicle wholesale		102		64		38		59.4
Finance & insurance		953		1,000		(47)		(4.7)

Revenue mix
New vehicle retail		48.8	%	47.6	%
Used vehicle retail		28.5		27.7
Used vehicle wholesale		4.8		4.2
Finance & insurance, net		3.1		3.3
Service, body & parts		14.2		17.1
Fleet and other		0.6		0.1

		Adjusted				As reported
		Six Months Ended				Six Months Ended
		June 30,				June 30
Other metrics		2010		2009		2010			2009
SG&A as a % of revenue		14.5	%	16.3	%	14.7	%	16.3		%
SG&A as a % of gross profit		79.6		83.3		80.3		83.3
Operating profit as a % of revenue		2.8		2.4		1.2		1.7
Operating profit as a % of gross profit		15.2		12.1		6.5		8.7
Pretax margin		1.6		0.9		-		0.3

Lithia Motors, Inc.

Key Performance Metrics (Unaudited)

	Six Months Ended
	June 30,
	2010		2009
New vehicle unit sales brand mix
Chrysler	27.5	%	32.5	%
General Motors	17.0		16.5
Toyota	13.7		14.2
Honda	8.7		8.6
Hyundai	5.9		4.5
Ford	5.6		4.8
BMW	5.5		5.0
Subaru	5.4		4.6
Nissan	3.5		3.6
Volkswagen, Audi	3.4		3.2
Kia	1.9		-
Mercedes	1.1		1.0
Other	0.8		1.5

Same store revenue changes
New vehicle retail	19.3	%	(37.4)	%
Used vehicle retail	18.3		(4.9)
Used vehicle wholesale	41.6		(40.1)
Finance & insurance	7.5		(33.1)
Service, body & parts	(3.1)		(4.8)
Total sales (excluding fleet)	15.7		(26.0)

Same store gross profit changes
New vehicle retail	17.7	%	(31.7)	%
Used vehicle retail	29.0		8.0
Used vehicle wholesale	30.6		(148.6)
Service, body & parts	(1.8)		(3.1)
Total gross profit (excluding fleet)	9.7		(14.2)

Geographic revenue mix
Texas	24.7	%	24.2	%
Oregon	15.0		16.4
California	11.4		11.5
Alaska	10.8		9.6
Washington	10.0		9.9
Montana	6.8		6.9
Iowa	7.0		7.3
Idaho	6.4		6.6
Nevada	4.1		3.9
North Dakota	2.0		1.6
New Mexico	1.0		1.2
Colorado	0.8		0.9

Lithia Motors, Inc.

Consolidated Balance Sheet (Unaudited)

(In thousands except per share data)

		June 30, 2010		December 31, 2009
Cash and cash equivalents	$	15,379	$	12,776
Contracts in transit		25,373		21,940
Trade receivables, net		36,187		30,157
Inventory, net		361,063		328,726
Vehicles leased to others		7,940		7,384
Prepaid expenses and other		3,443		5,387
Assets held for sale		-		11,693
Total current assets	$	449,385	$	418,063

Land and building, net		308,389		326,625
Equipment and other, net		54,868		59,429
Intangible assets, net		42,935		42,496
Other non-current assets		8,484		7,752
Deferred income taxes		45,231		40,735
Total assets	$	909,292	$	895,100

Flooring notes payable		234,878		210,488
Current maturities of line of credit		-		24,000
Current maturities of other debt		23,248		14,303
Trade payables		26,437		18,782
Accrued liabilities		50,540		47,518
Deferred income taxes		122		1,036
Liabilities related to assets held for sale		-		5,050
Total current liabilities	$	335,225	$	321,177

Real estate debt		229,947		230,265
Other long-term debt		2,725		2,800
Deferred revenue		19,043		17,981
Other long-term liabilities		16,879		15,839
Total liabilities	$	603,819	$	588,062

Class A common stock		282,764		280,880
Class B common stock		468		468
Additional paid-in capital		10,358		10,501
Other comprehensive income		(5,404)		(3,850)
Retained earnings		17,287		19,039
Total liabilities & shareholders' equity	$	909,292	$	895,100

Lithia Motors, Inc.

Summarized Cash Flow from Operations (Unaudited)

(In thousands)


	Six Months Ended
	June 30,
	2010	2009
Net income (loss)	$(452)	$4,992

Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:
Asset impairments	14,751	5,197
Depreciation and amortization	9,159	8,449
Amortization of debt discount	-	48
Stock-based compensation	948	1,122
Gain on early extinguishment of debt	-	(1,317)
(Gain) loss on disposal of assets	93	(9,196)
Deferred income taxes	(4,784)	2,208
Excess tax deficit from share-based payment arrangements	-	46
(Increase) decrease, net of effect of acquisitions and divestitures
Trade receivables, net	(5,997)	8,631
Contracts in transit	(3,433)	5,013
Inventories	(28,996)	114,084
Vehicles leased to others	(1,210)	737
Prepaid expenses and other	1,350	19,028
Other non-current assets	(768)	523
Increase (decrease), net of effect of acquisitions and divestitures
Floorplan notes payable	2,770	(94,523)
Trade payables	7,655	958
Accrued liabilities	2,106	(2,357)
Other long-term liabilities and deferred revenue	50	10,673
Net cash provided by (used in) operating activities	$(6,758)	$74,316

Lithia Motors, Inc.

Reconciliation of Non-GAAP Cash Flow from Operations (Unaudited)

(In thousands)


	Six Months Ended
	June 30,
Net cash provided by (used in) operating activities	2010	2009
As reported	$(6,758)	$74,316
Floorplan notes payable, non-trade	23,854	(25,502)
Adjusted	$17,096	$48,814

Lithia Motors, Inc.

Other Highlights (Unaudited)

(In thousands except per share data)


	June 30, 2010		December 31, 2009
Other information
Lt debt/total cap	43.2	%	43.2	%
Adjusted Lt debt/total cap (excludes mortgage financing)	0.9	%	0.9	%
Book value per outstanding share	$11.75		$11.90

Debt covenant ratios
	Requirement				As of June 30, 2010
Minimum tangible net worth	Not less than $200 million				$261.3 million
Vehicle equity	Not less than $65 million				$148.1 million
Fixed charge coverage ratio	Not less than 1.15 to 1				1.52 to 1
Liabilities to tangible net worth ratio	Not more than 4.00 to 1				2.31 to 1

Lithia Motors, Inc.

Reconciliation of Certain Non-GAAP Financial Measures (Unaudited)

(In thousands)


	Three months ended June 30,		Six months ended June 30,
	2010	2009	2010	2009
Selling, general & administrative
As reported	$74,813	$68,854	$145,852	$137,912
Disposal gain (loss)	(2)	-	365	-
Lease termination and severance reserve	(1,076)	-	(1,334)	-
Adjusted	$73,735	$68,854	$144,883	$137,912

Income from operations
As reported	$3,268	$9,946	$11,894	$14,401
Impairments and disposal gain	13,262	3,680	14,451	5,760
Lease termination and severance reserve	1,076	-	1,334	-
Adjusted	$17,606	$13,626	$27,679	$20,161

Income (loss) from continuing operations before income taxes
As reported	$(2,613)	$4,173	$(258)	$2,900
Impairments and disposal gain	13,262	3,680	14,451	5,760
Lease termination and severance reserve	1,076	-	1,334	-
Gain on extinguishment of debt	-	(231)	-	(1,317)
Adjusted	$11,725	$7,622	$15,527	$7,343

Lithia Motors, Inc.

Reconciliation of Certain Non-GAAP Financial Measures (Unaudited)

(In thousands except per share data)


Adjusted net income/(loss) and diluted earnings per share

	Three Months Ended June 30,
	Net income/(loss)		Diluted earnings per share
	2010	2009	2010	2009
Continuing Operations
As reported	$(1,514)	$2,539	$(0.06)	$0.12
Impairments and disposal gain	8,046	2,057	0.31	0.10
Lease termination and severance reserve	561	-	0.02	-
Gain on extinguishment of debt	-	(38)	-	-
Adjusted	$7,093	$4,558	$0.27	$0.22

Discontinued Operations
As reported	$(205)	$1,124	$(0.01)	$0.05
Impairments and disposal (gain) loss	163	(1,869)	0.01	(0.09)
Adjusted	$(42)	$(745)	-	(0.04)

Consolidated Operations
As reported	$(1,719)	$3,663	$(0.07)	$0.17
Adjusted	7,051	3,813	0.27	0.18

	Six Months Ended June 30,
	Net income/(loss)		Diluted earnings per share
	2010	2009	2010	2009
Continuing Operations
As reported	$(71)	$1,755	-	$0.08
Impairments and disposal gain	8,777	3,431	0.34	0.16
Lease termination and severance reserve	725	-	0.03	-
Gain on extinguishment of debt	-	(812)	-	(0.04)
Adjusted	$9,431	$4,374	$0.37	$0.20

Discontinued Operations
As reported	$(381)	$3,237	$(0.02)	$0.16
Impairments and disposal (gain) loss	173	(5,421)	0.01	(0.26)
Adjusted	$(208)	$(2,184)	$(0.01)	(0.10)

Consolidated Operations
As reported	$(452)	$4,992	$(0.02)	$0.24
Adjusted	9,223	2,190	0.36	0.10