EX-99.1 2 lad2019q1-8k_ex991.htm EXHIBIT 99.1 Exhibit


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LITHIA REPORTS RECORD FIRST QUARTER 2019 RESULTS; INCREASES EARNINGS PER SHARE 17 %
________________________________________________

DECLARES DIVIDEND OF $0.30 PER SHARE FOR FIRST QUARTER

Medford, Oregon, April 24, 2019 - Lithia Motors, Inc. (NYSE: LAD) today reported the highest first quarter revenue and earnings per share in company history.

First quarter 2019 revenue increased 7% to a record $2.8 billion from $2.7 billion in the first quarter of 2018.

First quarter 2019 net income per diluted share was $2.42, a 17 % increase over $2.07 per diluted share reported in the first quarter of 2018. Adjusted first quarter 2019 net income per diluted share was $2.44, an 18% increase compared to net income of $2.07 per diluted share in the same period of 2018. First quarter 2019 net income was $56 million, an 8% increase compared to net income of $52 million in the same period of 2018. Adjusted first quarter 2019 net income was $57 million, a 9% increase compared to net income of $52 million for the same period of 2018.

First Quarter-over-Quarter Operating Highlights:
•
Total income from operations increased 16%
•
Total same store sales increased 3%
•
Same store used vehicle retail sales increased 11%
•
Same store F&I per unit increased 8% to a record $1,485
•
Same store service, body and parts sales increased 6%
•
Same store total gross profit per unit increased 4% to $3,614

Results for the quarter were driven by strong same store increases in three of our four business lines with retail used vehicles up 11%, F&I up 9%, and service body and parts up 6% compared to the same period of 2018. The performance in these more-profitable business lines contributed to revenue growth of 7%, and generated gross profit and adjusted pretax income increases of 10% and 12%, respectively, compared to the same period of 2018.

"First quarter results demonstrate a marked improvement in our store teams capturing their potential," said Bryan DeBoer, President and CEO. "The resiliency of our diversified business model and operational improvements, combined with opportunities in corporate development, is driving us towards our $15.00 in annual earnings per share aspirations."

Corporate Development
Our corporate development strategy centers around purchasing strong businesses that have yet to realize their earnings potential. We focus teams on consumer experience and clear performance measurements to increase profitability. The capital generated through these efforts is redeployed to expand our nationwide footprint and diversify our business.
"We made a small number of strategic adjustments to our portfolio in the quarter through a disciplined approach to optimizing our network," said DeBoer. "Our over half billion dollars of available liquidity combined with disciplined return expectations strongly positions us for continued expansion of our network and other strategic opportunities."
We invest in innovation to advance our position as a leading provider of personal transportation solutions. Initiatives are pursued in several categories, including investments to drive improvements and efficiencies in our existing operations, vertical and horizontal adjacencies to our core business, and through bold partnerships with emerging disruptors.

"The path to dominant U.S. market share is the combination of a strategically diversified physical network enhanced by solutions that serve customers wherever, whenever, and however they desire," said DeBoer.

In 2018 we partnered with Shift Technologies, a San Francisco-based digital retailer that provides vehicle purchase and selling experiences to consumers' homes. Our collaborative partnership leverages Shift's technology, Lithia's existing retail network, vendor and lender relationships, and robust set of transactional data. We expect that these efforts will drive a mutual expansion of consumer reach, and that available liquidity and financing capacity can enable Shift to scale towards $1 billion in annual revenues.





Balance Sheet Update
We ended the first quarter with $45 million in cash and $235 million in availability under our credit facility. Additionally, approximately $330 million of our operating real estate is currently unfinanced, which we estimate could provide $247 million in capital, for total potential liquidity of approximately $527 million.

Dividend Payment
Our Board of Directors approved a dividend of $0.30 per share related to first quarter 2019 financial results. We expect to pay the dividend on May 24, 2019 to shareholders of record on May 10, 2019.

First Quarter Earnings Conference Call and Updated Presentation
The first quarter 2019 conference call may be accessed at 10:00 a.m. ET today by telephone at 877-407-8029. An updated presentation highlighting the first quarter 2019 results has been added to our investor relations website. 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 providers of personal transportation solutions in the United States and is among the fastest growing companies in the Fortune 500 (#294-2018). Consumers can buy, sell and service vehicles digitally or through our 182 nationwide locations. Our mission, Growth Powered by People, drives us to grow and serve our customers wherever, whenever, and however they choose.

Sites
www.lithia.com
www.shift.com

www.lithiainvestorrelations.com
www.lithiacareers.com

Lithia Motors on Facebook
http://www.facebook.com/LithiaMotors

Lithia Motors on Twitter
http://twitter.com/lithiamotors

Contact:
Megan Kurz
Director, Corporate Finance
(541) 864-1729

Forward-Looking Statements
Certain statements in this presentation, and at times made by our officers and representatives, constitute forward-looking statements within the meaning of the “Safe Harbor” provisions of the Private Securities Litigation Reform Act of 1995. Generally, you can identify forward-looking statements by terms such as “project”, “outlook,” “target”, “may,” “will,” “would,” “should,” “seek,” “expect,” “plan,” “intend,” “forecast,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “likely,” “goal,” “strategy,” “future,” “maintain,” and “continue” or the negative of these terms or other comparable terms. Examples of forward-looking statements in this presentation include, among others, statements regarding:

•
Future market conditions, including anticipated national new car sales levels;
•
Expected operating results, such as improved store performance; continued improvement of selling, general and administrative expenses (“SG&A”) as a percentage of gross profit and all projections;
•
Anticipated integration, success and growth of acquired stores;
•
Anticipated ability to capture additional market share;
•
Anticipated ability to find accretive acquisitions;
•
Expected revenues from acquired stores;
•
Anticipated synergies, ability to increase ownership and ability to monetize our investment in Shift;
•
Anticipated ability for Shift to reach revenue projections;
•
Anticipated additions of dealership locations to our portfolio in the future;
•
Anticipated availability of liquidity from our unfinanced operating real estate;
•
Anticipated levels of capital expenditures in the future; and




•
Our strategies for customer retention, growth, market position, financial results and risk management.

Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. 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 presentation. Therefore, you should not rely on any of these forward-looking statements. 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);
•
the adequacy of our cash flow and earnings and other conditions which may affect our ability to pay our quarterly dividend at the planned level;
•
disruptions to our technology network including computer systems and software, as well as natural events such as severe weather, fires, floods and earthquakes or man-made or other disruptions of our operating systems, structures, facilities or equipment; and
•
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.

Any forward-looking statement made by us in this presentation is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.
 
Non-GAAP Financial Measures
This presentation contains non-GAAP financial measures such as adjusted net income and diluted earnings per share, adjusted SG&A as a percentage of revenue and gross profit, adjusted operating margin, adjusted operating profit as a percentage of gross profit, adjusted pre-tax margin, EBITDA, adjusted EBITDA, leveraged EBITDA and adjusted total debt. 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 millions except per share data)
 
 
Three months ended March 31,
 
%
 
 
 
Increase
 
 
2019
 
2018
 
(Decrease)
Revenues:
 
 
 
 
 
 
New vehicle retail
 
$
1,461.1

 
$
1,454.7

 
0.4
 %
Used vehicle retail
 
827.9

 
715.6

 
15.7

Used vehicle wholesale
 
77.4

 
76.0

 
1.8

Finance and insurance
 
117.5

 
106.5

 
10.3

Service, body and parts
 
317.4

 
285.7

 
11.1

Fleet and other
 
48.4

 
21.2

 
128.3

Total revenues
 
2,849.7

 
2,659.7

 
7.1
 %
Cost of sales:
 
 
 
 
 
 
New vehicle retail
 
1,375.2

 
1,367.8

 
0.5

Used vehicle retail
 
743.3

 
642.0

 
15.8

Used vehicle wholesale
 
76.5

 
75.0

 
2.0

Service, body and parts
 
157.9

 
147.3

 
7.2

Fleet and other
 
46.1

 
19.5

 
136.4

Total cost of sales
 
2,399.0

 
2,251.6

 
6.5

Gross profit
 
450.7

 
408.1

 
10.4
 %
Asset impairments
 
0.5

 
—

 
NM
SG&A expense
 
321.8

 
297.5

 
8.2

Depreciation and amortization
 
19.8

 
16.8

 
17.9

Income from operations
 
108.6

 
93.8

 
15.8
 %
Floor plan interest expense
 
(18.1
)
 
(13.5
)
 
34.1

Other interest expense
 
(15.3
)
 
(11.8
)
 
29.7

Other income, net
 
2.6

 
1.3

 
NM
Income before income taxes
 
77.8

 
69.8

 
11.5
 %
Income tax expense
 
(21.4
)
 
(17.7
)
 
20.9

Income tax rate
 
27.5
%
 
25.4
%
 


Net income

$
56.4

 
$
52.1

 
8.3
 %
 
 
 
 
 
 
 
Diluted net income per share:
 
 
 
 
 
 
Net income per share
 
$
2.42

 
$
2.07

 
16.9
 %
 
 
 
 
 
 
 
Diluted shares outstanding
 
23.2
 
25.2
 
(7.9)
 %
NM - not meaningful




Lithia Motors, Inc.
Key Performance Metrics (Unaudited)
 
 
Three months ended March 31,
 
%
 
 
 
Increase
 
 
2019
 
2018
 
(Decrease)
Gross margin
 
 
 
 
 
 
New vehicle retail
 
5.9
%
 
6.0
%
 
(10
)bps
Used vehicle retail
 
10.2

 
10.3

 
(10
)
Finance and insurance
 
100.0

 
100.0

 
—

Service, body and parts
 
50.2

 
48.4

 
180

Gross profit margin
 
15.8

 
15.3

 
50

 
 
 
 
 
 
 
Unit sales
 
 
 
 
 
 
New vehicle retail
 
39,695

 
41,497

 
(4.3)
 %
Used vehicle retail
 
40,675

 
36,114

 
12.6

Total retail units sold
 
80,370

 
77,611

 
3.6

 
 
 
 
 
 
 
Average selling price
 
 
 
 
 
 
New vehicle retail
 
$
36,809

 
$
35,056

 
5.0
 %
Used vehicle retail
 
20,353

 
19,814

 
2.7

 
 
 
 
 
 
 
Average gross profit per unit
 
 
 
 
 
 
New vehicle retail
 
$
2,165

 
$
2,095

 
3.3
 %
Used vehicle retail
 
2,079

 
2,038

 
2.0

Finance and insurance
 
1,462

 
1,372

 
6.6

Total vehicle(1)
 
3,594

 
3,453

 
4.1

 
 
 
 
 
 
 
Revenue mix
 
 
 
 
 
 
New vehicle retail
 
51.3
%
 
54.7
%
 
 
Used vehicle retail
 
29.1

 
26.9

 
 
Used vehicle wholesale
 
2.7

 
2.9

 
 
Finance and insurance, net
 
4.1

 
4.0

 
 
Service, body and parts
 
11.1

 
10.7

 
 
Fleet and other
 
1.7

 
0.8

 
 
 
 
Adjusted
 
As reported
 
 
Three months ended March 31,
 
Three months ended March 31,
Other metrics
 
2019
 
2018
 
2019
 
2018
SG&A as a % of revenue
 
11.3
%
 
11.2
%
 
11.3
%
 
11.2
%
SG&A as a % of gross profit
 
71.4

 
72.9

 
71.4

 
72.9

Operating profit as a % of revenue
 
3.8

 
3.5

 
3.8

 
3.5

Operating profit as a % of gross profit
 
24.2

 
23.0

 
24.1

 
23.0

Pretax margin
 
2.8

 
2.6

 
2.7

 
2.6

Net profit margin
 
2.0

 
2.0

 
2.0

 
2.0

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




Lithia Motors, Inc.
Same Store Operating Highlights (Unaudited)
 
 
Three months ended March 31,
 
%
 
 
 
Increase
 
 
2019
 
2018
 
(Decrease)
Revenues
 
 
 
 
 
 
New vehicle retail
 
$
1,371.1

 
$
1,417.9

 
(3.3)
 %
Used vehicle retail
 
778.5

 
699.3

 
11.3

Finance and insurance
 
113.0

 
103.9

 
8.8

Service, body and parts
 
297.1

 
279.2

 
6.4

Total revenues
 
2,676.6

 
2,594.6

 
3.2

 
 
 
 
 
 
 
Gross profit
 
 
 
 
 
 
New vehicle retail
 
$
80.2

 
$
84.7

 
(5.3)
 %
Used vehicle retail
 
81.2

 
72.4

 
12.2

Finance and insurance
 
113.0

 
103.9

 
8.8

Service, body and parts
 
149.7

 
135.5

 
10.5

Total gross profit
 
427.1

 
399.2

 
7.0

 
 
 
 
 
 
 
Gross margin
 
 
 
 
 
 
New vehicle retail
 
5.8
%
 
6.0
%
 
(20
)bps
Used vehicle retail
 
10.4

 
10.4

 
—

Finance and insurance
 
100.0

 
100.0

 
—

Service, body and parts
 
50.4

 
48.6

 
180

Gross profit margin
 
16.0

 
15.4

 
60

 
 
 
 
 
 
 
Unit sales
 
 
 
 
 
 
New vehicle retail
 
37,540

 
40,259

 
(6.8)
 %
Used vehicle retail
 
38,568

 
35,172

 
9.7

 
 
 
 
 
 
 
Average selling price
 
 
 
 
 
 
New vehicle retail
 
$
36,522

 
$
35,220

 
3.7
 %
Used vehicle retail
 
20,185

 
19,884

 
1.5

 
 
 
 
 
 
 
Average gross profit per unit
 
 
 
 
 
 
New vehicle retail
 
$
2,136

 
$
2,104

 
1.5
 %
Used vehicle retail
 
2,106

 
2,059

 
2.3

Finance and insurance
 
1,485

 
1,378

 
7.8

Total vehicle(1)
 
3,614

 
3,474

 
4.0

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




Lithia Motors, Inc.
Other Highlights (Unaudited)
 
As of
 
March 31,
 
December 31,
 
March 31,
 
2019
 
2018
 
2018
Days Supply(1)
 
 
 
 
 
New vehicle inventory
82
 
71
 
76
Used vehicle inventory
53
 
66
 
57
(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 March 31, 2019
Current ratio
Not less than 1.10 to 1
 
1.26 to 1
Fixed charge coverage ratio
Not less than 1.20 to 1
 
1.96 to 1
Leverage ratio
Not more than 5.00 to 1
 
2.66 to 1





Lithia Motors, Inc.
Condensed Consolidated Balance Sheets (Unaudited)
(In millions)
 
 
March 31, 2019
 
December 31, 2018
Cash and cash equivalents
 
$
45.0

 
$
31.6

Trade receivables, net
 
491.0

 
529.4

Inventories, net
 
2,441.0

 
2,365.3

Other current assets
 
50.9

 
65.1

Total current assets
 
$
3,027.9

 
$
2,991.4

 
 
 
 
 
Property and equipment, net
 
1,454.4

 
1,448.0

Intangibles
 
764.9

 
723.6

Other non-current assets
 
444.8

 
221.0

Total assets
 
$
5,692.0

 
$
5,384.0

 
 
 
 
 
Floor plan notes payable
 
2,126.2

 
2,057.7

Other current liabilities
 
459.0

 
435.8

Total current liabilities
 
$
2,585.2

 
$
2,493.5

 
 
 
 
 
Long-term debt
 
1,295.7

 
1,358.2

Other long-term liabilities and deferred revenue
 
560.6

 
335.1

Total liabilities
 
$
4,441.5

 
$
4,186.8

 
 
 
 
 
Stockholder's Equity
 
1,250.5

 
1,197.2

Total liabilities & stockholders' equity
 
$
5,692.0

 
$
5,384.0






Lithia Motors, Inc.
Summarized Cash Flow from Operations (Unaudited)
(In millions)
 
 
Three months ended March 31,
 
 
2019
 
2018
Net income
 
$
56.4

 
$
52.1

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Asset impairments
 
0.5

 
—

Depreciation and amortization
 
19.8

 
16.8

Stock-based compensation
 
3.5

 
3.6

Gain on sale of franchises
 
0.1

 
—

Deferred income taxes
 
5.2

 
2.7

(Increase) decrease:
 
 
 
 
Trade receivables, net
 
49.9

 
42.6

Inventories
 
(81.4
)
 
(98.9
)
Other assets
 
9.0

 
14.7

Increase (decrease):
 
 
 
 
Floor plan notes payable, net
 
34.6

 
17.7

Trade payables
 
(6.4
)
 
6.9

Accrued liabilities
 
(14.5
)
 
(13.6
)
Other long-term liabilities and deferred revenue
 
0.5

 
4.3

Net cash provided by operating activities
 
$
77.2

 
$
48.9




Lithia Motors, Inc.
Reconciliation of Non-GAAP Cash Flow from Operations (Unaudited)
(In millions)
 
 
Three months ended March 31,
Net cash provided by operating activities
 
2019
 
2018
As reported
 
$
77.2

 
$
48.9

Floor plan notes payable, non-trade, net
 
43.5

 
47.8

Add: Borrowings on unsecured revolver to increase new vehicle floor plan capacity(1)
 
—

 
150.0

Less: Borrowings on floor plan notes payable, non-trade associated with acquired new vehicle inventory
 
—

 
(117.1
)
Adjusted
 
$
120.7

 
$
129.6

(1) Indebtedness associated with a six month unsecured revolving credit facility to provide flooring capacity in anticipation of expanding syndicated credit facility in 2018.





Lithia Motors, Inc.
Reconciliation of Certain Non-GAAP Financial Measures (Unaudited)
(In millions, except for per share data)

 
 
Three Months Ended March 31, 2019
 
 
As reported
 
Net disposal gain on sale of store
 
Asset Impairment
 
Acquisition expenses
 
Adjusted
Asset impairments
 
$
0.5

 
$
—

 
$
(0.5
)
 
$
—

 
$
—

 
 
 
 
 
 
 
 
 
 
 
Selling, general and administrative
 
321.8

 
0.1

 
—

 
$
(0.2
)
 
321.7

 
 
 
 
 
 
 
 
 
 
 
Income from operations
 
108.6

 
(0.1
)
 
0.5

 
0.2

 
109.2

 
 
 
 
 
 
 
 
 
 
 
Income before income taxes
 
$
77.8

 
$
(0.1
)
 
$
0.5

 
$
0.2

 
$
78.4

Income tax benefit (expense)
 
(21.4
)
 
—

 
(0.1
)
 
(0.1
)
 
(21.6
)
Net income
 
$
56.4

 
$
(0.1
)
 
$
0.4

 
$
0.1

 
$
56.8

 
 
 
 
 
 
 
 
 
 
 
Diluted earnings per share
 
$
2.42

 
$
—

 
$
0.01

 
$
0.01

 
$
2.44

Diluted share count
 
23.2

 
 
 
 
 
 
 
 


Lithia Motors, Inc.
Adjusted EBITDA and Leveraged Free Cash Flow (Unaudited)
(In millions)
 
 
Three months ended March 31,
 
%
 
 
 
Increase
 
 
2019
 
2018
 
(Decrease)
EBITDA and Adjusted EBITDA
 
 
 
 
 
 
Net income
 
$
56.4

 
$
52.1

 
8.3
 %
Other interest expense
 
15.3

 
11.8

 
29.7

Income tax expense
 
21.4

 
17.7

 
20.9

Depreciation and amortization
 
19.8

 
16.8

 
17.9

EBITDA
 
$
112.9

 
$
98.4

 
14.7
 %
 
 
 
 
 
 
 
Other adjustments:
 
 
 
 
 
 
Less: used vehicle line of credit interest
 
$
(1.6
)
 
$
(0.5
)
 
220.0

Less: (gain) loss on divestitures
 
(0.1
)
 
—

 
NM
Add: asset impairment
 
0.5

 
—

 
NM
Add: acquisition expenses
 
0.2

 
—

 
NM
Adjusted EBITDA
 
$
111.9

 
$
97.9

 
14.3
 %
 
 
 
 
 
 
 
Leveraged EBITDA
 
 
 
 
 
 
Adjusted EBITDA
 
$
111.9

 
$
97.9

 
14.3
 %
Less: Capital expenditures
 
(29.1
)
 
(42.0
)
 
(30.7
)
Leveraged EBITDA
 
$
82.8

 
$
55.9

 
48.1
 %
NM - not meaningful