Declares Dividend of $0.30 Per Share for
First Quarter
Lithia Motors, Inc. (NYSE: LAD) today reported first quarter
2020 revenue of $2.8 billion. First quarter 2020 net income per
diluted share was $1.97, a 19% decrease from $2.42 per diluted
share reported in the first quarter of 2019. Adjusted first quarter
2020 net income per diluted share was $2.01, an 18% decrease
compared to adjusted net income of $2.44 per diluted share in the
same period of 2019.
First quarter 2020 net income was $46 million, an 18% decrease
compared to net income of $56 million in the same period of 2019.
Adjusted first quarter 2020 net income was $47 million, a 17%
decrease compared to adjusted net income of $57 million for the
same period of 2019.
As shown in the attached non-GAAP reconciliation tables, the
2020 first quarter adjusted results exclude a $0.04 net non-core
charge related to insurance reserves and acquisition expenses
partially offset by a net gain on sale of stores. The 2019 first
quarter adjusted results exclude a $0.02 net non-core charge due to
acquisition expenses and an asset impairment partially offset by a
net gain on sale of stores.
First Quarter-over-Quarter Operating Highlights:
- Same store new vehicle sales decreased 10.6 %
- Same store used vehicle retail sales increased 2.7%
- Same store F&I per unit increased 6.1% to $1,557
- Same store service, body, and part sales increased 0.5 %
- Same store total gross profit per unit increased 2.3% to
$3,697
"First quarter results were driven by strength in January and
February, with same store new, used, F&I and service, body and
part sales up 4%, 22%, 18% and 6% respectively," said Bryan DeBoer,
President and CEO. "These results continued through early March
before being negatively impacted by varying levels of shelter in
place policies enacted in most states due to COVID-19. Our
decentralized operating structure has allowed our teams to respond
independently to these differences with decisive actions aligned
with their local market conditions."
Corporate Development
During the quarter, we acquired the two exclusive Lexus stores
in Sacramento and Roseville, California, which are anticipated to
generate $160 million in expected steady state annual revenues. We
are working closely with our future acquisition partners to
restructure transactions in order to preserve capital. In addition,
we are also deferring closing until the second half of this year to
gain greater insights into earnings quality and market
conditions.
Balance Sheet Update
We ended the first quarter with over $550 million in cash and
availability on our revolving lines of credit. Our unfinanced real
estate could provide additional liquidity of approximately $500
million. In the current environment, we are actively managing our
capital utilization to preserve cash through deferring
approximately $65 million in capital expenditures, suspending share
repurchases and restructuring acquisitions. Additionally, our $2.8
billion syndicated credit facility was renewed in December for five
years with a maturity date of 2025 and we have no significant debt
maturities until that time.
"We have the strongest balance sheet in our history, with the
lowest leverage in our industry and liquidity to be strategically
acquisitive and weather this period of uncertainty," said DeBoer.
"In addition, we are more diversified than ever with a network
covering 92% of our country and no single manufacturer making up
more than 18% of our revenue."
Dividend Payment and Share Repurchases
Our Board of Directors approved maintaining our dividend of
$0.30 per share. We expect to pay the dividend on May 22, 2020 to
shareholders of record on May 8, 2020.
Year to date, we have repurchased 563,953 shares at a weighted
average price of $81.71 per share under our existing share
repurchase authorization. After accounting for these repurchases,
approximately $188 million remains available. As previously
announced, we have suspended all share repurchases until further
notice.
First Quarter Earnings Conference Call and Updated
Presentation
The first quarter 2020 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 2020 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 (#265-2019). Lithia is
a growth company powered by people and innovation. By purchasing
and building strong businesses that have yet to realize their
potential, Lithia generates significant cash flows with low
leverage. Operational excellence is achieved by refocusing the
business on the consumer experience and by utilizing proprietary
performance measurements to increase market share and
profitability. Lithia’s unique growth model invests to expand its
nationwide network and to fund innovations that create personal
transportation solutions wherever, whenever and however consumers
desire.
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
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 car sales
levels;
- Anticipated impacts on consumer demand or governmental
restrictions related to the COVID-19 pandemic or otherwise;
- Expected level of business interruption due to shelter in place
policies or lifting of those restrictions, and when volumes and
consumer demand will return;
- Continuation of our sales and services, including in-store
appointments and home deliveries;
- 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 monetize our investment in
digital innovation;
- Anticipated additions of dealership locations to our portfolio
in the future;
- Anticipated financial condition and liquidity, including from
our cash, availability on our credit facility and unfinanced real
estate;
- Anticipated use of proceeds from our financings;
- Anticipated allocations, uses and levels of capital
expenditures in the future;
- Expectations regarding compliance with financial and
restrictive covenants in our credit facility and other debt
agreements; 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), including as a result of the COVID-19 pandemic;
- 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, Item 8.01 in our Form 8-K filed on April 13, 2020, 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. Except as required by law, 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
revenue and gross profit, adjusted pre-tax margin and net profit
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
2020
2019
(Decrease)
Revenues:
New vehicle retail
$
1,373.5
$
1,461.1
(6.0
)%
Used vehicle retail
874.4
827.9
5.6
Used vehicle wholesale
66.7
77.4
(13.8
)
Finance and insurance
121.9
117.5
3.7
Service, body and parts
329.9
317.4
3.9
Fleet and other
37.4
48.4
(22.7
)
Total revenues
2,803.8
2,849.7
(1.6
)%
Cost of sales:
New vehicle retail
1,295.3
1,375.2
(5.8
)
Used vehicle retail
784.4
743.3
5.5
Used vehicle wholesale
66.1
76.5
(13.6
)
Service, body and parts
161.8
157.9
2.5
Fleet and other
35.3
46.1
(23.4
)
Total cost of sales
2,342.9
2,399.0
(2.3
)
Gross profit
460.9
450.7
2.3
%
Asset impairments
—
0.5
NM
SG&A expense
346.0
321.8
7.5
Depreciation and amortization
22.0
19.8
11.1
Income from operations
92.9
108.6
(14.5
)%
Floor plan interest expense
(14.0
)
(18.1
)
(22.7
)
Other interest expense
(17.0
)
(15.3
)
11.1
Other income, net
2.3
2.6
NM
Income before income taxes
64.2
77.8
(17.5
)%
Income tax expense
(18.0
)
(21.4
)
(15.9
)
Income tax rate
28.0
%
27.5
%
Net income
$
46.2
$
56.4
(18.1
)%
Diluted net income per share:
Net income per share
$
1.97
$
2.42
(18.6
)%
Diluted shares outstanding
23.5
23.2
1.3
%
NM - not meaningful
Lithia Motors, Inc.
Key Performance Metrics
(Unaudited)
Three months ended March
31,
%
Increase
2020
2019
(Decrease)
Gross
margin
New vehicle retail
5.7
%
5.9
%
(20
)bps
Used vehicle retail
10.3
10.2
10
Finance and insurance
100.0
100.0
—
Service, body and parts
51.0
50.2
80
Gross profit margin
16.4
15.8
60
Unit
sales
New vehicle retail
35,907
39,695
(9.5
) %
Used vehicle retail
42,631
40,675
4.8
Total retail units sold
78,538
80,370
(2.3
)
Average selling
price
New vehicle retail
$
38,252
$
36,809
3.9
%
Used vehicle retail
20,510
20,353
0.8
Average gross
profit per unit
New vehicle retail
$
2,178
$
2,165
0.6
%
Used vehicle retail
2,110
2,079
1.5
Finance and insurance
1,552
1,462
6.2
Total vehicle(1)
3,701
3,594
3.0
Revenue
mix
New vehicle retail
49.0
%
51.3
%
Used vehicle retail
31.2
29.1
Used vehicle wholesale
2.4
2.7
Finance and insurance, net
4.3
4.1
Service, body and parts
11.8
11.1
Fleet and other
1.3
1.7
Gross Profit
Mix
New vehicle retail
17.0
%
19.1
%
Used vehicle retail
19.5
18.8
Used vehicle wholesale
0.1
0.2
Finance and insurance, net
26.4
26.1
Service, body and parts
36.5
35.3
Fleet and other
0.5
0.5
Adjusted
As reported
Three months ended March
31,
Three months ended March
31,
Other
metrics
2020
2019
2020
2019
SG&A as a % of revenue
12.3
%
11.3
%
12.3
%
11.3
%
SG&A as a % of gross profit
74.8
71.4
75.1
71.4
Operating profit as a % of revenue
3.4
3.8
3.3
3.8
Operating profit as a % of gross
profit
20.4
24.2
20.1
24.1
Pretax margin
2.3
2.8
2.3
2.7
Net profit margin
1.7
2.0
1.6
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
2020
2019
(Decrease)
Revenues
New vehicle retail
$
1,281.5
$
1,433.6
(10.6
) %
Used vehicle retail
831.6
809.7
2.7
Finance and insurance
114.5
115.3
(0.7
)
Service, body and parts
311.0
309.3
0.5
Total revenues
2,637.5
2,789.1
(5.4
)
Gross
profit
New vehicle retail
$
73.0
$
84.6
(13.7
) %
Used vehicle retail
83.7
83.0
0.8
Finance and insurance
114.5
115.3
(0.7
)
Service, body and parts
158.5
155.9
1.7
Total gross profit
432.6
442.1
(2.1
)
Gross
margin
New vehicle retail
5.7
%
5.9
%
(20
)bps
Used vehicle retail
10.1
10.3
(20
)
Finance and insurance
100.0
100.0
—
Service, body and parts
51.0
50.4
60
Gross profit margin
16.4
15.9
50
Unit
sales
New vehicle retail
33,178
38,865
(14.6
) %
Used vehicle retail
40,374
39,708
1.7
Average selling
price
New vehicle retail
$
38,625
$
36,886
4.7
%
Used vehicle retail
20,597
20,390
1.0
Average gross
profit per unit
New vehicle retail
$
2,200
$
2,177
1.1
%
Used vehicle retail
2,073
2,091
(0.9
)
Finance and insurance
1,557
1,468
6.1
Total vehicle(1)
3,697
3,613
2.3
(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)
Financial
covenants
Requirement
As of March 31, 2020
Current ratio
Not less than 1.10 to 1
1.34 to 1
Fixed charge coverage ratio
Not less than 1.20 to 1
2.68 to 1
Leverage ratio
Not more than 5.75 to 1
2.67 to 1
Lithia Motors, Inc.
Condensed Consolidated Balance
Sheets (Unaudited)
(In millions)
March 31, 2020
December 31, 2019
Cash and cash equivalents
$
56.6
$
84.0
Trade receivables, net
298.2
505.0
Inventories, net
2,512.8
2,433.7
Other current assets
58.2
47.8
Total current assets
$
2,925.8
$
3,070.5
Property and equipment, net
1,631.5
1,611.7
Intangibles
763.7
761.3
Other non-current assets
693.1
640.4
Total assets
$
6,014.1
$
6,083.9
Floor plan notes payable
1,985.8
2,067.6
Other current liabilities
445.7
501.5
Total current liabilities
$
2,431.5
$
2,569.1
Long-term debt
1,489.8
1,430.6
Other long-term liabilities and deferred
revenue
636.3
616.5
Total liabilities
$
4,557.6
$
4,616.2
Stockholder's Equity
1,456.5
1,467.7
Total liabilities & stockholders'
equity
$
6,014.1
$
6,083.9
Lithia Motors, Inc.
Summarized Cash Flow from
Operations (Unaudited)
(In millions)
Three months ended March
31,
2020
2019
Net income
$
46.2
$
56.4
Adjustments to reconcile net income to net
cash provided by operating activities:
Asset impairments
—
0.5
Depreciation and amortization
22.0
19.8
Stock-based compensation
5.1
3.5
Gain on disposal of assets
0.1
—
Gain on sale of franchises
(0.1
)
0.1
Deferred income taxes
8.2
5.2
(Increase) decrease:
Trade receivables, net
202.1
49.9
Inventories
(69.8
)
(81.4
)
Other assets
(6.8
)
9.0
Increase (decrease):
Floor plan notes payable, net
(32.7
)
34.6
Trade payables
(14.6
)
(6.4
)
Accrued liabilities
(49.4
)
(14.5
)
Other long-term liabilities and deferred
revenue
11.4
0.5
Net cash provided by operating
activities
$
121.7
$
77.2
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
2020
2019
As reported
$
121.7
$
77.2
Floor plan notes payable, non-trade,
net
(43.5
)
43.5
Less: Borrowings on floor plan notes
payable, non-trade associated with acquired new vehicle
inventory
(14.1
)
—
Adjusted
$
64.1
$
120.7
Lithia Motors, Inc.
Reconciliation of Certain Non-GAAP
Financial Measures (Unaudited)
(In millions, except for per share
data)
Three Months Ended March 31,
2020
As reported
Disposal gain on sale of
stores
Insurance reserves
Acquisition expenses
Adjusted
Selling, general and administrative
$
346.0
$
0.1
$
(0.8
)
$
(0.5
)
$
344.8
Operating income
92.9
(0.1
)
0.8
0.5
94.1
Income before income taxes
64.2
(0.1
)
0.8
0.5
65.4
Income tax (provision) benefit
(18.0
)
—
(0.2
)
(0.1
)
(18.3
)
Net income
$
46.2
$
(0.1
)
$
0.6
$
0.4
$
47.1
Diluted earnings per share
$
1.97
$
—
$
0.02
$
0.02
$
2.01
Diluted share count
23.5
Three Months Ended March 31,
2019
As reported
Disposal gain on sale of
stores
Asset impairment
Acquisition expenses
Adjusted
Asset impairments
$
0.5
$
—
$
(0.5
)
$
—
$
—
Selling, general and administrative
321.8
0.1
—
(0.2
)
321.7
Operating income
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 (provision) benefit
(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 Net Debt to
Adjusted EBITDA (Unaudited)
(In millions)
Three months ended March
31,
%
Increase
2020
2019
(Decrease)
EBITDA and
Adjusted EBITDA
Net income
$
46.2
$
56.4
(18.1
) %
Flooring interest expense
14.0
18.1
(22.7
)
Other interest expense
17.0
15.3
11.1
Income tax expense
18.0
21.4
(15.9
)
Depreciation and amortization
22.0
19.8
11.1
EBITDA
$
117.2
$
131.0
(10.5
) %
Other adjustments:
Less: flooring interest expense
$
(14.0
)
$
(18.1
)
(22.7
)
Less: used vehicle line of credit
interest
(0.2
)
(1.6
)
(87.5
)
Add: acquisition expenses
0.5
0.2
150.0
Less: gain on divestitures
(0.1
)
(0.1
)
—
Add: insurance reserve
0.8
—
NM
Add: asset impairment
—
0.5
NM
Adjusted EBITDA
$
104.2
$
111.9
(6.9
)%
NM - not meaningful
As of
%
March 31,
Increase
Net Debt to
Adjusted EBITDA
2020
2019
(Decrease)
Floor plan notes payable: non-trade
$
1,595.9
$
1,767.2
(9.7
)%
Floor plan notes payable
389.9
359.0
8.6
Used and service loaner vehicle inventory
financing facility
204.0
332.0
(38.6
)
Revolving lines of credit
—
76.6
NM
Real estate mortgages
608.9
583.4
4.4
5.250% Senior notes due 2025
300.0
300.0
—
4.625% Senior notes due 2027
400.0
—
NM
Other debt
33.1
34.2
(3.2
)
Unamortized debt issuance costs
(10.4
)
(5.9
)
76.3
Total debt
$
3,521.4
$
3,446.5
2.2
%
Less: Floor plan related debt
$
(2,189.8
)
$
(2,458.2
)
(10.9
)%
Less: Cash and cash equivalents
(56.6
)
(45.0
)
25.8
Less: Availability on used vehicle and
service loaner LOCs
(162.9
)
—
—
Net Debt
$
1,112.1
$
943.3
17.9
%
TTM Adjusted EBITDA
$
510.3
$
470.6
8.4
%
Net debt to Adjusted EBITDA
2.18
x
2.00
x
9.0
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200422005254/en/
Eric Pitt VP, Investor Relations and Treasurer EPitt@lithia.com
(541) 864-1748
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