Lithia Motors, Inc. · NYSE:LAD
Lithia Motors — Q2 2010 Earnings Presentation
33 slides from Lithia Motors's earnings presentation, Jul 29, 2010
Slide 1: Q2'10 Company Update
SLITHIA Q2’10 COMPANY UPDATE
Slide 2: Disclosure
DISCLOSURE This presentation includes “forward-looking statements” within the meaning of the "Safe-Harbor” provisions of the Private Securties 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 Mor TOR CHRYSLE ER + PLYN : THE BEGINNING: SINCE 1946 fm, NAMED AFTER LITHIA SPRINGS IN ASHLAND, OR
Slide 4: Lithia Motors Overview
=|.P.O. in Dec. 1996 - 5 dealerships = The 9th largest U.S. auto retailer = Fortune 800 we Company 84 DEALERSHIPS, 12 STATES, 26 BRANDS LITHIA MOTORS OVERVIEW
Slide 5: Lithia's Differentiated Model
ke Market Position = Mid-sized regional markets = Rural, single- point stores = Higher demand for trucks and domestic brands p< a Jo Operations = Stable, profitable business =|mproved brand mix = Leader in used vehicles Growth * Organic sales improvement » Acquire : underperforming stores . sie fina
Slide 6: Performance at a Glance
PERFORMANCE AT A GLANCE
Slide 7: Q2'10 Financial Results
Revenue ($M) Adjusted Diluted EPS $534.1 20.4% 22.7% $443.6 ey ms va a2 2009 2 2010 a2 2009 2 2010 or reconctiaton of guste ted EPS =Same store sales increased 19% = Service, body and parts revenues flat despite declining warranty and units in operation = Exceeded high end of guidance by $0.06 Q2’10
Slide 8: Gross Profit Analysis
New Vehicle Same Store Gross Profit Change 5.1% 25.2% 21.2% (TIy% Retail Used Vehicle Same Store Gross Profit Change 37% 187% 45% 10.6% Service, Body & Parts Same Store Gross Profit Change 27% Volume Price Margin Total Change = New vehicle same store gross profit up 25% Volume Price Margin Total Cha
Slide 9: Service, Body and Parts Revenue Mix by Component
St SERVICE, BODY AND PARTS ° Ve A REVENUE MIX BY COMPONENT baa Same Store Revenue Mix 94% 9.0% 9.6% 97% 86% =Same store sales a% 13% oA flat in quarter Ae 7 =|mproving customer pay sales trend 22009 §©—Q32009 © Q42009 12010 © 22010 Merce Wickes Pars Body Shop = Warranty decline Same Store Y-o-Y Reve
Slide 10: Service Trend Analysis
SERVICE TREND ANALYSIS “ BUSINESS REMAINS STABLE DUE TO MIX SHIFT SSCs = Consistent number of vehicles serviced per month More older vehicles being serviced = Declining average sale per RO indicates some deferral of maintenance Age of Serviced Vehicles Average Sale per RO Avg # of Vehicles Serviced
Slide 11: Finance and Insurance
Penetration Rates Q2’09 Q2°10 Finance and Insurance 69% 70% * Sold 1,600 “as-is” units in Serco Gonads 1% AG Q2’10 with below average LOF 36% 34% F&l per unit of $350 Fal per Unit Breakdown = Deferral of self-insured Insurance sig = LOF contracts reduce F&l per unit $60 in Q2’10 and Service $73 in Q
Slide 12: Acquisition Details: Finding Opportunities at Compelling Prices
COMPLETED ACQUISITION CRITERIA ACQUISITIONS W » wz C52 Anchorage Kie nd ige Kia vanes December 2009 ($M) Multiple re) @ ¢ Dd Invested Capital $1.2 vom ) Annualized EBITDA $04 3.0x Pace Annualized Revenues $15.4 13% SUBARU Corpus Christi CJ = Targets for initial investment ae fod Caoial _ Multiple Es
Slide 13: Chrysler Update: Encouraging Developments and Trends
(aR CHRYSLER UPDATE : ENCOURAGING DEVELOPMENTS AND TRENDS Chrysler Unit Sales Q2 2010 =Chrysler new vehicle same Ram Pickup 50% Oo/.- Jeep Medes io store sales up 28 %,; better Charger/Challenger/300 12% than total new vehicle Minivan 8% Giher 449% same store sales Total 100% =Chrysler stores compri
Slide 14: SG&A Analysis
14 Gross Profit ($M) & Adjusted SG&A 81.9% 9 — = SG&A as a % of gross TH profit down in all areas -_ a except advertising 2.2008 2.2009 2.2010 = Additional advertising wmccns Pott Ad SotA ana otc . to increase market % of Gross Profit Q2709 = Q210-- Change share Personnel 49.4% 47.6% (180) bps Adver
Slide 15: Gross Profit Retention
15 su Q2’09 210 % Change Q2'10 Incremental Throughput sM Gross Profit $863 $95.7 10.9% Change in Gross Profit $04 Change in Adj SG&A $5.0 Personnel $426 $45.5 6.9% % Incremental Throughput 46.7% Advertisin 8 9 44.5% . “4 $6 Q2'10 Incremental Throughput, Facility Cost $04 $04 (0.5)% at 2009 Advertisi
Slide 16: Asset Impairment Charges
ASSET IMPAIRMENT CHARGES* CONVERTING NON-OPERATING ASSETS = Evaluated all non-operating assets for impairment =Non-operating assets 11% of total PP&E = Disposal will save $0.12-$0.15 in annual expenses Property, Plant and As of Equipment ($M) June 30, 2010 Vacant Facilities & Land $112.7 Bare Land (
Slide 17: Book Value Per Share
BOOK VALUE PER SHARE “ STOCK TRADING BELOW TANGIBLE BOOK VALUE SSCs = 86% of book value in tangible assets = No goodwill recorded on balance sheet = $11.75 book value per share Book Value SM. Assets Liabilities Net Value___per Share CashiCIT $40.8 - $408 $1.57 Inventory/Flooring $361.1 $(234.9) $126
Slide 18: Financial Position
FINANCIAL POSITION
Slide 19: Cash Flow Activity
1H 2010 Liquidity Developments ($M) ‘Adj CF trom Ops pee <——__—_ Changes in Cash ———————> con Ste os in i CASH FLOW ACTIVITY STRONG OPERATIONAL CASH FLOWS
Slide 20: Current Liquidity
CURRENT LIQUIDITY AMENDED CREDIT FACILITY 20 Immediately Available Funds ($M) June 30, 2010 Cash and Cash Equivalents $15.4 Availability on Line of Credit 71.2 Unfinanced New Vehicles 31.6 Total $118.2 =Facility increased $25M to $75M total = 3-year extension to June 2013 =|nterest rate reduced 90 b
Slide 21: Stable Balance Sheet
STABLE BALACE SHEET 7 MINIMAL NEAR TERM DEBT MATURITIES = No debt except mortgages and new vehicle financing = Comfortably in compliance with all financial covenants Future Mortgage Debt Maturities ($M)
Slide 22: Updated Guidance
22 ~ UPDATED GUIDANCE ES Projected adjusted Q3’10 - $0.27 - $0.29 earnings range: FY 2010 - $0.72 - $0.77 ASSUMPTIONS = Total revenues in range of $1.95 to $2.0 billion = New vehicle same store sales increasing 12.4% = New vehicle gross margin from 8.0% to 8.3% = Used vehicle same store sales increa
Slide 23: Appendix
APPENDIX
Slide 24: 2009 Quarterly Income Statement
2009 Quarterly Income Statement 24 OFS 3°09 7°09 arog New vehicle ‘210494 "266,769 ‘211,760 192,306 Used vehicle 112,051 129,857 126,256 109,089 Wholesale used vehicles 18,212 20,223, 17,751 16.513 Service, body and parts 71,268 74,538 72312 72.957 Finance and insurance 12,299 15,704 14.857 13.537 F
Slide 25: 2008 Quarterly Income Statement
2008 Quarterly Income Statement, 25 Ors (Q3'08 2°08 ‘aros New vehicle 207,378 ‘310,655 332,629 ‘316,670 Used vehicle 94,789 127,179 123,150 124,485 Wholesale used vehicles 14,871 24,959 25,417 31,229 Service, body and parts 74211 76,470 75,528 77387 Finance and insurance 13,819 20,870 21,373 21,441
Slide 26: GAAP Reconciliation: Q2'10 Adjusted Diluted EPS
26 Three Months Ended June 30, Net incomei(loss) Diluted earnings per share 2010 2005 200 2009 Continuing Operations ‘As reported $(1,514) $2,539 (0.06) $0.12 Impairments and disposal gain 8,046 2,057 031 0.10 Lease termination and severance reserve 561 - 0.02 - Gain on extinguishment of debt = 8 =
Slide 27: GAAP Reconciliation: 1H'10 Adjusted Diluted EPS
Months Ended June 30, Net incomei(loss) Diluted earnings per share 2010 2009 2010 2009 Cont erations As reported S(71) $1,755 - $0.08 Impairments and disposal gain 8777 3.431 0.34 0.16 Lease termination and severance reserve 725 - 0.03 - Gain on extinguishment of debt ~ 812) = (0.04) Adjusted 39431
Slide 28: 2009 Quarterly Adjusted Net Income & Diluted EPS
28 2009 Quarterly Adjusted Net Income & Diluted EPS Net incomei{loss) Diluted earnings per share arog as09 209 TOF FOS (3°09 209 ‘ros Continuing Operations GAAP Basis, (1.814) $6,975 $2,539 $784) (0.07) $0.33 $0.12 $(0.04) Impairments and disposal gain (81) 1571 2,057 1,374 (0.01) 0.06 0.10 0.07 Lea
Slide 29: 2008 Quarterly Adjusted Net Income & Diluted EPS
29 2008 Quarterly Adjusted Net Income & Diluted EPS Net incomei{loss) Diluted earnings per share ar08 708 02°08. Or0s a0 23°08 (27°08 ars. Continuing Operations GAAP Basis, S(1,174) $1,021 $(224,393) _$(586) (0.06) $0.05 —§(11.18) —_$(0.03) Impairments and disposal gain 917 1,668 227,652 - 0.04 0.08
Slide 30: 2010 Proforma Adjustments
30 2010 Proforma Adjustments, Qri0 ari Selling, general & administrative As reported $74,813 $71,039 Impairments and disposal gain Q) 367 Lease termination and severance reserve (4,076) (258) Adjusted $73,735 971,148 Income from operations As reported Impairments and disposal gain Lease termination
Slide 31: 2009 Proforma Adjustments
31 2009 Proforma Adjustments OF09 ‘03°09 ‘Q7'09 ‘arog Selling general & administrative GAAP Basis 967.508 $71,557 $68,854 $69,058 Impairments and disposal gain - 393) (160) (403) Lease termination (1,854) = = = Adjusted 365,654 $71,164 $08,694 $68,055 Income from operations GAAP Basis, $3,227 $18,08
Slide 32: 2008 Proforma Adjustments
32 2008 Proforma Adjustments aF06. ‘3°08 ‘Q7'08 aT08. Selling, general & administrative GAAP Basis, $69,427 $78,136 $80,314 ‘$83,676 Impairments = (150) (418) = Adjusted 369427 $77,986 $79,896 $83,676 Income from operations GAAP Basis, (3,268) $9,352 $(322,227) $8,854 Impairments and disposal gain 4
Slide 33: Proforma Cash Flow from Operations
Proforma Cash Flow from Operations YD 2010-2009 2008, 2007 GAAP Basis $(6,758) $9,934 $85,165 $49,211) Flooring Notes Payable, non-trade 2: 31417 ___ (16,803) usted $17,096 GAAP RECONCILIATION i ADJUSTED CASH FLOW FROM OPERATIONS