Lithia Motors, Inc. · NYSE:LAD
Lithia Motors — Q3 2009 Earnings Presentation
31 slides from Lithia Motors's earnings presentation, Nov 24, 2009
Slide 1: Q3'09 Company Update
Q3’09 Company Update
Slide 2: Disclosure
SSSS=3_~DISCLOSURE is 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 forw
Slide 3: Named after Lithia Springs in Ashland, OR
q Named after Lithia Springs in Ashland, OR
Slide 4: Lithia Motors, based in Medford, OR, is a leading operator of automotive franchises
Lithia Motors, based in Medford, OR, is a leading operator of automotive franchises and retailer of new and used vehicles and related services As of November 3, 2009, we offered 27 brands of new vehicles and all brands of used vehicles in 86 stores in the United States and over the internet Revenue
Slide 5: 86 Dealerships, 12 States, 27 Brands
‘Seatle Ui, Reson 21" Sookane Ea WASHINGTON Tei Chiealt NORTH DAKOTA rand Forks (3) WAKO Grams Bisel Klamath Falls (2]" ‘Sura fT (Pocatelle [2] ‘gesting [21 is NEVADA ‘Banta Rusalt}@ Reno ld) Loveland! 1] = btn Denver [11 # east a *Freseal] COLORADO CALIFORNIA Amari (11 Lubbock £0 ale eeu a TEXAS ar
Slide 6: Business Overview
Business Overview
Slide 7: Lithia's Differentiated Business Model
LITHIA’S DIFFERENTIATED BUSINESS MODEL Lithia’s differentiated auto retail model
Slide 8: Revenue per State
Revenue per State Colorado ovata NomthDakots New exico 1% Montana ae 1% idaho 1% % tows f aa Note: Revenue are based on results forthe nine-months ended September 30, 2008 Diversification helps insulate Lithia from market-specific risks = Derives less than 25% of revenue from one state her demand fo
Slide 9: Target 30% new vehicle market share
Target 30% new vehicle market share Cluster stores for economies of scale New Vehicle Market Share #ofmktsin Avgsharein Top market in state our mkts state Alaska 3 12.3% 16.4% California 6 48% 17.0% Colorado 1 2.8% 2.8% lowa 3 2.8% 2.4% Idaho 3 11.5% 15.6% North Dakota bE 27.1% 12.9% New Mexico 1 7.
Slide 10: Centralized administrative processes promote entrepreneurial store management
Centralized administrative processes promote entrepreneurial store management Admi istrative Functions Entrepreneurial Environment * Cash Management * Model Tailored to Local * Advertising / Marketing Markets * Accounts Payable <== + Empowered Store * Procurement Centralized ee Management: * Account
Slide 11: Revenue and gross profit mix
Pre-tax income % Revenue Gross Profit Auto Manufacturers = Peer Group 1 Service, body and parts WF and Other 2006 2007 sew vehide sed vee ‘SAAR 16.6 16.2 Liaiiiai red shi ' | 57% of gross profit from 19% of revenues
Slide 12: Domestic brands strong in our markets
DOMESTIC BRANDS STRO OUR MARKETS New Vehicle Revenues New Vehicle Gross Profits Domestic brands derive more gross profit than revenue, = New Vehicle Gross Margin Highest new vehicle margins among publically traded peers Ss Note: Revenue apd gross profits are aed on resus forthe nine months ended Sep
Slide 13: Value line autos shifts sales to retail transactions
Value line autos shifts sales to retail transactions Margins improve as retail sales price declines ug ‘ " ¢ hel | Average Selling Price lit T_T Re h 6 87, ~. - f 2007 2008 Converting more used cars to retail transactions SS SAE SSSR Gi PSOE TESST SSSA 30) 2008) AUSFRRE BAY ER Feta Wholesale spits a
Slide 14: Steady Service, Body & Parts Business
STEADY SERVICE, BODY & PARTS BUSINESS eeciniies om ae SAAR = Despite a weak economy, gross profit flat Hoey = Introducing commodity products 35% of buyers subscribe to a Lithia lifetime oil contract S/S0/09U181 = Lifetime oil contracts ensure oe fre (SM) and Margin captive customer base after Tie BE
Slide 15: Organic Opportunities to Grow in New Vehicles
ORGANIC OPPORTUNITIES TO GROW IN NEW VEHICLES Change in Units in Operation nite 2008 2005 2006 2007 2008 «2009E_—2010E_=(2011E = “Pent-up” demand must be realized = Earnings unlocked as cost structure leveraged Given scrappage rates, SAAR levels will recover ‘Source: Global insight, NADA, RL. Polk &
Slide 16: Organic Opportunities to Grow in Used Vehicles
ORGANIC OPPORTUNITIES TO GROW IN USED VEHICLES Used-to-New Ratio | 7 i 2608 2999 4th = Demand shifts to used vehicles in a recession = Incremental sales with no additional investment = Free of manufacturer restrictions = Adaptable inventory to meet customer demand Focused on increasing used vehicle
Slide 17: Acquisition Opportunities
ACQUISITION OPPORTUNITIES The industry is poised for consolidation = Public dealerships only 3.7%” of industry = Targeted brands: = Room to grow in existing markets = Consolidation benefits survivors Current timing = attractive opportunities (2) Based on public flings and NADA Sg
Slide 18: Proven Acquisition Strategy with Experienced Management
PROVEN ACQUISITION STRATEGY WITH EXPERIENCED MANAGEMENT Years in = Growth since IPO Industry Sid Deer 45 = Purchased over 100 stores in 12 Chairman & CEO years M.L. Dick Heimann Vice Chairman = Improvement i Net Income 1 Year After Acquisition R. Bradford Gray cS Exeeutivelvp poets Bryan DeBoer 30 P
Slide 19: Financial Overview
Financial Overview
Slide 20: Revenue, Gross Margin, Adjusted EBITDA and EPS
Gross Margin Revenue ($M) $2,2238 = sels 19.1% i 91,9098 | | suena | | ) | = i | i 2006 2007 2008 9/30/09.L1M 2006 2007 2008 9/30/09 TM Adjusted EBITDA (SM) Adjusted Diluted EPS sap —— se 6155 | eee se om j sa1 ao | eee | a) Spe 2008 {008 200s10
Slide 21: Q3'09 Financial Update
Q3’09 FINANCIAL UPDATE Focus on profitability, margins and cash flow (SK) Q3'09 Q3'08 %change_ = |mproved results over 2008 5,960 $502,572 a Aue pecies = 2 despite declining Gross Profit 85,303 84,257 id SGBA Expense 63,863, 69,226 environment Pre-tax Income 11,780 4,582 , = Improved vehicle margins
Slide 22: Quarterly Adjusted EBITDA
Quarterly Adjusted EBITDA (SM) ts 71% improvement in toe ot out adjusted EBITDA from an ; Q3’08 despite a 9% decline in SAAR ga'ng ares EBITDA Comparison (% of Rev) = Higher margins and better expense leverage differentiate Lithia from dss l 3% the peer group AutoNation Lithia Group1_— Some Asbury P
Slide 23: Stable Balance Sheet
STABLE BALANCE SHEET Significant tangible net worth compared to our peers = Tangible net worth is defined as equity less goodwill and franchise value = Goodwill written off, minimal franchise value remaining Auto lithia Asbury Nation Group1__ Penske Sonic Stock Price (11/11) ' $9.33 1 $10.53 $18.75
Slide 24: Manageable Debt Maturities
MANAGABLE DEBT MATURITIES Minimal outstanding debt except for mortgages 9/30/09 (31/07 _% chi gx) ___ Juss GE anes = Reduced debt levels 41% Working capital line of eae ee) ES = Retired all convertible Real estate debt 192,648 187,468 | caeeblencie — 85,000 |(100.0)%! notes Other notes payable 17,71
Slide 25: SAAR Projections
SAAR Projections SAAR Level Estimated EPS 8.5 million Breakeven 11.5 million $1.05 13.5 million $1.53 15.5 million $2.01
Slide 26: Appendix
APPENDIX
Slide 27: Mission Statement
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 28: Chrysler and GM Bankruptcy Have Had Limited Impact on Sales
CHRYSLER AND GM BANKRUPTCY HAVE HAD LIMITED IMPACT ON SALES lewthe Ceurits New.and Used Unit Sales (Ors Tskal) (% of Fatal) i ras SPIE 36.0% aby are qe Se uw 34281 s.05,| 33.2% Be anos Jue Fe iar ABE May) Je) Sue Sey Jan Feb Mar Apr May Jun Jul Aug Sep GM Chrysler = The Company received three non- =
Slide 29: EBITDA - Quarterly
EBITDA - Quarterly Income from continuing operations ‘Addback: Taxes Other interest exp Depreciation - building Depreciation and amortization - other Adjustments Impairments in SG&A Gain on extinguishment of debt Adjusted EBITDA 9/30/2009 6/30/2009 3/31/2009 12/31/2008 9/30/2008 7,060 18,979 4,108 2
Slide 30: Adjusted Pre-tax Income and Diluted EPS reconciliation
YTD 9/30/09 12131108 12/3107 12131106 Pre-tax Income from Continuing Operations 18,890 (290,259) 35,796 48,636 Adjustments Asset Impairments - 294,075 - - Other Asset Impairments - A527 - - Impairments in SG&A 790 568 Gain on Extinguishment of Debt (1,317) (5,248) - - Total Proforma Adj (627) 293,92
Slide 31: Adjusted cash flow from operations
12/31/2008 12/31/2007 12/31/2009 Cash flows from operations 85,165 (49,211) 37,939 Flooring notes payable: non-trade (16,803) 69,540 16,005 Adjusted cash flow from operations 68,362 20,329 © 53,944