lithiamotorsinclogoa21.jpg


LITHIA REPORTS RECORD THIRD QUARTER 2018 RESULTS, INCREASES REVENUE 15%
_____________________________________________________

DECLARES DIVIDEND OF $0.29 PER SHARE FOR THIRD QUARTER

Medford, Oregon, October 24, 2018 - Lithia Motors, Inc. (NYSE: LAD) today reported the highest third quarter revenue and earnings per share in company history.

Third quarter 2018 revenue increased 15% to $3.1 billion from $2.7 billion in the third quarter of 2017.

Third quarter 2018 net income per diluted share was $3.84, an 86% increase over $2.07 per diluted share reported in the third quarter of 2017. Adjusted third quarter 2018 net income per diluted share was $2.83, a 30% increase compared to adjusted net income of $2.18 per diluted share in the same period of 2017. Third quarter 2018 net income was $93 million, a 79% increase over $52 million reported in the third quarter of 2017. Adjusted third quarter 2018 net income was $69 million, a 25% increase compared to adjusted net income of $55 million for the same period of 2017.

As shown in the attached non-GAAP reconciliation tables, the 2018 third quarter adjusted results exclude a $1.01 net non-core benefit related to gains on dispositions and tax attributes. The 2017 third quarter adjusted results exclude a $0.11 net non-core charge related to acquisition expenses and storm insurance reserves.

Third Quarter-over-Quarter Operating Highlights:
Online traffic up 33% over prior year
Total revenues increased 15%
Total same store sales increased 1%
Adjusted SG&A as a percentage of gross profit was 69.6%

"We achieved record results in the third quarter driven by strong top line growth," said Bryan DeBoer, President and CEO. "Total revenue and gross profit both increased over 15%, and adjusted EPS grew 30%. We are seeing traction in realizing the over $250 million of store earnings potential as operations continue to season and stabilize. Our focus on innovation and diversification is producing results as evidenced by ongoing internal and external investment in digital initiatives."

For the first nine months of 2018, revenues increased 20% to $8.8 billion, compared to $7.4 billion in the first nine months of 2017.

Net income for the first nine months of 2018 was $8.31 per diluted share, compared to $6.19 per diluted share for the same period in 2017. Adjusted net income per diluted share for the first nine months of 2018 increased 19% to $7.41 from $6.24 for the first nine months of 2017.

Technology Partnerships and Corporate Development
As previously announced, during the third quarter, we launched a strategic partnership with Shift Technologies, a San Francisco-based digital retailer, committing $54 million to lead their series D fundraising round. Earlier this month, we announced Shift secured a credit line to acquire used vehicle inventory, providing the capacity to reach $1 billion in revenue. This successful operational collaboration resulted in Lithia receiving additional equity ownership in Shift.

Shift is an innovative platform that provides consumers a digital purchase and selling experience, providing vehicle pickup and delivery at a customer’s location. Shift currently operates throughout California and is the largest used car retailer in the San Francisco Bay Area. Our partnership allows both companies to share technology and scale infrastructure to expand into new markets and capture a dominant share of the $1 trillion U.S. retail vehicle market.

“We continue to expand our omni-channel capabilities,” said Bryan DeBoer, President and CEO. “The partnership with Shift is one example of the external innovation initiatives we are pursuing. It is both a strategic and a financial investment. Their proprietary technology platform is robust: it includes a seamless point of sale mobile application, which provides on-the-spot financing, bank payments, vehicle pricing, and contracting. Consumers can sell vehicles directly to Shift, and have them conveniently picked up





at home or work, which is a key advantage in sourcing desirable inventory to retail. Over 80% of the vehicles Shift sells are sourced from consumers, instead of from an auction.”
We recently announced integration of Apple Business Chat in our stores as an inaugural retail partner.  This allows customers to engage with us directly from iOS native apps Messages, Maps, Safari and Siri.  For the majority of our mobile customers, this provides one-click access to service scheduling, vehicle pricing, trade-in offers and financing.  Lithia is among a select group of retailers Apple partnered with to debut Apple Business Chat for U.S. auto shoppers.

We continue to optimize our nationwide network of service and delivery points. In the third quarter, we added a Chrysler Jeep Dodge location in Calallen, Texas, and separated a Subaru franchise into a stand-alone facility in Utica, New York. As announced in September, we completed the divestiture of six stores this quarter, generating approximately $48 million in capital and increasing EPS $0.03 - $0.04 annually.

"Our recent actions further our goal of high performing fulfillment centers reaching coast to coast," said DeBoer. "We reach over 80% of the consumers in the United States with our network of locations. Our strategy is to purchase strong assets that underperform their potential, utilize entrepreneurial store leaders to create a high performing culture and increase earnings, and deploy capital in accretive and innovative ways to serve consumers wherever, whenever and however they desire."

Balance Sheet Update
We ended the third quarter with $31 million in cash and $197 million in availability under our credit facility. Additionally, approximately $302 million of our operating real estate is currently unfinanced, which we estimate could provide $227 million in capital, for total potential liquidity of $455 million.

Dividend Payment and Share Repurchases
Our Board of Directors approved a dividend of $0.29 per share related to third quarter 2018 financial results. We expect to pay the dividend on November 23, 2018 to shareholders of record on November 9, 2018.

Since our last earnings announcement on July 25th, 2018, we have repurchased approximately 946,000 shares, or 4.0% of shares outstanding, at a weighted average price of $81.20 per share. Year to date, we have repurchased approximately 1.6 million shares, or 6.8% of shares outstanding, at a weighted average price of $88.87 per share. Under our existing $250 million share repurchase authorization, approximately $18 million remains available.

Our Board of Directors has increased our share repurchase authorization by an additional $250 million, bringing total funds available for share repurchase to $268 million.

Earnings Outlook
For 2018, our outlook for full year revenue is $11.75 to $12.25 billion and earnings per share of $9.50. Actual results may be affected by items described under Forward-Looking Statements below.

Third Quarter Earnings Conference Call and Updated Presentation
The third quarter conference call may be accessed at 10:00 a.m. ET today by telephone at 877-407-8029. An updated presentation highlighting the third quarter results has been added to our investor relations website. To listen live on our website or for replay, visit www.lithiainvestorrelations.com and click on webcasts.

About Lithia
Lithia Motors, Inc. is one of the largest providers of personal transportation solutions in the United States and is among the fastest growing companies in the Fortune 500 (#294-2018). Consumers can buy, sell and service vehicles digitally or through our 182 nationwide locations. Our mission statement, Growth Powered by People, drives us to continuously improve and to give back to our communities.

Sites
www.lithia.com
www.shift.com

www.lithiainvestorrelations.com
www.lithiacareers.com

Lithia Motors on Facebook
http://www.facebook.com/LithiaMotors






Lithia Motors on Twitter
http://twitter.com/lithiamotors

Contact:
John North
Senior Vice President and Chief Financial Officer
(541) 618-5748

Forward-Looking Statements
This press release includes "forward-looking statements" within the meaning of the "Safe-Harbor" provisions of the Private Securities Litigation Reform Act of 1995. Forward looking statements include statements regarding our goals, plans, projections and guidance regarding our financial position, results of operations, market position, pending and potential future acquisitions and business strategy, and often contain words such as "project," "outlook," "expect," "anticipate," "intend," "plan," "believe," "estimate," "may," "seek," "would," "should," "likely," "goal," "strategy," "future," "maintain," "continue," "remain," "target" or "will" and similar references to future periods. Examples of forward-looking statements in this press release include, among others, statements regarding:

Expected operating results, such as improved store efficiency and performance; achieving a 2018 full year earnings target of $9.50 per diluted share and all projections set forth under the headings "Earnings Outlook";
Our ability to improve store performance;
Anticipated acquisition opportunities and additions of dealership locations to our portfolio in the future, and our ability to improve earnings and achieve returns on investments;
Anticipated revenues from acquired and open point stores; and
Anticipated availability of liquidity from our credit facility and unfinanced operating real estate.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events that depend on circumstances that may or may not occur in the future. Forward-looking statements are not guarantees of future performance, and our actual results of operations, financial condition and liquidity and development of the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements in this press release. The risks and uncertainties that could cause actual results to differ materially from estimated or projected results include, without limitation, future economic and financial conditions (both nationally and locally), changes in customer demand, our relationship with, and the financial and operational stability of, vehicle manufacturers and other suppliers, risks associated with our indebtedness (including available borrowing capacity, compliance with financial covenants and ability to refinance or repay indebtedness on favorable terms), acts of God or other incidents which may adversely impact our operations and financial performance, government regulations, legislation and others set forth throughout "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and in "Part I, Item 1A. Risk Factors" of our most recent Annual Report on Form 10-K, and from time to time in our other filings with the SEC. We urge you to carefully consider this information and not place undue reliance on forward-looking statements. We undertake no duty to update our forward-looking statements, including our earnings outlook, which are made as of the date of this release.

Non-GAAP Financial Measures
This press release and the attached financial tables contain non-GAAP financial measures such as adjusted net income and diluted earnings per share, adjusted SG&A as a percentage of revenue and gross profit, adjusted operating margin, adjusted operating profit as a percentage of gross profit, adjusted pre-tax margin, EBITDA, adjusted EBITDA, leveraged cash flow and adjusted total debt. Non-GAAP measures do not have definitions under GAAP and may be defined differently by and not comparable to similarly titled measures used by other companies. As a result, we review any non-GAAP financial measures in connection with a review of the most directly comparable measures calculated in accordance with GAAP. We caution you not to place undue reliance on such non-GAAP measures, but also to consider them with the most directly comparable GAAP measures. We present cash flows from operations in the attached tables, adjusted to include the change in non-trade floor plan debt to improve the visibility of cash flows related to vehicle financing. As required by SEC rules, we have reconciled these measures to the most directly comparable GAAP measures in the attachments to this release. We believe the non-GAAP financial measures we present improve the transparency of our disclosures; provide a meaningful presentation of our results from core business operations, because they exclude items not related to core business operations and other non-cash items; and improve the period-to-period comparability of our results from core business operations. These presentations should not be considered an alternative to GAAP measures.







Lithia Motors, Inc.
Consolidated Statements of Operations (Unaudited)
(In thousands except per share data)
 
 
Three months ended September 30,
 
%
 
Nine months ended September 30,
 
%
 
 
 
Increase
 
 
Increase
 
 
2018
 
2017
 
(Decrease)
 
2018
 
2017
 
(Decrease)
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
New vehicle retail
 
$
1,732,950

 
$
1,553,511

 
11.6
 %
 
$
4,914,478

 
$
4,147,870

 
18.5
 %
Used vehicle retail
 
805,928

 
679,180

 
18.7

 
2,325,600

 
1,915,038

 
21.4

Used vehicle wholesale
 
91,956

 
65,739

 
39.9

 
253,246

 
206,754

 
22.5

Finance and insurance
 
121,062

 
101,044

 
19.8

 
342,059

 
282,672

 
21.0

Service, body and parts
 
311,327

 
265,683

 
17.2

 
908,431

 
744,262

 
22.1

Fleet and other
 
28,729

 
15,185

 
89.2

 
104,354

 
86,883

 
20.1

Total revenues
 
3,091,952

 
2,680,342

 
15.4
 %
 
8,848,168

 
7,383,479

 
19.8
 %
Cost of sales:
 
 
 
 
 
 
 
 
 
 
 
 
New vehicle retail
 
1,632,068

 
1,465,466

 
11.4

 
4,625,155

 
3,909,168

 
18.3

Used vehicle retail
 
719,575

 
600,522

 
19.8

 
2,078,535

 
1,693,091

 
22.8

Used vehicle wholesale
 
90,553

 
64,565

 
40.3

 
248,991

 
202,351

 
23.0

Service, body and parts
 
156,871

 
133,191

 
17.8

 
461,860

 
376,096

 
22.8

Fleet and other
 
26,646

 
13,577

 
96.3

 
98,550

 
82,829

 
19.0

Total cost of sales
 
2,625,713

 
2,277,321

 
15.3

 
7,513,091

 
6,263,535

 
19.9

Gross profit
 
466,239

 
403,021

 
15.7
 %
 
1,335,077

 
1,119,944

 
19.2
 %
SG&A expense
 
309,024

 
282,241

 
9.5

 
939,868

 
782,303

 
20.1

Depreciation and amortization
 
19,649

 
14,828

 
32.5

 
55,324

 
41,598

 
33.0

Income from operations
 
137,566

 
105,952

 
29.8
 %
 
339,885

 
296,043

 
14.8
 %
Floor plan interest expense
 
(15,958
)
 
(10,629
)
 
50.1

 
(45,126
)
 
(28,013
)
 
61.1

Other interest expense
 
(15,010
)
 
(9,905
)
 
51.5

 
(40,645
)
 
(23,745
)
 
71.2

Other income (expense), net
 
2,389

 
1,125

 
NM
 
5,422

 
11,357

 
NM
Income before income taxes
 
108,987

 
86,543

 
25.9
 %
 
259,536

 
255,642

 
1.5
 %
Income tax expense
 
(15,880
)
 
(34,657
)
 
(54.2
)
 
(53,708
)
 
(99,829
)
 
(46.2
)
Income tax rate
 
14.6
%
 
40.0
%
 


 
20.7
%
 
39.1
%
 
 
Net income

$
93,107

 
$
51,886

 
79.4
 %
 
$
205,828

 
$
155,813

 
32.1
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted net income per share:
 
 
 
 
 
 
 
 
 
 
 
 
Net income per share
 
$
3.84

 
$
2.07

 
85.5
 %
 
$
8.31

 
$
6.19

 
34.2
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted shares outstanding
 
24,258
 
25,076
 
(3.3)
 %
 
24,767
 
25,158
 
(1.6
)%
NM - not meaningful





Lithia Motors, Inc.
Key Performance Metrics (Unaudited)
 
 
Three months ended September 30,
 
%
 
Nine months ended September 30,
 
%
 
 
 
Increase
 
 
Increase
 
 
2018
 
2017
 
(Decrease)
 
2018
 
2017
 
(Decrease)
Gross margin
 
 
 
 
 
 
 
 
 
 
 
 
New vehicle retail
 
5.8
%
 
5.7
%
 
10
bps
 
5.9
%
 
5.8
%
 
10
bps
Used vehicle retail
 
10.7

 
11.6

 
(90
)
 
10.6

 
11.6

 
(100
)
Finance and insurance
 
100.0

 
100.0

 

 
100.0

 
100.0

 

Service, body and parts
 
49.6

 
49.9

 
(30
)
 
49.2

 
49.5

 
(30
)
Gross profit margin
 
15.1

 
15.0

 
10

 
15.1

 
15.2

 
(10
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Unit sales
 
 
 
 
 
 
 
 
 
 
 
 
New vehicle retail
 
48,790

 
45,452

 
7.3
 %
 
139,314

 
121,944

 
14.2
 %
Used vehicle retail
 
39,751

 
34,717

 
14.5

 
114,961

 
97,671

 
17.7

Total retail units sold
 
88,541

 
80,169

 
10.4

 
254,275

 
219,615

 
15.8

 
 
 
 
 
 
 
 
 
 
 
 
 
Average selling price
 
 
 
 
 
 
 
 
 
 
 
 
New vehicle retail
 
$
35,519

 
$
34,179

 
3.9
 %
 
$
35,276

 
$
34,015

 
3.7
 %
Used vehicle retail
 
20,274

 
19,563

 
3.6

 
20,229

 
19,607

 
3.2

 
 
 
 
 
 
 
 
 
 
 
 
 
Average gross profit per unit
 
 
 
 
 
 
 
 
 
 
 
 
New vehicle retail
 
$
2,068

 
$
1,937

 
6.8
 %
 
$
2,077

 
$
1,957

 
6.1
 %
Used vehicle retail
 
2,172

 
2,266

 
(4.1
)
 
2,149

 
2,272

 
(5.4
)
Finance and insurance
 
1,367

 
1,260

 
8.5

 
1,345

 
1,287

 
4.5

Total vehicle(1)
 
3,498

 
3,354

 
4.3

 
3,471

 
3,405

 
1.9

 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue mix
 
 
 
 
 
 
 
 
 
 
 
 
New vehicle retail
 
56.0
%
 
58.0
%
 
 
 
55.5
%
 
56.2
%
 
 
Used vehicle retail
 
26.1

 
25.3

 
 
 
26.3

 
25.9

 
 
Used vehicle wholesale
 
3.0

 
2.5

 
 
 
2.9

 
2.8

 
 
Finance and insurance, net
 
3.9

 
3.8

 
 
 
3.9

 
3.8

 
 
Service, body and parts
 
10.1

 
9.9

 
 
 
10.3

 
10.1

 
 
Fleet and other
 
0.9

 
0.5

 
 
 
1.1

 
1.2

 
 
 
 
Adjusted
 
As reported
 
Adjusted
 
As reported
 
 
Three months ended September 30,
 
Three months ended September 30,
 
Nine months ended September 30,
 
Nine months ended September 30,
Other metrics
 
2018
 
2017
 
2018
 
2017
 
2018
 
2017
 
2018
 
2017
SG&A as a % of revenue
 
10.5
%
 
10.3
%
 
10.0
%
 
10.5
%
 
10.7
%
 
10.4
%
 
10.6
%
 
10.6
%
SG&A as a % of gross profit
 
69.6

 
68.7

 
66.3

 
70.0

 
71.2

 
68.8

 
70.4

 
69.9

Operating profit as a % of revenue
 
3.9

 
4.1

 
4.4

 
4.0

 
3.7

 
4.2

 
3.8

 
4.0

Operating profit as a % of gross profit
 
26.1

 
27.6

 
29.5

 
26.3

 
24.6

 
27.4

 
25.5

 
26.4

Pretax margin
 
3.0

 
3.4

 
3.5

 
3.2

 
2.8

 
3.5

 
2.9

 
3.5

Net profit margin
 
2.2

 
2.0

 
3.0

 
1.9

 
2.1

 
2.1

 
2.3

 
2.1

(1) 
Includes the sales and gross profit related to new, used retail, used wholesale and finance and insurance and unit sales for new and used retail





Lithia Motors, Inc.
Same Store Operating Highlights (Unaudited)
 
 
Three months ended September 30,
 
%
 
Nine months ended September 30,
 
%
 
 
 
Increase
 
 
Increase
 
 
2018
 
2017
 
(Decrease)
 
2018
 
2017
 
(Decrease)
Revenues
 
 
 
 
 
 
 
 
 
 
 
 
New vehicle retail
 
$
1,443,965

 
$
1,480,737

 
(2.5)
 %
 
$
3,954,946

 
$
3,998,702

 
(1.1
)%
Used vehicle retail
 
688,965

 
655,814

 
5.1

 
1,960,126

 
1,855,211

 
5.7

Finance and insurance
 
105,462

 
97,033

 
8.7

 
287,202

 
273,143

 
5.1

Service, body and parts
 
260,683

 
254,084

 
2.6

 
740,725

 
719,898

 
2.9

Total revenues
 
2,594,562

 
2,566,159

 
1.1

 
7,230,131

 
7,134,877

 
1.3

 
 
 
 
 
 
 
 
 
 
 
 
 
Gross profit
 
 
 
 
 
 
 
 
 
 
 
 
New vehicle retail
 
$
82,596

 
$
83,478

 
(1.1)
 %
 
$
226,531

 
$
228,625

 
(0.9
)%
Used vehicle retail
 
77,667

 
76,836

 
1.1

 
218,013

 
217,190

 
0.4

Finance and insurance
 
105,462

 
97,033

 
8.7

 
287,202

 
273,143

 
5.1

Service, body and parts
 
129,720

 
126,623

 
2.4

 
366,878

 
355,917

 
3.1

Total gross profit
 
398,673

 
386,805

 
3.1

 
1,107,344

 
1,083,312

 
2.2

 
 
 
 
 
 
 
 
 
 
 
 
 
Gross margin
 
 
 
 
 
 
 
 
 
 
 
 
New vehicle retail
 
5.7
%
 
5.6
%
 
10
bps
 
5.7
%
 
5.7
%
 

Used vehicle retail
 
11.3

 
11.7

 
(40
)
 
11.1

 
11.7

 
(60
)
Finance and insurance
 
100.0

 
100.0

 

 
100.0

 
100.0

 

Service, body and parts
 
49.8

 
49.8

 

 
49.5

 
49.4

 
10

Gross profit margin
 
15.4

 
15.1

 
30

 
15.3

 
15.2

 
10

 
 
 
 
 
 
 
 
 
 
 
 
 
Unit sales
 
 
 
 
 
 
 
 
 
 
 
 
New vehicle retail
 
40,974

 
43,171

 
(5.1)
 %
 
112,660

 
117,086

 
(3.8
)%
Used vehicle retail
 
34,434

 
33,498

 
2.8

 
97,962

 
94,338

 
3.8

 
 
 
 
 
 
 
 
 
 
 
 
 
Average selling price
 
 
 
 
 
 
 
 
 
 
 
 
New vehicle retail
 
$
35,241

 
$
34,299

 
2.7
 %
 
$
35,105

 
$
34,152

 
2.8
 %
Used vehicle retail
 
20,008

 
19,578

 
2.2

 
20,009

 
19,666

 
1.7

 
 
 
 
 
 
 
 
 
 
 
 
 
Average gross profit per unit
 
 
 
 
 
 
 
 
 
 
 
 
New vehicle retail
 
$
2,016

 
$
1,934

 
4.2
 %
 
$
2,011

 
$
1,953

 
3.0
 %
Used vehicle retail
 
2,256

 
2,294

 
(1.7
)
 
2,225

 
2,302

 
(3.3
)
Finance and insurance
 
1,399

 
1,266

 
10.5

 
1,364

 
1,292

 
5.6

Total vehicle(1)
 
3,541

 
3,372

 
5.0

 
3,490

 
3,421

 
2.0

(1) 
Includes the sales and gross profit related to new, used retail, used wholesale and finance and insurance and unit sales for new and used retail





Lithia Motors, Inc.
Other Highlights (Unaudited)
 
As of
 
September 30,
 
December 31,
 
September 30,
 
2018
 
2017
 
2017
Days Supply(1)
 
 
 
 
 
New vehicle inventory
77
 
69
 
64
Used vehicle inventory
64
 
66
 
63
(1) Days supply calculated based on current inventory levels, excluding in-transit vehicles, and a 30-day historical cost of sales level.

Financial covenants
 
 
 
 
Requirement
 
As of September 30, 2018
Current ratio
Not less than 1.10 to 1
 
1.28 to 1
Fixed charge coverage ratio
Not less than 1.20 to 1
 
2.35 to 1
Leverage ratio
Not more than 5.00 to 1
 
2.86 to 1






Lithia Motors, Inc.
Condensed Consolidated Balance Sheets (Unaudited)
(In thousands)
 
 
September 30, 2018
 
December 31, 2017
Cash and cash equivalents
 
$
31,432

 
$
57,253

Trade receivables, net
 
470,689

 
521,938

Inventories, net
 
2,275,965

 
2,132,744

Other current assets
 
47,648

 
70,847

Total current assets
 
$
2,825,734

 
$
2,782,782

 
 
 
 
 
Property and equipment, net
 
1,248,692

 
1,185,169

Intangibles
 
612,972

 
443,297

Other non-current assets
 
487,171

 
271,818

Total assets
 
$
5,174,569

 
$
4,683,066

 
 
 
 
 
Floor plan notes payable
 
1,955,867

 
1,919,026

Other current liabilities
 
407,343

 
381,955

Total current liabilities
 
$
2,363,210

 
$
2,300,981

 
 
 
 
 
Long-term debt
 
1,287,052

 
1,028,476

Other long-term liabilities and deferred revenue
 
319,165

 
270,391

Total liabilities
 
$
3,969,427

 
$
3,599,848

 
 
 
 
 
Stockholder's Equity
 
1,205,142

 
1,083,218

Total liabilities & stockholders' equity
 
$
5,174,569

 
$
4,683,066







Lithia Motors, Inc.
Summarized Cash Flow from Operations (Unaudited)
(In thousands)
 
 
Nine months ended September 30,
 
 
2018
 
2017
Net income
 
$
205,828

 
$
155,813

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
55,324

 
41,598

Stock-based compensation
 
9,776

 
8,396

(Gain) on disposal of assets
 
(91
)
 
(382
)
(Gain) on sale of franchises
 
(15,396
)
 

Deferred income taxes
 
19,446

 
7,398

(Increase) decrease:
 
 
 
 
Trade receivables, net
 
63,419

 
(13,345
)
Inventories
 
(14,466
)
 
(16,098
)
Other assets
 
12,007

 
15,207

Increase (decrease):
 
 
 
 
Floor plan notes payable, net
 
8,073

 
12,126

Trade payables
 
3,645

 
12,397

Accrued liabilities
 
8,637

 
25,907

Other long-term liabilities and deferred revenue
 
23,084

 
11,519

Net cash provided by operating activities
 
$
379,286

 
$
260,536




Lithia Motors, Inc.
Reconciliation of Non-GAAP Cash Flow from Operations (Unaudited)
(In thousands)
 
 
Nine months ended September 30,
Net cash provided by operating activities
 
2018
 
2017
As reported
 
$
379,286

 
$
260,536

Floor plan notes payable, non-trade, net
 
61,705

 
34,056

Less: Borrowings on floor plan notes payable, non-trade associated with acquired new vehicle inventory
 
(120,899
)
 
(85,527
)
Adjusted
 
$
320,092

 
$
209,065







Lithia Motors, Inc.
Reconciliation of Certain Non-GAAP Financial Measures (Unaudited)
(In thousands, except for per share data)

 
 
Three Months Ended September 30, 2018
 
 
As reported
 
Disposal gain on sale of store
 
Tax attributes
 
Adjusted
Selling, general and administrative
 
$
309,024

 
15,681

 
$

 
$
324,705

 
 
 
 
 
 
 
 
 
Income from operations
 
137,566

 
(15,681
)
 

 
121,885

 
 
 
 
 
 
 
 
 
Income before income taxes
 
$
108,987

 
$
(15,681
)
 
$

 
$
93,306

Income tax benefit (expense)
 
(15,880
)
 
4,089

 
(12,848
)
 
(24,639
)
Net income
 
$
93,107

 
$
(11,592
)
 
$
(12,848
)
 
$
68,667

 
 
 
 
 
 
 
 
 
Diluted earnings per share
 
$
3.84

 
$
(0.48
)
 
$
(0.53
)
 
$
2.83

Diluted share count
 
24,258

 
 
 
 
 
 

 
 
Three Months Ended September 30, 2017
 
 
As reported
 
Insurance reserves
 
Acquisition expenses
 
Adjusted
Selling, general and administrative
 
$
282,241

 
$
(1,704
)
 
$
(3,516
)
 
$
277,021

 
 
 
 
 
 
 
 
 
Income from operations
 
105,952

 
1,704

 
3,516

 
111,172

 
 
 
 
 
 
 
 
 
Income before income taxes
 
$
86,543

 
$
1,704

 
$
3,516

 
$
91,763

Income tax expense
 
(34,657
)
 
(943
)
 
(1,380
)
 
(36,980
)
Net income
 
$
51,886

 
$
761

 
$
2,136

 
$
54,783

 
 
 
 
 
 
 
 
 
Diluted earnings per share
 
$
2.07

 
$
0.03

 
$
0.08

 
$
2.18

Diluted share count
 
25,076

 
 
 
 
 
 






Lithia Motors, Inc.
Reconciliation of Certain Non-GAAP Financial Measures (Unaudited)
(In thousands, except for per share data)

 
 
Nine Months Ended September 30, 2018
 
 
As reported
 
Insurance reserves
 
Acquisition expenses
 
Disposal gain on sale of store
 
Tax attributes
 
Adjusted
Selling, general and administrative
 
$
939,868

 
$
(1,490
)
 
$
(3,251
)
 
15,681

 
$

 
$
950,808

 
 
 
 
 
 
 
 
 
 
 
 
 
Income from operations
 
339,885

 
1,490

 
3,251

 
(15,681
)
 

 
328,945

 
 
 
 
 
 
 
 
 
 
 
 
 
Income before income taxes
 
$
259,536

 
$
1,490

 
$
3,251

 
$
(15,681
)
 
$

 
$
248,596

Income tax benefit (expense)
 
(53,708
)
 
(389
)
 
(853
)
 
4,089

 
(14,257
)
 
(65,118
)
Net income
 
$
205,828

 
$
1,101

 
$
2,398

 
$
(11,592
)
 
$
(14,257
)
 
$
183,478

 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted earnings per share
 
$
8.31

 
0.04

 
$
0.10

 
$
(0.47
)
 
$
(0.57
)
 
$
7.41

Diluted share count
 
24,767

 
 
 
 
 
 
 
 
 
 

 
 
Nine Months Ended September 30, 2017
 
 
As reported
 
Insurance reserves
 
Acquisition expenses
 
OEM settlement
 
Adjusted
Selling, general and administrative
 
$
782,303

 
$
(5,582
)
 
$
(5,653
)
 
$

 
$
771,068

 
 
 
 
 
 
 
 
 
 
 
Income from operations
 
296,043

 
5,582

 
5,653

 

 
307,278

 
 
 
 
 
 
 
 
 
 
 
Other income (expense), net
 
11,357

 

 

 
(9,111
)
 
2,246

 
 
 
 
 
 
 
 
 
 
 
Income before income taxes
 
$
255,642

 
$
5,582

 
$
5,653

 
$
(9,111
)
 
$
257,766

Income tax benefit (expense)
 
(99,829
)
 
(2,174
)
 
(2,201
)
 
3,423

 
(100,781
)
Net income
 
$
155,813

 
$
3,408

 
$
3,452

 
$
(5,688
)
 
$
156,985

 
 
 
 
 
 
 
 
 
 
 
Diluted earnings per share
 
$
6.19

 
$
0.14

 
$
0.14

 
$
(0.23
)
 
$
6.24

Diluted share count
 
25,158

 
 
 
 
 
 
 
 







Lithia Motors, Inc.
Adjusted EBITDA and Leveraged Free Cash Flow (Unaudited)

 
 
Three months ended September 30,
 
%
 
Nine months ended September 30,
 
%
 
 
 
Increase
 
 
Increase
 
 
2018
 
2017
 
(Decrease)
 
2018
 
2017
 
(Decrease)
EBITDA and Adjusted EBITDA
 
 
 
 
 
 
 
 
 
 
 
 
Net income
 
$
93,107

 
$
51,886

 
79.4
 %
 
$
205,828

 
$
155,813

 
32.1
 %
Other interest expense
 
15,010

 
9,905

 
51.5

 
40,645

 
23,745

 
71.2

Income tax expense
 
15,880

 
34,657

 
(54.2
)
 
53,708

 
99,829

 
(46.2
)
Depreciation and amortization
 
19,649

 
14,828

 
32.5

 
55,324

 
41,598

 
33.0

EBITDA
 
$
143,646

 
$
111,276

 
29.1
 %
 
$
355,505

 
$
320,985

 
10.8
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
Other adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
Less: used vehicle line of credit interest
 
$
(443
)
 
$
(365
)
 
21.4

 
$
(978
)
 
$
(2,522
)
 
(61.2
)
Less: gain on divestitures
 
(15,681
)
 

 
NM
 
(15,681
)
 

 
NM
Add: insurance reserve
 

 
1,704

 
NM
 
1,490

 
5,582

 
(73.3
)
Add: acquisition expenses
 

 
3,516

 
NM
 
3,251

 
5,653

 
(42.5
)
Less: OEM legal settlements
 

 

 
NM
 

 
(9,111
)
 
NM
Adjusted EBITDA
 
$
127,522

 
$
116,131

 
9.8
 %
 
$
343,587

 
$
320,587

 
7.2
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
Leveraged EBITDA
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
 
$
127,522

 
$
116,131

 
9.8
 %
 
$
343,587

 
$
320,587

 
7.2
 %
Less: Capital expenditures
 
(41,013
)
 
(39,908
)
 
2.8

 
(113,386
)
 
(72,174
)
 
57.1

Leveraged EBITDA
 
$
86,509

 
$
76,223

 
13.5
 %
 
$
230,201

 
$
248,413

 
(7.3)
 %
NM - not meaningful



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