Lithia Motors, Inc. · NYSE:LAD
Lithia Motors — Stephens Investor Conference June 2009
29 slides from Lithia Motors's conference presentation, Jun 2, 2009
Slide 1: Stephens Investor Conference June 2009
Slide 2: Disclosure
DISCLOSURE This presentation includes forward-looking statements within the meaning of the “Safe-Harbor” provisions of the Private Securities Litigation Reform Act of 1995, which management believes are a benefit to shareholders. These statements are necessarily subject to risk and uncertainty and a
Slide 3: The Beginning - Since 1946
THE BEGINNING - “S/NCE 1946” “LITHIA” — Named after Lithia Springs in Ashland, Oregon LITHIA
Slide 4: Serving Our Communities Since 1946
Serving Our Communities Since 1946 90 Dealerships, 13 States, 27 Brands ® LP.O. in Dec. 1996 - 5 Stores © $2.6B in revenues in 2008 ® The 8th largest U.S. auto retailer - by retail sales ® 25% revenue CAGR since going public
Slide 5: Presentation Overview
PRESENTATION OVERVIEW June 2, 2009 * Q1’09 Update * Progress on Restructuring Plan * Current Financial Position i we * Operational Improvements ee M © Industry Summary * Chrysler Reorganization Impact * General Motors Update es * Outlook LITHIA
Slide 6: Q1'09 Update
Slide 7: Q1'09 Update
Q1’709 UPDATE The Company achieved a profit in Q1’09 despite the negative economic environment * Net income from continuing operations was $0.2 million or $0.01 per share, the same as the prior year - * Consolidated net income was $0.06 per share with the inclusion _ wan of $0.05 per share income fr
Slide 8: Restructuring Plan
RESTRUCTURING PLAN Of the 31 stores originally classified in 2008 as held for sale, significant progress has been made with 20 divested ° Fourteen of the original 31 stores have been sold to date, generating $47 million in cash * Six stores have been closed or had operations minimized *° Eleven stor
Slide 9: Opportunistic Divestitures
OPPORTUNISTIC DIVESTITURES Additional stores have been sold when attractive purchase offers have been received * Opportunistic stores sales result in a P&L upside as no goodwill is currently recorded on the balance sheet * In 2008, Sioux Falls Dodge and Chevrolet were sold * In 2009, Vacaville Toyot
Slide 10: Financial Position
FINANCIAL POSITION The Company has focused on generating cash to reduce outstanding debt levels and strengthen the balance sheet * Sources include the sale of stores, mortgage financing, sale of investment property, tax refunds and the assumption of LOF contracts * These sources have been used to re
Slide 11: Financial Position
10 FINANCIAL POSITION The Company has retired all outstanding convertible notes * In 2008, $42.5 million was repurchased early with a gain of $5 million wees _. * The remaining $42.5 million eel was repurchased in 2009 with a slight gain $85M Convertible Notes Repurchases (3M) Q3'08 Q4'08 Q1'09 Q2'0
Slide 12: Financial Position
11 FINANCIAL POSITION With a focus on paying down debt, the Company has reduced the outstanding line of credit balance by $139 million during the past 15 months ° As the line of credit matures on May 1, 2010, it will be classified as current beginning in Q2’09 * Covenants have been modified to accom
Slide 13: Operational Improvements
12 OPERATIONAL IMPROVEMENTS Operations has focused on basic “blocking and tackling” to improve profitability and reduce SG&A expenses * Improving profitability with each transaction Q1 2009 1 2008 New retail gross profit/unit $2,604 $2,312 Used retail gross profit/unit 1,916 2,095. Used wholesale gr
Slide 14: Operational Improvements
13 OPERATIONAL IMPROVEMENTS With a focus on profitability, the Company has seen improved operating margins * Q1'09 gross margin was 19.7%, an improvement of 260 bps compared to the prior year * Margins have improved in all areas , Q1'09 Q4'08 Q3'08 Q2'08 Q1'08 > New Vehicle 8.7% 8.4% 7.6% 7.7% 7.8%
Slide 15: Operational Improvements
14 OPERATIONAL IMPROVEMENTS A focus on cost cutting has resulted in quarterly SG&A expense below $70 million * Current estimated annualized cost savings is $55 million, nearly 3x greater than the original estimate from June 2008 of $18 million * The $55 million in annualized savings relate only to f
Slide 16: Industry Summary
Slide 17: Industry Summary
16 INDUSTRY SUMMARY The Chrysler reorganization had minimal impact and resulted in a net positive position for the Company * Of the announced franchise terminations, only two Lithia locations were impacted: Omaha, ND and Colorado Springs, CO * The Company was awarded franchises in five markets as Ch
Slide 18: Industry Summary
17 INDUSTRY SUMMARY General Motors is also in a deep restructuring * Letters warning of potential franchise terminations sent to approximately 1,100 dealers nationwide * Two or three Lithia locations may not have their franchise agreements renewed in October 2010 * The Company believes the impact of
Slide 19: Outlook
Slide 20: Outlook
19 OUTLOOK The Company is cautiously optimistic for the remainder of 2009 * Q1'09 had positive free cash flow* of $5 million * Internal forecast indicates breakeven achievable at a 9 million SAAR level * Lithia will continue to raise cash and reduce outstanding debt * Q2 Update * April results met f
Slide 21: Mission Statement
20 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 the
Slide 22: Appendix
APPENDIX
Slide 23: Lithia's Operations
Slide 24: Lithia's Operations
23 LITHIA’S OPERATIONS The Lithia Business Model ° Focus on middle-sized single-point markets ¢ Platform building instead of buying * Common computer system — Intranet * Centralized in Medford, Oregon * Common practices in all stores ° Standardized asset management tools ° Fully integrated sales sys
Slide 25: Lithia's Operations
24 LITHIA’S OPERATIONS Business Lines: Sales and Gross Profit % FY 2008 New Veh. Used Veh. SB&P Fal (LITHIA
Slide 26: Lithia's Operations
25 LITHIA’S OPERATIONS Gross Margins — FY 2008 Fal 100% 100% oe ‘STBUP: 48% 20% NewReran UeedRetall Gross Margin SLITHIA
Slide 27: Industry Dynamics
Slide 28: Industry Dynamics
INDUSTRY DYNAMICS Stable Profitability Manufacturer incentives 50% + variable costs Multiple Brands Diversified profit sources 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% (2.0)% (4.0)% (6.0)% (8.0)% (10.0)% Historical Pre-Tax Margins 27 Updated through 2006 Source: MSDW and NADA SLITHIA
Slide 29: Industry Dynamics
28 INDUSTRY DYNAMICS Huge and Fragmented Industry Nearly $1 Trillion Market Finance & New Vehicle — $375.Bn a Source: Automotive News Data Center 2005 LITHIA
Lithia Motors — Stephens Investor Conference June 2009 on 6ix