Market Overview

Lithia Reports Preliminary Record Second Quarter 2017 Results

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Lithia Motors, Inc. (NYSE:LAD) today reported that based on preliminary
results, second quarter 2017 net income is estimated to be in the range
of $51.5 million to $53.0 million, or $2.05 to $2.11 per diluted share.
This compares to second quarter 2016 net income of $51.4 million, or
$2.01 per diluted share. Adjusted second quarter 2017 net income is
estimated to be in the range of $55.1 million to $56.6 million, or $2.20
to $2.26 per diluted share, compared to $50.2 million, or $1.96 per
diluted share, from the same period a year ago.

As shown in the attached non-GAAP reconciliation tables, our results for
the three months ended June 30, 2017, exclude non-core charges in the
range of $0.14 to $0.15 related to acquisition expenses and a hail storm
insurance reserve. Our results for the three months ended June 30, 2016,
exclude a non-core benefit of $0.05 related to an equity investment.

Second Quarter Preliminary Operating Results:

  • Revenue in the range of $2,425 million and $2,475 million
  • Operating income in the range of $100.0 million and $104.0 million and
    adjusted operating income in the range of $106.0 million and $110.0
    million
  • Net income in the range of $51.5 million and $53.0 million and
    adjusted net income in the range of $55.1 million and $56.6 million
  • Diluted net income per share in the range of $2.05 and $2.11 and
    adjusted diluted net income per share in the range of $2.20 and $2.26
  • EBITDA in the range of $106.2 million and $108.7 million and adjusted
    EBITDA in the range of $111.1 million and $113.6 million

Second Quarter Same Store Highlights:

  • Total same store sales increase in the range of 2.3% to 2.6%
  • New vehicle same store sales increase in the range of 0.5% to 0.8%
  • New vehicle same store unit sales decreased (0.4)%
  • Used vehicle retail same store sales increase in the range of 3.8% to
    4.1%
  • Used vehicle same store unit sales increased 4.6%
  • Service, body and parts same store sales increase in the range of 6.8%
    to 7.1%
  • Same store F&I per unit in the range of $1,330 to $1,355

As previously announced, Lithia is launching a $300 million senior notes
private offering. We are releasing our preliminary second quarter
results in conjunction with the offering.

"We grew revenue and adjusted earnings per diluted share by double
digits as our results exceeded our internal projections in the second
quarter. Our store leaders continue to modify their tactics in this
dynamic market and produced strong results in retail used vehicle sales,
service and parts and F&I," said Bryan DeBoer, President and CEO. "The
acquisition market remains active and we believe this is an opportune
time to access additional capital for growth. We seek greenfield-like
returns on our acquisition targets and anticipate further activity in
the near future."

Second Quarter Earnings and Conference Call

Lithia also announced its second quarter 2017 earnings will be released
before the market opens on Friday, July 28, 2017. A conference call to
discuss our earnings results is scheduled for the same day at 10:00 a.m.
Eastern Time. The conference call may be accessed by telephone at (877)
407-8029. To listen live on our website or for replay, visit www.lithiainvestorrelations.com
and click on webcasts.

About Lithia

Lithia Motors, Inc. is one of the largest automotive retailers in the
United States and is among the fastest growing companies in the Fortune
500. Lithia sells 30 brands of new vehicles and all brands of used
vehicles at 160 stores in 18 states. Lithia also arranges finance,
warranty and credit insurance contracts. In addition, Lithia provides
vehicle parts, maintenance and repair services at all of its locations.

Sites
www.lithiamotors.com
www.lithiainvestorrelations.com
www.lithiacareers.com

Lithia Motors on Facebook
www.facebook.com/LithiaMotors

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

Forward-Looking Statements

This filing 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 filing include, among others,
statements regarding:

  • Expected operating results for the three months ended June 30, 2017;
  • Our ability to improve store performance an achieve targets; and
  • Anticipated acquisition opportunities and our ability to achieve
    operational improvements and returns on investments.

By their nature, forward-looking statements involve risks and
uncertainties because they relate to events that depend on circumstances
that may or may not occur in the future. Forward-looking statements are
not guarantees of future performance, and our actual results of
operations, financial condition and liquidity and development of the
industry in which we operate may differ materially from those made in or
suggested by the forward-looking statements in this press release. The
risks and uncertainties that could cause actual results to differ
materially from estimated or projected results include, without
limitation, future economic and financial conditions (both nationally
and locally), changes in customer demand, our relationship with, and the
financial and operational stability of, vehicle manufacturers and other
suppliers, risks associated with our indebtedness (including available
borrowing capacity, compliance with financial covenants and ability to
refinance or repay indebtedness on favorable terms), government
regulations, legislation and others set forth throughout "Part II, Item
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations" and in "Part I, Item 1A. Risk Factors" of our
most recent Annual Report on Form 10-K, and from time to time in our
other filings with the SEC. We urge you to carefully consider this
information and not place undue reliance on forward-looking statements.
We undertake no duty to update our forward-looking statements, including
our earnings outlook, which are made as of the date of this release.

Non-GAAP Financial Measures

This filing and Exhibit 99.1 include certain non-GAAP financial measures
such as adjusted operating profit, adjusted net income, adjusted diluted
earnings per share and adjusted EBITDA. 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. As required by SEC rules, we have reconciled these
measures to the most directly comparable GAAP measures in Exhibit 99.1.
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.

Selected Financial Data (unaudited)

(In thousands except per share data)

 
Three Months Forecasted

Three Months Ended,

Ended June 30, 2017
June 30, 2016 Low       High
Revenues $ 2,133,339 $ 2,425,000 $ 2,475,000
Operating profit 90,509 100,000 104,000
Net income 51,428 51,500 53,000
Diluted net income per share 2.01 2.05 2.11
 
Adjusted operating profit 94,007 106,000 110,000
Adjusted net income 50,154 55,130 56,630
Adjusted diluted net income per share $ 1.96 $ 2.20 $ 2.26
 
 
           

Lithia Motors, Inc.

Reconciliation of EBITDA Non-GAAP Financial Measures
(Unaudited)

(In thousands except per share data)

 
Three Months Forecasted

Three Months Ended,

Ended June 30, 2017
June 30, 2016 Low       High
Net income $ 51,428 $ 51,500 $ 53,000
Other interest expense 5,502 7,170 7,170
Income tax expense 25,875 33,480 34,460
Depreciation and amortization 12,503   14,050   14,050  
EBITDA $ 95,308   $ 106,200   $ 108,680  
 
Other adjustments:
Used vehicle line of credit interest expense (a) (873 ) (1,130 ) (1,130 )
Equity investment fair value adjustment 5,563
Acquisition expenses and insurance reserve   6,000   6,000  
Adjusted EBITDA $ 99,998   $ 111,070   $ 113,550  
 
(a)     Interest expense associated with our used vehicle line of credit
under our Credit Facility of $0.9 million for the three months ended
June 30, 2016, was included as a component of Other interest expense.
 
 
     

Lithia Motors, Inc.

Reconciliation of Certain Non-GAAP Financial Measures
(Unaudited)

(In thousands except per share data)

 
Three Months Ended June 30, 2016

As

reported

     

Equity

investment

fair value

adjustment

      Adjusted
Asset impairments $ 3,498 $ (3,498 ) $
 
Income from operations 90,509 3,498 94,007
 
Other income (expense), net (1,495 ) 2,065 570
 
Income before income taxes $ 77,303 $ 5,563 $ 82,866
Income tax expense (25,875 ) (6,837 ) (32,712 )
Net income $ 51,428   $ (1,274 ) $ 50,154  
 
Diluted earnings per share $ 2.01 $ (0.05 ) $ 1.96
Diluted share count 25,534
 

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