Lithia Motors, Inc. · NYSE:LAD
Lithia Motors — Q1 2011 Earnings Presentation
39 slides from Lithia Motors's earnings presentation, Apr 27, 2011
Slide 1: Q1'11 Company Update
SLTHIA Q1'11 COMPANY UPDATE
Slide 2: Disclosure
DISCLOSURE This presentation includes “forwardtooking 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 guidance
Slide 3: The Beginning: Since 1946
1947 Photo LITHIA Matos cuRYste rR “out Sy THE BEGINNING: SINCE 1946 fm FOUNDED IN ASHLAND, OREGON
Slide 4: Lithia Motors Overview
=|.P.O. in Dec. 1996 -5 dealerships = The 9th largest U.S. auto retailer = Primarily exclusive franchises ees LITHIA MOTORS OVERVIEW »~ 86 DEALERSHIPS, 12 STATES, 26 BRANDS
Slide 5: Sector Strengths
SECTOR STRENGTHS
Slide 6: Stable, Profitable Industry
| STABLE, PROFITABLE INDUSTRY Auto Retaers Q1'11 Profitability Mix 0% ee vom = Ez New Vehicles Pre-tax income % 7 51.8% 22.9% (29)% J 195% 02 Used Vehicles 31.7% (15.0)% Auto Manufacturers F&l and Other ~_ | 2007 2008 2009 2010 Service, Body & Parts SAAR 16.1 13.2 10.4 11.6 Revenue Gross Profit ‘Soi
Slide 7: Significant External Support
ay ‘ SIGNIFICANT EXTERNAL SUPPORT - CSC = Incentives support inventory value = National advertising campaigns = Warranties provide ongoing revenue = Support consumer, real estate & inventory financing \WANUFACTURERS DEALER FRANCHISE LAWS ASSOCIATIONS = Strong state and federal = Prevent new franchis
Slide 8: Unconsolidated Industry
i UNCONSOLIDATED INDUSTRY Dealerships in the U.S. Highly Fragmented Sector Top 10 2u7oL 21,463 has Dealers ll [| i l I 2007 208 2008 010 zn ‘Source: Automate News, number fh Veice Design me US. = $1T automotive retail market = 17,700 dealerships in the country = Largest retail sector in the U.S. ABU
Slide 9: Lithia's Strategy
LITHIA’S STRATEGY
Slide 10: Lithia's Strategy
SE ie LITHIA’S STRATEGY 10 TARGET EXCLUSIVE FRANCHISES = Mid-sized, regional markets for domestic and import, metro markets for luxury = Insulation from competition offers pricing protection OPERATORS; ENTREPRENEURIAL CULTURE = Store focused on positive customer experience = Store ownership of marke
Slide 11: Q1'11 Results
Q1°11 RESULTS
Slide 12: Q1'11 Financial Results
Q1711 FINANCIAL RESULTS | Revenue ($MM) Adjusted Diluted EPS 31% 278% $0.34 $603.0 3469.2 ee a - or 2010 a1 2011 a1 2010 at 2011 te: See apenas acon oad te ES =Increased same stores sales in all business lines =Largest first quarter net income since 2006
Slide 13: Q1'11 Gross Margin
=f Q1'11 GROSS MARGIN Gross Margin Progression AT 9% 18.0% - 171% 17 4% =|ncrease over fourth quarter on stronger used and service margins 110 Q1’11 Change =|nsulated markets New vehicle retail 85% 7.5% (100) bps mai ntai n higher Used vehicle retail 13.7% 14.7% 100 bps Fe Used vehicle wholesale 16%
Slide 14: Gross Profit Analysis
New Vehicle Same Store Gross Profit Change | 23.6% (17.8)% Volume Price Margin Total Change 40.8% 0.6% = New vehicle same store gross profit up 24% Retail Used Vehicle Same Store Gross Profit Volume Price Margin Total Change = Retail used vehicle same store gross profit up 25% GROSS PROFIT ANALYSIS
Slide 15: New Vehicle Sales
NEW VEHICLE SALES Same Store Sales Growth Y-o-Y 41 4% 34.4% ap [ = Domestic same store sales tas 8.0% + increased 53% i erte 92a ea ip eign = Truck sales increased 47% Gross Margin 2 = Some margin pressure 85% ij . ee 78% and reduced domestic I | | | dealer incentives ar == a210 aso aaa SOLID GROWTH
Slide 16: Used Vehicle Sales
USED VEHICLE SALES Same Store Sales Growth Y-o-Y 22.0% 19.8% 21.1% I | P 4 = Retail gross margin 15% = As-is vehicle gross margin ore 22% Used to New Ratio = Maintained 1:1 ratio 1.28 to despite strong new a : I i | T vehicle sales CONTINUED FOCUS AND STRONG EXECUTION
Slide 17: Service, Body and Parts Revenue Mix
Same Store Revenue Mix Same Store Y-o-Y Revenue Change 8.6% 9.2% 10.4% 10.4% Q140 240 Q340 a440 atti 16.1% 16.3% 17.0% 18.2% 1 17.4% 47.3% 16.6% 175% Customer Pay 06% 56% 59% 52% H 12%, — Warranty (13.4)% (10.0)% (6.7)% (3.5)% H 24%I 57.9% Ill 57.29% Ul 56.076 IM 53,096 Wholesale Parts (11.6)% (3.1)
Slide 18: Finance and Insurance
ies FINANCE AND INSURANCE © F&l per Unit Breakdown Insurance and Other $103 sis Penetration Rates Qi10Qi'14 Arranged Financing 70% 73% | Service Contracts 42% 40% Maintenance Lifetime Oil and Filter 35% 37% Contracts so Financial Composition _Q1’10 Q111 ae | Sub-Prime <620 12% 14% ar Non-Prime 620-6
Slide 19: SG&A Analysis
19 SG&A ANALYSIS Adjusted SG&A as a % of % of Gross Profit Q1'10 11 Change Gross Profit Personnel 51.0% 48.5% (250) bps Advertising 68% 5.6% (120) bps Rent 42% 3.4% — (80)bps Facility Cost 7.2% 65% (70) bps Other 13.6% 12.0% (160) bps Total 82.8% 76.0% (680) bps on 2009 a1 2010 12011 ute: Se pn sian
Slide 20: Gross Profit Retention
20 GROSS PROFIT RETENTION a $M Q110 = Q1'14 % Change Gross Profit $85.9 $105.0 22.2% Q1'14 Incremental Throughput sm Personnel $438 $50.9 16.2% Advertising $58 $59 14% Change in Gross Profit $19.4 Rent $3.6 $3.6 — (1.9)% Change in Adj SG&A $8.6 Facility Cost $6.2 $68 10.5% Other S117 © $125 73% % In
Slide 21: Growth Opportunities
Py GROWTH OPPORTUNITIES LE Funds for Growth Internal Initiatives = Increase new vehicle sales 5% above 2011 market increase = Increase used vehicle sales through sales of 3 to 7 year old used cars = Grow customer pay in service, body and parts through advertising, IT initiatives and shorter cycle ti
Slide 22: Acquisition Growth
ACQUISITION GROWTH “ ST Acquisition Objectives 2011 Recap = Targets for initial investment: Portland Acquisition $M___Muttiple = 75-100% 5-year after-tax ROI Net invested Capital sila . . Annualized EBITDA 10.8 3.4x . 2x-4x EBITDA, including Annualized Revenues* $205.9 18% flooring interest -nerunng
Slide 23: Increased 2011 Guidance
FA ic 23 4 INCREASED 2011 GUIDANCE Dw. SL—_S—SSS=— Projected Q2’11 - $0.32 - $0.34 earnings range*: FY 2011 - $1.42 - $1.50 ASSUMPTIONS = Total revenues in range of $2.5 to $2.6 billion = New vehicle same store sales increasing 14% = New vehicle gross margin from 7.5% to 7.7% = Used vehicle same sto
Slide 24: Appendix
APPENDIX
Slide 25: New Vehicle Supply
25 ) NEW VEHICLE SUPPLY New Vehicle Days Supply 120 a 106 90 —= at : | 65 pon 61 60 = = —_ = _ 54 : | ll 0 ' ’ Toyota Honda Nissan ‘Subaru Chrysler Ford Chevy All Other #0n-Ground «In-Transit = Japan events impacting vehicle supply = Current new vehicle days supply ~ 63 days = Current used vehicle d
Slide 26: Non-Operating Assets
26 fq NON-OPERATING ASSETS = Mitigated 56% of non-operating properties since Q2’10; estimated annual savings of $0.07 per share = 5% of remaining non-operating assets under advanced negotiations Property, Plant and As of Equipment (SMM) ___ Mar 31, 2011 Vacant Facilities & Real Estate $342.7 pareilf
Slide 27: Stable Balance Sheet
STABLE BALANCE SHEET 27 = Paid off $11.8MM in mortgages during Q111 = $3MM mature in 2011; no mortgages due in 2012 Future Mortgage Debt Maturities (SMM) a) 30 19 o-—_. es 2011 2012 2013 2014 2015 2016 2017 Beyond MINIMAL NEAR TERM DEBT MATURITIES
Slide 28: Chrysler Update
CHRYSLER UPDATE = 71% of Chrysler unit volume from Ram and Jeep lines = Chrysler stores comprise 27% of current store count Brand Mix Ford 5% Mercedes 1% Kia 2% Subaru 6% Nissan 4% Volkwagen san a0" Audi 3% BMW5% Note: fran moc basen uns Ses he qu ended of March 31,2011 Honda. Acur aB%, All Other 1%
Slide 29: 2011 Quarterly Income Statement
29 (sk) New vehicle Used vehicle Wholesale used vehicles Service, body and parts Finance and insurance Fleet and other Total Revenues Cost of Goods Sold New vehicles Retail used vehicles Wholesale used vehicles Service, body and parts Finance and insurance Fleet and other Gross Profit, Asset impairm
Slide 30: 2010 Quarterly Income Statement
30 (sk) Ao rio iv New vehicle $293,237 $268,721—« $215,617, Used vehicle 18,798 148,836 135,899 Wholesale used vehicles 30,869 25,570 23,465 ‘Service, body and parts TH 133 71,996 68,797 Finance and insurance 18,928 16,274 14,638 Fleet and other 3.122 4.704 ‘803, Total Revenues 582,687 934,101 459,2
Slide 31: 2009 Quarterly Income Statement
31 (sk) aro “arog 209 ares New vehicle ‘S710404 $266,709 $211,700 $192,306 Used vehicle 112051 129857 126,256 © 109,089 ‘Wholesale used vehicies, 18.212 20,223 47751 16.513 ‘Service, body and parts 71,268 74,538 72,312 72.957 Finance and insurance 12.299 15,704 14,857 13.537 Fleet and other 524 895
Slide 32: Quarterly Same Store Revenue Changes
32 Quarterly Same Store Revenue Changes ‘a3 az ‘at 2011 New vehicles 41.4% Retall used vehicles 16.9% Wholesale used vehicles 30.8% Service, body and parts 83% Finance and insurance 38.2% Total 28.6% 2010 New vehicles 344% = «80% = 28.3%" = 11.7% Retail used vehicles 21.1% 19.8% 180% += 22.0% Wholes
Slide 33: Quarterly Gross Margin by Line
33 af Gs ‘a2 ar 2011 New vehicles 75% Retail used vehicles 14.7% Wholesale used vehicles 14% Service, body and parts 48.5% Finance and insurance 100.0% Total 7A 2010 New vehicles 78% 83% 8.2% 85% Retail used vehicles 135% 147% «= 145% «= 13.7%. Wholesale used vehicles (0.29% 0.1% 12% 1.6% Service, b
Slide 34: 2011 Adjusted Income Statement Detail
Orit Income from operations repor $20,618, Impairments and disposal gain Adjusted $21,000 Income from continuing operations before income taxes ‘As reported $14,828 Impairments and disposal gain 38: Adjusted $15,210 2011 ADJUSTED INCOME STATEMENT DETAIL EEE GAAP RECONCILIATION
Slide 35: 2010 Adjusted Income Statement Detail
35 —ot_ aig ig aro Selling, general & administrative As reported $77,292 S77.46B $74,813 $71,039 Impairments and disposal gain 48 - Q) 367 Lease termination and severance Teserve 96. = 1,076) 258) Adjusted S77 436 S17 468 ___$73,135 $71,148 Income from operations As reported $12,808 $23,237 $3,269 $
Slide 36: 2009 Adjusted Income Statement Detail
OF09 as09 A709 ‘arog Selling, general & administrative As reported $67,507 $71,165 ‘$68,694 $68,655 Impairments and disposal gain - - - - Lease termination (454) 2 = zs Adjusted 367,053 $71,165 908,694 $60,055 Income from operations As reported $3,226 $18,086 $9,946 $4,455 Impairments and disposal g
Slide 37: 2011 Quarterly Adjusted Income & Diluted EPS
Net Diluted earnings (SK) per share arit ort Continuing Operations ‘As reported $8,705 $0.33 Impairments and disposal gain 229 001 Stock based compensation tax shortfall 186 = Adjusted 39,120 30.34 Discontinued Operations As reported $- s* Impairments and disposal (gain) loss = Adjusted - Consolidat
Slide 38: 2010 Quarterly Adjusted Income & Diluted EPS
38 Net incomel/loss) (SK) Diluted earnings per share QF a3'10 a0 OTTO FIO Q3x10azi0 ar 10, Contin tions, As reported $4379 $9,792 $1,514) $1,443 $0.16 $037 — $(0.06) 80.06 Impairments and disposal gain 401 - 8,046 732 0.02 - 031 0.03 Lease termination and severance reserve 807 = 560 164 0.03 = 0.02
Slide 39: 2009 Quarterly Adjusted Income & Diluted EPS
Continuing Operations ‘As reported Impairments and disposal gain Lease termination and severance reserve Gain on extinguishment of debt Adjusted Discontinued Operations ‘As reported Impairments and disposal (gain) loss Adjusted Consolidated Operations ‘As reported Adjusted Net income/(loss) (SK) Dil