Lithia Motors, Inc. · NYSE:LAD
Lithia Motors — Stephens, Inc. Investment Conference 2008
36 slides from Lithia Motors's conference presentation, Jun 5, 2008
Slide 1: Stephens, Inc. Investment Conference
SLTHIA Stephens, Inc. Investment Conference June 5th, 2008
Slide 2: Before We Begin...
BEFORE WE BEGIN... ... THE COMPANY WANTS YOU TO KNOW THAT THIS PRESENTATION INCLUDES FORWARD LOOKING STATEMENTS. THESE STATEMENTS ARE NECESSARILY SUBJECT TO. RISK AND UNCERTAINTY AND ACTUAL RESULTS COULD DIFFER MATERIALLY DUE TO CERTAIN RISK FACTORS, INCLUDING WITHOUT LIMITATION ECONOMIC CONDITIONS,
Slide 3: The Beginning... Since 1946
The Beginning... “Since 1946” “Lithia” - Named after Lithia springs in Ashland, Oregon LITHIA Motopy CHRYSLER + pLynoy
Slide 4: Lithia Motors Overview
Lithia Motors Overview 15 States, 46 Markets, 110 SI.P.O. in Dec. 1996 - 5 Stores $3.2 Bn revenues in 2007 , “The 8th largest U.S. auto retailer - by retail sales $33% revenue CAGR since going public Target 15% long- term E.P.S. growth Quarterly dividend $0.14
Slide 5: Current Situation
Current Situation
Slide 6: Historical Price of Oil
Historical Price of Oil (Adjusted for inflation) Price DOUBLED in past year; $135 risen sixfold since 2002 Current Price iranfirag War Guif War Sept 11, 2001 \ "Gr are 520 tet to ‘05050141 198 Zoo ‘aro 00s 208 2008 Year
Slide 7: Recent News
Recent News Falling Consumer Confidence ™Declining home values and housing starts ' Tightening credit markets rs shift in both outlook
Slide 8: Used Vehicle Segment Shift
Used Vehicle Segment Shift Gasoline Prices Impact Price Movements April 2007 to April 2008 Wholesale Price Change for Selective Market Classes 4% | —20% = 2% | 2% | | 4A% 25% -6% 8% 10% 9.4% -12% -14% -16% Ae 15.8% nie. 17.5% -20% Compact cars Midsize cars Luxury cars- Large pickups Fullsize SUVs en
Slide 9: New & Used Vehicle Sales
New & Used Vehicle Sales j ® Drive-It-Now Price = 3-Day/500 mile return policy ar & truck guaranteed g more older vehicles
Slide 10: Cost Cutting - Recession Related
Cost Cutting - Recession Related = Adjust new/used inventory to match demand = Restructuring store mgmt. personnel & duties = Reducing all corporate level expenses where possible =Deferring L2 Auto investments = Slowing any cap-ex we can
Slide 11: Planned Restructuring Actions
Planned Restructuring Actions = Reducing domestic exposure by divesting 10 - 15 underperforming stores =Deferring uncommitted cap-ex =Selling unnecessary property & assets ®Financing all unfinanced real estate =Postponing acquisitions Adjusting pricing on all inventory to match demand Adjusting inve
Slide 12: Additional Cost Reductions
Additional Cost Reductions "$1 million per month ($12 Fixed Operations mm/yr.) . implemented Advertising by end of July 7% Yn addition to oi TPN arto reductions of $500k/month made at end of March 2008 Store Personnel 35% 11
Slide 13: Simplification of Duties
Simplification of Duties = Sales staff sHigher volume Greater productivity Restructuring payplans = Management Consolidation of duties = Reduction of headcount
Slide 14: Learning From...
Learning From WW
Slide 15: Industry Dynamics
Industry Dynar
Slide 16: Stable Profitability
Stable Profitability ® 100% ee ee Updated through 2006 6 : S Manufacturer es | Retailers |_ incentives sa Sy , c §50%+ i o 50%+ variable costs £ eon ll 7 ______\)_______] ; S wow [Lp --------"-------4 ~ é Multiple brands Se - . 2 (9.0% | #---------__--_---==1_- Diversified profit GR Th mannan > + 3
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Slide 18: The Lithia Business Model
The Lithia Business Model " Platform building instead of buying Common Computer System - Intranet & Centralized in Medford, OR & Common practices in all stores Standardized asset management tools S Fully Integrated Sales Systems Specialized operational support teams Human Development Strategies S Ma
Slide 19: Business Lines: Sales & Gross Profits %
Business Lines: Sales & Gross Profits % 60% 50% 40% 30% 20% 10% 0% <a 57% New Veh. FY 2007 Used Veh. SB&P F&l @ Sales H Gross Profits
Slide 20: Gross Margins - FY 2007
Gross Margins — FY 2007 ® 100% 100.00% 5 80.00% | S/B/P: 47.0% 60.00% ; 40.00% + 20.00% | <<a 0.00% + New Used Parts Body Service F&l Retail Retail Shop
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Slide 22: New Vehicle Unit Mix
New Vehicle Unit Mix ‘a Subaru BMW Working to improve Nissan 2% 4% vwiAudi our sales mix with more \ 3% Other | !mport and Luxury brands Hyundai id ay 4 3% — Too elie 1% Chrysler/Dodgef y Ford Jeep 38% 5% ——_ Toyota 14% General Motors (Chevy, Saturn, Cadillac & Hummer) 17%
Slide 23: Used Vehicles
22 Used Vehicles Seats
Slide 24: L2 Used Vehicle Operation
L2 Used Vehicle Operation * Unlimited Growth Potential We can open in any market Don’t need manufacturer approval No goodwill — only start-up costs Four stores currently ———<———_— ——
Slide 25: L2 Auto
AUTO ‘= Pausing store openings for now best practices int 24
Slide 26: Finance & Insurance
25 inance & Insuranc
Slide 27: Maximizing the F&I Opportunity
Maximizing the F&l Opportunity a Non-Recourse Business F&l Penetration F&l per Vehicle ($) $1,116 90% Sector Leader 1,100 Sector Leader ’ Target $438 FY 2007 NADA Avg.
Slide 28: Parts/Service & Body Shop
Slide 29: Service & Parts
Service & Parts a S Extending hours $3-Year/50,000 mile warranty All repair work ‘sParts and labor price based on estima tment needed
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Slide 31: Huge and Fragmented Industry
30 Huge and Fragmented Industry Nearly $1 Trillion Market Highly Fragmented Sector Service & Finance & % of Sales yoy 499 | Public Insurance Dealer groups Gorts Groups 1 New Vehicle Used Vehicle All Other Dealers Source: Automotive News Data Center 2005
Slide 32: Our Opportunity
Our Opportunity " 22,000 independent stores operated by 14,000 dealers 30% 25% 20% 15% 10% 5% 0% | 7 Optimal Acquisition Target Zone 26% 27% 750% (16,500 stores) 11% Th Below 0-1% 0-1% 1-2% 2-3% 3-4% avove 5% 2% 1% Loss Loss NADA Pre-Tax Margins [Souree: NADA (National Automobile Dealers Association
Slide 33: Acting on the Opportunity
32 Acting on the Opportunity - 164 Target Markets West of the Mississippi & 102 East... - Currently in 46 markets
Slide 34: Where Will We Be?
where will we be ? Goal of $3.00 per share Earnings in 2012
Slide 35: Year Revenue Growth Goal @ 12% Year
10 - Year Revenue Growth Goal @ 12% Year * in Billions : $12 billion revenues 13.0° by 2019 5.0 3.0 156 187 014032 0.7114 oy al 1.0. — — “1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 11.0 9.0- 7.0 Revenues
Slide 36: Lithia's Mission...
Lithia’s Mission... 35 TO BE THE PREFERRED PROVIDER OF CARS AND TRUCKS AND RELATED SERVICES IN NORTH AMERICA Vision Statement = what we are sitiving to be... ® Lithia envisions the future, develops and embraces a strategic plan, and ensures the success of the plan. @ We strive for strong, sustainabl
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