Lithia Motors, Inc. · NYSE:LAD
Lithia Motors — Q1 2012 Earnings Presentation
40 slides from Lithia Motors's earnings presentation, Apr 25, 2012
Slide 1: Q1'12 Company Update
LITHIA Q1°12 COMPANY UPDATE
Slide 2: Disclosure
DISCLOSURE y 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. Forward-looking statements in this presentation include our guidan
Slide 3: The Beginning: Since 1946
1947 Photo THE BEGINNING: SINCE 1946 fe FOUNDED IN ASHLAND, OREGON
Slide 4: Lithia Motors Overview
= |.P.O. in Dec. 1996-5 dealerships “a The 9th largest U.S. auto retailer = Primarily exclusive franchises LITHIA MOTORS OVERVIEW »~ 83 DEALERSHIPS, 11 STATES, 25 BRANDS
Slide 5: Brand Mix and State Composition
Ly LITHIA MOTORS OVERVIEW ~ r BRAND MIX AND STATE COMPOSITION Brand Mix State Mix
Slide 6: Sector Strengths
SECTOR STRENGTHS
Slide 7: Stable, Profitable Industry
STABLE, PROFITABLE INDUSTRY ‘Auto Retailers Q1'12 Profitability Mix 2.0% 1.9% 1.5% | 2.5% 24.4% 2 New Vehicles 53.3% 8 22.9% : 202% Pa (10.2)% Used Vehicles 39 39 2007 2008 +2009 «2010-2011 Sentee Bowes hats SAAR 16.1 13.2 10.4 11.6 12.7 Revenue Gross Profit [be gine ptm ene tree mente eee Macht 212
Slide 8: Significant External Support
— = SIGNIFICANT EXTERNAL SUPPORT = = Incentives support inventory value = National advertising campaigns = Warranties provide ongoing revenue = Support consumer, real estate & inventory financing MANUFACTURERS DEALER FRANCHISE LAWS ASSOCIATIONS = Strong state and federal = Prevent new franchises in
Slide 9: Unconsolidated Industry
i UNCONSOLIDATED INDUSTRY Dealerships in the U.S. Highly Fragmented Sector 21761 21,461 | ; i lil = $1T automotive retail market = 17,900 dealerships in the country = Largest retail sector in the U.S. ABUNDANT ACQUISITION OPPORTUNITIES
Slide 10: Lithia's Strategy
LITHIAS STRATEGY
Slide 11: Lithia's Strategy
= LITHIA’S STRATEGY 1 TARGET EXCLUSIVE FRANCHISES = Mid-sized, regional markets for domestic and import, metro markets for luxury = Insulation from competition offers pricing protection OPERATORS; ENTREPRENEURIAL CULTURE = Store focused on positive customer experience = Store ownership of marketing
Slide 12: Q1'12 Results
Q1°12 RESULTS
Slide 13: Q1'12 Financial Results
13 My Q1°12 FINANCIAL RESULTS Revenue ($MM) Adjusted Diluted EPS $758.9 $0.60 | / 9 a 3B “§ | ams 12012 12011 12012 Nee: See sepa raceonaten of apeee ates EPS «Increased same store sales 21% = Grew adjusted EPS over 80% = Strongest Q1 results in Company history
Slide 14: Q1'12 Gross Profit
=f Q1'12 GROSS PROFIT Same Store Gross Profit Growth Y-o-Y = Insulated markets tee an pe maintain higher overall gross margin l) [| compared to public ore gee tee een peers = Mix shift to vehicle Qt Q112 Change New vehicle retail 75% 7.7% 20bps sales reduces Used vehicle retail 14.7% 148% 10 bps ove
Slide 15: Q1'12 Gross Profit Analysis
1 Q1712 GROSS PROFIT ANALYSIS. \' New Vehicle Same Store Retail Used Vehicle Same Service, Body & Parts Gross Profit Change Store Gross Profit Change Same Store Gross Profit Change oy, aoa B 40% 22.3% 230% 14% 28% 15.5% 4.6% ___ 0.1% __(0.5)% sO eg 4.2 Volume Price Margin Total Volume Price Margin T
Slide 16: New Vehicle Sales
16 NEW VEHICLE SALES a Same Store Sales Growth Y-o-Y 39.6% =Q1'12 same store sales increased 25%; Q1’11 same store Qit 211 311 a4 Qii2 sales increased 40% Gross Margin Trend = Maintained gross 75% 81% 78% 76% 77% margin despite sales growth art att att ast tt, SOLID GROWTHAND PERFORMANCE
Slide 17: Used Vehicle Sales
16 USED VEHICLE SALES Same Store Sales Growth Y-o-Y *As-is vehicle same 217% 166% 15.4% i Bae store sales increased il i 46% Y-0-Y a fer Ge =As-is vehicle same iicndti Now Batic store gross margin 20% " = Maintained 0.9:1 used | l i | to new ratio art ont ast are CONTINUED FOCUS AND STRONG EXECUTION
Slide 18: Finance and Insurance
18 FINANCE AND INSURANCE Same Store Sales Growth Y-o-Y 36.8% 38.0% 26.8% 28.3% 20.8% Penetration Rates ar ai12 Arranged Financing 73% 75% Service Contracts 40% 41% Lifetime Oil and Filter 38% 37% art a2 ast ast arte “ Financial Composition _Q1711 Q1'12 Fl per Unit Trend Sub-Prime <620 12% 15% Non-Pr
Slide 19: Service, Body and Parts
=f SERVICE, BODY AND PARTS | Same Store Revenue Mix Same Store Y-o-Y Revenue Change 10.3% 9.2% 87% 9.8% 11.1% Qn 211 Q3'11 411 = Q112 oS eS ee ee Customer P. 71% 20% 25% 33%! 6 3%! _ & 1 omer Pa fo 5 a a a 167% 162% , J Warranty 1.6% (2.1)% (4.8)% (11 oye orl Wholesale Parts 13.4% 103% 93% 7 3%! " o
Slide 20: SG&A Analysis
20 4 2G&A ANALYSIS Adjusted SG&A as a % of % of Gross Prot Q1°11.-Q1"12_— Change Gross Profit Personnel 48.7% 471% (160) bps 82.6% Advertising 55% 51% (40) bps Rent 32% 34% — 20bps 75.9% Facllty Cost 65% 4.9% (160) bps 72.2% Other 120% 11.7% (30) bps il Total 75.9% 72.2% (370) bps Qi10 ait 112 [Nole
Slide 21: Gross Profit Retention
¥ 411 GROSS PROFIT RETENTION $MM Qt Q112 % Change Q1'12 Incremental Throughput $MM Gross Profit $101.6 $127.9 25.9% Change in Gross Profit $263 Personnel $494 $60.2 21.8% Advertising $5.6 $65 16.2% Change in Adj SG&A $15.2 Rent $3.3 $43 31.6% % Incremental Throughput 42% Facility Cost $66 $6.2 (4.6)
Slide 22: Capital Deployment
22 <= CAPITAL DEPLOYMENT Funds for Growth New Credit Facility (SMM) Q4'it Q112 Change . Cash and Cash Equivalents $20.9 $9.0 $(11.9) . Signed new $650MM 5-year Availability on Line of Credit 104 169 65 Credit Facility in April 2012 Unfinanced New Vehicles 65.9 76.2 10.3 . Total $97.2 $102.1 $4.9 . e
Slide 23: Growth Opportunities
23 py GROWTH OPPORTUNITIES a Internal Initiatives Acquisition Objectives = Increase new vehicle sales = Targets for initial investment: 5% above market increase = 75-100% 5-year after-tax ROE = Increase used vehicle sales * 2x-4x EBITDA, including through sales of 3 to 7 year flooring interest old u
Slide 24: Acquisition Growth
24 \9' # ACQUISITION GROWTH ee 2011 Recap = BMW/MINI and 2 Mercedes-Benz Kamath Open Point S$MM_Multiple stores in Portland, OR area Net Invested Capital $16 = Subaru/Mitsubishistore in Fresno, CA Annualized EBITDA 05 3.2x = Ford open point in Klamath Falls, OR Annualized Revenues* $20.1 8% 2012 Upd
Slide 25: Increased 2012 Guidance
= INCREASED 2012 GUIDANCE 25 PROJECTED EARNINGS RANGE* = Q2'12: $0.60 - $0.62 =» FY 2012: $2.45 - $2.53 ASSUMPTIONS = Total revenues in range of $2.9 to $3.1 billion New vehicle same store sales increasing 16.0% New vehicle gross margin from 7.6% to 7.8% Used vehicle same store sales increasing 13.0
Slide 26: Appendix
APPENDIX
Slide 27: Impact of Rising Gas Prices
React OF RISING GAS PRICES ~ = Spikes cause initial decline in truck sales = Truck mix recovers before gas price drops ie Oct-07 Feb-08 Jun08 Oct-08 Feb-09 Jun-09 Oct-09 Feb10 Jun10 Oct-10 Feb-t1 Jun41 Oct-11 Feb-12 80% Thick %ofTotal —-—»— ——Gas Price per Gallon g Truck % of New and Used Sales g 8
Slide 28: New Vehicle Supply
28 NEW VEHICLE SUPPLY New Vehicle Days Supply "20 = Import supply returning to normal = New vehicle days supply: 68 58 43 61 days 2 bas = Used vehicle days supply: of I ~ 2 48 days Domestic Import Luxury = On-Ground = In-Transit Note vce cays enya a tae, 202 ELY POSITIONED FOR NEAR TERM
Slide 29: Service Trend Analysis
29 I~ SERVICE TREND ANALYSIS = More older vehicles being serviced = Increasing average sale per repair order indicates some deferred maintenance recovery Age of Serviced Vehicles Average Sale per RO Avg # of Vehicles Serviced per Month Model Year 81,326 78,558 82,887 89,665 88,195 (Aged) 2008 2009 2
Slide 30: Stable Balance Sheet
1 STABLE BALANCE SHEET 30 = Acceleration clause for $8.5MM in mortgages triggered with new Credit Facility = No mortgage maturities in 2012 Future Mortgage Debt Maturities ($MM) 30 20 10 0 2014 2015 2016 mt 2018 Beyond MINIMAL NEAR TERM DEBT MATURITIES
Slide 31: Chrysler Update
CHRYSLER UPDATE = Majority of Lithia’s sales from Ram Pickup and Jeep Units = 88% increase in Chrysler car and 25% increase in Ram Pickup sales over prior year Chrysler Unit Sales Q112 Chrysler Same Store Sales Y-o-Y Ram Pickup 40% Jeep Models 25% 62.5% Charger/Challenger/300 12% sua er Durango/Jour
Slide 32: Supplemental Information: Balance Sheet
32 As of As of As of As of March December March December 3 st st 6K) 2012 _2011 eK) 202 20 Assets Liabilities and Stockholders’ Equity Currentassets: Current iabitties Cashandcashequivalents © § «8.985 $20,851 Floor plan notes payable 5 109628 «§ 114,760 Accounts receivable 111,040 99,407 Floor plan
Slide 33: 2012 Quarterly Income Statements
33 (sw) ar Newvenicte 7404288 Usedvehicle 495421 Wholesale usedvehicies 34336 Finance andinsurance 251420 Senice, body andparts 86.448 Feet and otner 12.981 Total Revenues 758,994 Costot goods sold 631,023 Newvehicies 34,126 Retailusedvehicies 2a914 Wholesale usedvehicies 418 Finance andinsurance 25
Slide 34: 2011 Quarterly Income Statements
34 (sk) arti ari an ari FY 2011 Newvehicle $394,570 $383,951 «$347,727 —«$300,840 «$1,426,888 Usedvehicle 175,284 187,443 176,691 156,478 695,796 Wholesale usedvehicles 35,925 36,105 29,153 29,537 130,720 Finance andinsurance 22,920 22,787 20,886 49,299 85,852 Service, body andparts 84,799 86,161 80
Slide 35: 2010 Quarterly Income Statements
cs) Newvehicle Usedvehicle Wholesale usedvehicles Finance andinsurance Senvice, body andparts, Fleet and other Total Revenues Costof Goods Sold Newvehicles Retall usedvehicles Wholesale usedvehicles Finance andinsurance Senvice, body andparts, Fleet and other Gross Profit ‘Assetimpairmentcharges SGA
Slide 36: Quarterly Same Store Revenue Changes
BF SUPPL 2012 Newvehicles Retallusedvehicles Wholesale usedvehicles Finance andinsurance Service, body andparts Fleet andother Total 2011 Newvehicles Retailusedvehicles Wholesale usedvehicles Finance andinsurance Service, body andparts Fleet and other Total 2010 Newvehicles Retail usedvehicles Whole
Slide 37: Quarterly Gross Margins
37 Quarterly Gross Margins a3 2 Qt ind 2012 Newvehicles 71% = 7.1% Retail usedvehicles 14.8% 14.8% Wholesale usedvehicles 12% 1.2% Finance andinsurance 100.0% © 100.0% Service, body andparts 48.1% 48.1% Fleet and other 3.1% 3.1% Total 168% 16.8% 2011 Newvehicles 76% 78% 81% 75% 7.1% Retail usedvehic
Slide 38: 2012 Adjusted Income Statement Detail
38 Asset QTD impairments ar 3131/2012 and disposal Equity Tax arat2012 (sk) Asreported in investment __atfrbute ___Adusted _ Other asset impairments 115 1s) - a Z SSeling, general and administrative 91,590 733 = - 92,329 Income fromoperations, 31,967 (24) - - 31,383 ther income, net 499 2 244) 2 258
Slide 39: 2011 Adjusted Income Statement Detail
39 ym yD yae12011 Reserve srst2011 (se) Asreported __Assetimpairments and disposalgains/osses _ _Adjustments___Stock based comp shortfal__ Adjusted ai a2 a4 4 ai a2 Gross Prof 457,538 950 458,488 Other asset impairments 1,376 (382) (490) (504) : Seling, general and administrative 327,545 @ 580 6301
Slide 40: 2010 Adjusted Income Statement Detail
40 yo yo yarsi2010 sai2010 (sk) Asreported __Assetimpaitments and disposal ains/losses. Reserve adjustments Adjusted ai a2 a a2 oF Gross Proft 369,860 2 2 2 > > 4040 370,900 Other asset impairments 415,201 (14st) (13,280) (650) 5 5 2 = Seling, general and administrative 290,833, are @ a (258) (1,078