Lithia Motors, Inc. · NYSE:LAD
Lithia Motors — Shareholder Meeting (April 2010)
36 slides from Lithia Motors's shareholder meeting presentation, Apr 28, 2010
Slide 1: 2010 Annual Meeting of Shareholders
2010 Annual Meeting of Shareholders ,
Slide 2: Disclosure
“SS DISCLOSURE This presentation includes numerous “forward-looking statements”. These forward-looking statements address our future objectives, plans and goals, as well as our intent, beliefs and current expectations regarding future operating performance. Specific events addressed by these forward
Slide 3: Slide 3
Slide 4: Lithia's Overview
'S OVERVIEW Lithia operator of automotive franchises and retailer of new and used vehicles and related services Par Sence,Body FRI leet Other Motors, based in Medford, OR, is a leading Revenue Mix Brand Mix
Slide 5: 85 Dealerships, 12 States, 26 Brands
Seattie DL, ~ En oo pe, “a Eureka) Teeth Santa Rosati}® | weno fA) = Concord) Seaside(2]a “Festa CALIFORNIA ‘Cedar Rapids (2) « ais Sonebortes 1 | oveanattie | emer « s Lobbock [11 Asitne 12 ie Tel w san Angee TEXAS ryan itl® corpus Christen 85 Dealerships, 12 States, 26 Brands =|'2-Onin Dec. iS96—5
Slide 6: Business Overview
Business Overview
Slide 7: Lithia's Differentiated Business Model
LITHIA’S DIFFERENTIATED & BUSINESS MODEL Lithia’s differentiated
Slide 8: Unique Market Position
UNIQUE MARKET POSITIC Revenue per State = Diversification helps insulate Lithia from market-specific risks ny NONM = Target 30% new vehicle ~ share in market = Derives no more than 25% of revenue from one state Higher demand for trucks and domestic cars in our markets (Note: Revenue is tazed on ruts
Slide 9: Centralized Administrative Functions and Local Entrepreneurial Environment
* Cash Management * Advertising / Marketing * Accounts Payable * Procurement * Accounts Receivable * Credit and Collections * Legal * Tax / Accounting * Information Systems * Payroll / Benefits * Inventory Management * Human Development + Human Resources Administrative Functions ‘Common Entrepreneur
Slide 10: Slide 10
Slide 11: Domestic Brands Strong in Our Markets
DOMESTIC BRANDS STRONG IN OUR MARKETS New Vehicle Revenues New Vehicle Gross Profits Domestic brands derive more gross profit than revenue, New Vehicle Gross Margin Diial a12009 gs2009 Q12010 Highest new vehicle margins among publicly traded
Slide 12: New Vehicle Unit Sales
New Vehicle Unit Sales Divested 21 domestic 0% i= stores in past two years i = Seeking no more than 9 20% of any one brand | i = = = = fy2007 FY2008-—«v2009 «al 2010 m Domestic simport/Luxury More balanced brand mix gS
Slide 13: Organic Opportunities to Grow in New Vehicles
ORGANIC OPPORTUNITIES TO GROW IN NEW VEHICLES Change in Units in Operation = “Pent-up” demand must be realized Earnings unlocked as cost structure leveraged Given scrappage rates, SAAR levels will recover ‘Source: Global Insight, NADA, R.L Polk & Co; Forward scrappage numbers provided by equity rese
Slide 14: Organic Opportunities to Grow in Used Vehicles
Ses ORGANIC OPPORTUNITIES TO _— — See GROW IN USED VEHICLES ee Used-to-New Ratio Lax Lx Lx : UW : if t| ai 2009 22009 32009 242008 ai 2010 = Focus on selling more inexpensive used vehicles = Incremental sales with no additional investment = Adaptable inventory to meet customer demand Focused on incr
Slide 15: Acquisition Opportunities
ACQUISITION OPPORTUNITIES The industry is poised for consolidation = Top 10 groups only 8%!) of $1 trillion market?) = Targeted brands: HYUNDAI = Opportunities for acquisition as current ownership ages = Additional economies of scale leveraged with growth Current timing = attractive opportunities ‘B
Slide 16: Proven Acquisition Strategy & Strong Management Team
PROVEN ACQUISITION STRATEGY & STRONG MANAGEMENT TEAM = Growth since IPO MLITHIA = Purchased over 100 stores in 12 years = Recession tested proven improvement in Net Income 1 management Year After Acquisition = Energetic group of new leaders in place = Operators rather than i consolidators te | 2004
Slide 17: Performance at a Glance
Performance at a Glance
Slide 18: Revenue, Gross Profit, Adjusted Diluted EPS
Revenue (SM) Gross Profit (SM) Adjusted Diluted EPS $463.4 y mes oo S866 08 saone / sso / 012009 @1 2010 a1 2009 12010 se: = Strong new and used vehicle retail sales growth = Continued discipline in cost management = Exceeded upper end of guidance by $0.03 Note: See appendix for reconciliation of ou
Slide 19: Revenue, Gross Profit and Adjusted Net Income
Revenue (SM) Used Auta Seah Gross Profit (SM) sa saa sis $187 $108, i 1 EA s Used-Retail Used Ww Spay Note: See appendix for reconciiation of adjusted net income sao ssa Margin Nev Used Bot Jedd WS. Spar Adjusted Net Income ($M) 22 soa 502) (514) Br) 1.6 Continuing Discontinued Consolidatd
Slide 20: Average Selling Price and Gross Profit per Unit
Average Selling Price per Unit ana aes soe = Same store new vehicle sales up 11.5% 2 = Same store new 12009 022009 32009 04.2009 a1 2010 vehicle sales excluding Average Gross Profit per Unit Chrysler up 25.3% 2a x 2S = Gross profit per unit SS increased $60 over prior year Z
Slide 21: Same store used retail sales up 22.4%
Same store used retail sales up 22.4% Used retail to new vehicle ratio of 1.2 to1 Margins improve as lower priced vehicles are retailed Retail Used Gross Retail / Wholesale Sales Margins Split 140% ws 20% 10.0% an 2009 12000 2000 Q12016 Converting more used cars to retail transactions ‘Note: Same st
Slide 22: Focus on Service, Body & Parts Business
FOCUS ON SERVICE, BODY & PARTS BUSINESS Revenues (SM) ze oe : = Declining units in sti $69.7 operations impacts revenues, particularly warranty ~—an2009 at = Emphasis on customer pay and accessories to offset trend 35% of retail vehicle customers purchase Lifetime oil contracts Gross Profit (SM) and
Slide 23: SG&A relatively flat for last quarters
= SG&A relatively flat for last 5 quarters = Cost leverage unlocked as revenues increase Restructured to match current SAAR levels ‘Note: See append for reconciliation of adjusted SG&A
Slide 24: 4-Quarter Rolling Revenues & Adjusted EBITDA
4-Quarter Rolling Revenues (SM) & Adjusted EBITDA mes 4G Rallng Res Ac E8704 25 9% of Re 29% 7 pos =i ] e $3,8313 79% 706) : 1.2003 22009 932003 8 2008 12010 = Consistent improvement despite flat revenues “Right-sizing” nearly complete Note: Adjusted EITA is calculated based on a rling @-quarters. S
Slide 25: Financial Position
Financial Position
Slide 26: Cash flow and cash management
12/31/2000 AdjcFrom sale ot Astets DebtProceeds Cap ty ope = Strong cash flow from operations = Prudent cash management
Slide 27: Stable Balance Sheet
STABLE BALANCE SHEET Solid liquidity and minimal debt maturities = Book value per basic share of $11.92 Cash and Cash Equivalents $114 Availability on Line of Credit 472" Current Ratio of 1.30 Urdloored Vehicles 322 = Comfortably in compliance with Total $908 covenants Future Mortgage Debt Maturitie
Slide 28: Projected earnings range for Q2'10 and 2010
Projected earnings range of $0.19 - $0.21 for Q2’10 and $0.63 - $0.69 for 2010 Assumptions Total revenues at $1.90 to $1.95 billion New vehicle same store sales increasing 5.9% New vehicle gross margin from 8.3% to 8.5% Used vehicle same store sales increasing 11.2% Used vehicle gross margin from 14
Slide 29: Mission Statement and Our Values
MISSION STATEMENT To be the preferred provider of cars and trucks and related services in North America OUR VALUES Earn Customers for Life Let’s listen and understand our customers’ needs. Know that you are empowered to ‘do the right thing.’ Let’s make sure our customers are so satisfied that they r
Slide 30: Appendix
APPENDIX
Slide 31: Diluted earnings per share reconciliation
Diluted earnings per Pre-tax income Net income /(Loss share Consnuing Operations 212010 a1 2009 2010 012009 2010 _ 042009 ‘As reported: $2,186 $(1,388) S142 ‘ST73) ‘$0.05 (0.04) Impairments and disposal sin 49892058 qt 467 003 006 Reserve adjustments 258 = 160 : oot : Gain on extinguishment of debt
Slide 32: Continuing Operations reconciliation
Contin rations Pre-tax income — as reported Asset Impairments Reserve adjustments Gain on Extinguishment of Debt Pre-tax income (loss) - non-GAAP. Income (loss), net of tax - non-GAAP. Implied Tax Rate Diluted net income per share - non-GAAP Dilutive shares outstanding (2,887) (277) 1,854 (1.310) (9
Slide 33: Continuing Operations reconciliation
‘Continuing Operations Pre-tax income — as reported ‘Asset Impairments Gain on Extinguishment of Debt Pre-tax income (loss) - non-GAAP Income (loss), net of tax - non-GAAP Implied Tax Rate Diluted net income per share - non-GAAP Dilutive shares outstanding 1213112008 (3,008) 1.147 (3,605) (5,466) (3
Slide 34: EBITDA - Quarterly
Q12010 42009 32009 Q22009 12009 Q42008 32008 22008 12008 EBITDA - Quarterly Income from continuing operations 1,342 (1,963) 7,005 2,383 (773) (1,238) 907 (226,370) (672) Addback: Taxes 844 (924) 4,802 1,657 (615) (1.770) 891 (107,871) (469) Other interest exp 3588 «3477 «= «3,294 3,370 «3.987 94.255
Slide 35: EBITDA - Qtr Rolling
EBITDA - 4 Qtr Rolling Income from continuing operations Addback: Taxes Other interest exp Depreciation - building Depreciation and amortization - other Adjustments: Goodwill impairment Franchise value impairments Other impairments & reserve adjustments Gain on asset sales Gain on extinguishment of
Slide 36: Adjusted cash flow from operations
2009 2008 2007 Cash flows from operations 9,934 85,165, (49,211) Flooring notes payable: non-trade 31,417 (16,803) 69,540 Adjusted cash flow from operations 41,351 68,362 20,329