1947 Photo. THE BEGINNING SINCE 1946" Named after Lithia Springs in Ashland, OR

Transcription

1 Q4 09 Company Update

2 DISCLOSURE This presentation includes numerous forward looking statements. These forward looking statements address our future objectives, plans and goals, as well as our intent, beliefs and current expectations regarding future operating performance. Specific events addressed by these forward looking statements include, without limitation: future U.S. automotive industry trends; future liquidity trends or needs and our business and growth strategies. These forward looking statements are based on our current estimates and assumptions and involve various risks and uncertainties. As a result, you are cautioned that these forward looking statements are not guarantees of future performance, and that actual results could differ materially from those projected in these forward looking statements. Factors which may cause actual results to differ materially from our projections include those risks described in our filings with the Securities and Exchange Commission, including those under the heading Risk Factors in such documents. Additionally, this presentation contains information about Adjusted Diluted EPS, Adjusted EBITDA and Adjusted Cash Flow from Operations. These are non GAAP financial measures used by Company management when evaluating results of operations and cash flow. Management believes these measures also provide users of the financial i statements t t with additional and useful comparisons of current results of operations and cash flows with past and future periods. Non GAAP financial measures should not be construed as being more important than comparable GAAP measures. Detailed reconciliations of the non GAAP measures included herein to comparable GAAP financial measures have been included in the tables appearing in the Appendix to this presentation. 2

3 1947 Photo o THE BEGINNING SINCE 1946" Named after Lithia Springs in Ashland, OR 3

4 RVIEW OVE MOT TORS LIT THIA Lithia Motors, based in Medford, OR, is a leading operator of automotive franchises and retailer of new and used vehicles and related services As of January 1, 2010, we offered 26 brands of new vehicles and all brands of used vehicles in 85 stores in the United States and over the internet Revenue Mix Brand Mix Wholesale Vehicles 4% Service, Body F&I, Fleet & Porsche & Parts Other Subaru VW Audi Suzuki 0.6% 16% Nissan 3% 4.6% 2.9% 3.1% 0.1% Toyota BMW 13.3% 8.9% Used and Program Vehicles 27% New Vehicles 50% Mercedes 1.9% Mazda 0.5% Hyundai 3.8% Kia 0.1% Chrysler Jeep Dodge 30.6% General Motors 17.1% Note: Revenue mix is as of the year ended December 31, 2009 and brand mix is based on new vehicle revenues s for the year ended December 31, 2009 Honda 7.4% Ford 5.1% 4

5 I.P.O. in Dec dealerships The 8th largest U.S. auto retailer by retail sales LITHIA MOTORS OVERVIEW LITHIA MOTORS OVERVIEW 85 Dealerships, 12 States, 26 Brands 5

6 Business Overview 6

7 LITHIA S DIFFERENTIATED BUSINESS MODEL Small and midsized, regional markets Vast majority single point markets Higher demand for trucks and domestic brands Lithia s differentiated auto retail model Growth Restructured to be profitable at current SAAR levels Unique and fullyintegrated and centralized operating structure Entrepreneurial store management Proven track record of purchasing and on average improving underperforming dealerships Substantial organic growth potential with SAAR recovery Successful used vehicle strategy 7 7

8 UNIQUE MARKET POSITION The Company focuses on small and mid sized markets Revenue per State Colorado 1% Montana Idaho 7% 6% Iowa 7% Alaska 10% Nevada 4% Washington 10% North Dakota 2% Oregon 16% California 12% New Mexico 1% Texas 24% Note: Revenue are based on results for the year ended December 31, 2009 Diversification helps insulate Lithia from market specific risks Target 30% new vehicle share Derives less than 25% of revenue from one state Higher demand dfor trucks and domestic cars in our markets kt 8

9 FOCUSED ON CENTRALIZATION TO SUPPORT STORE OPERATIONS Centralizedadministrativeprocesses administrative promoteentrepreneurial entrepreneurial store management Corporate Customer Facing Administrative Functions Cash Management Advertising / Marketing Accounts Payable Procurement Accounts Receivable Credit and Collections Legal Tax / Accounting Information Systems Payroll / Benefits Inventory Management Human Development Human Resources Centralized Budgeting & Common Measurement Entrepreneurial Environment Model Tailored to Local Markets Empowered Store Management: Hiring Decisions Ad Campaigns Customer Experience Community Reputation Internet Lead Mgmt GM is Local Leader Unique Store Culture Individual Recipe for Success Company wide administrative personnel reduced 50% from 6.4 to 3.1 per store since

10 MORE STABLE PROFITABILITY THROUGH BUSINESS LINE MIX Manufacturer / Retailer Comparison (1) Breakdown of Business Lines (2) 2.2% 1.9% 1.4% 30.9% 20.0% 22.4% tax Income % Pre t SAAR 3.5% Auto Manufacturers 2.8% Peer Group 14.8% % 3.3% 15.8% Revenue Service, body and parts New vehicle Significant gross profit contribution F&I and Other Used vehicle 17.4% 40.2% Gross Profit 57% of gross profit from 19% of revenues (1) Margin based on reported pre tax income as a percentage of revenue adjusted for one time asset impairment charges. Domestic auto manufacturers includes Daimler Chrysler (2006 only), General Motors and Ford Motor. Peer group average includes Lithia, AutoNation, Sonic, Asbury, Penske, and Group 1. (2) Used vehicles includes both used and wholesale vehicles. Revenues and gross profit based on the year ended December 31,

11 DOMESTIC BRANDS STRONG IN OUR MARKETS New Vehicle Revenues New Vehicle Gross Profits Import/Luxury 46.6% Domestic 53.4% Domestic brands derive more gross profit than revenue, proportionally Import/Luxury 45.9% Domestic 54.1% New Vehicle Gross Margin 8.4% 7.9% 7.8% 7.9% Highest new vehicle margins among publically traded peers 11 Note: Revenue and gross profits are based on results for the year ended December 31, Gross margins are based on the three months ended September 30, 2009

12 INDUSTRY LEADER IN USED VEHICLE SALE 16.0% 14.0% 12.0% 10.0% Retail Used Gross Margins 15.0% 14.1% 14.1% 11.5% Average Selling Price 16,980 6,629 16,638 Value line autos shifts sales to retail transactions Margins improve as retail sales price declines Retail / Wholesale Sales Split 68.2% 63.4% 61.6% 63.3% 16,316 6,249 5,897 16, % 38.4% 36.7% 31.8% Retail Wholesale 5, Converting more used cars to retail transactions Note: Gross margins are based on results for the three months ended September 30, Average selling price and retail wholesale splits are based on results for the year ended December 31,

13 STEADY SERVICE, BODY & PARTS BUSINESS Revenues ($M) and SAAR Revenue SAAR $284.8 $286.3 $276.7 $ Gross Profit fit($m) and Margin $120.8 Gross Profit Margin $137.0 $138.0 $132.5 Despite a weak economy, gross profit flat Introducing commodity products 35% of buyers subscribe to a Lithia lifetime oil contract Lifetime oil contracts ensure captive customer base after vehicle purchase 48.8% 48.1% 48.2% 47.9% Counter cyclical business provides earnings stability 13

14 ORGANIC OPPORTUNITIES TO GROW IN NEW VEHICLES 18 Change in Units in Operation SAAR Scrappage Units (M) Net reduction in vehicles in service E 2010E 2011E Pent up demand must be realized Earnings unlocked as cost structure leveraged Given scrappage rates, SAAR levels will recover 14 Source: Global Insight, NADA, R.L. Polk & Co.; Forward scrappage numbers provided by equity research.

15 ORGANIC OPPORTUNITIES TO GROW IN USED VEHICLES Used to New Ratio 1.0x 0.6x 0.6x 0.7x Demand shifts hf to used vehicles in a recession Incremental sales with no additional investment Free of manufacturer restrictions Adaptable inventory to meet customer demand Focused onincreasing usedvehicle sales 15 Note: Ratio is based on year to date new and used unit counts

16 ACQUISITION OPPORTUNITIES The industry is poised for consolidation Public dealerships only 3.7% (1) of industry Targeted brands: Room to grow in existing iti markets kt Consolidation benefits survivors Current timing = attractive opportunities 16 (1) Based on public filings and NADA

17 PROVEN ACQUISITION STRATEGY WITH EXPERIENCED MANAGEMENT Sid DeBoer Chairman & CEO M.L. Dick Heimann Vice Chairman R. Bradford Gray Executive VP Years in Industry Growth since IPO Purchased over 100 stores in 12 years Improvement in Net Income 1 Year After Acquisition (1) x # number of acquisitions in the year Bryan DeBoer President & COO Jeff DeBoer Senior VP & CFO x 2.8x 2.2x Scott Hillier Senior Vice President 23 #10 #5 #10 # Acq Acq Acq Acq. Successful management with over 170 years of experience 17 Note: Improvements based on total net income acquired during given year, annualized, compared to next year results

18 Financial Overview 18

19 $2,441.6 Revenue ($M) $2,585.1 $2,063.0 $1, % 16.9% Gross Margin 17.3% 18.8% AdjustedEBITDA ($M) $1.49 Adjusted Diluted EPS $95.9 $85.5 $1.11 $54.3 $ $0.01 $ See appendix for reconciliation of adjusted EBITDA and adjusted diluted EPS HISTORICAL FINANCIALS 19

20 Q4 09 FINANCIAL UPDATE Focus on profitability, margins and cash flow ($K) Q4 09 Q4 08 % change Q4 09 Highlights Revenues $418,670 $399, % New vehicle same store Gross Profit 75,405 75,997 (0.8)% sales up 1.2% SG&A Expense 66,083 67,437 (2.0)% Adj Income from Excluding Chrysler, new Con t Ops $132 $(3,195) NM vehicle same stores sales up Adj Diluted EPS $0.01 $(0.16) NM 18.5% Retail used vehicle same store sales up 17.9% ($K) % change Revenues $1,749,315 $2,063,000 (15.2)% Gross Profit 329, ,475 (7.5)% SG&A Expense 270, ,316 (12.1)% Adj Income from Con t Ops $11,036 $255 4,227.8% Adj Diluted EPS $0.50 $0.01 4,900.0% Profitable Q4 despite challenging environment Full Year Highlight Significant improvements in full year net income despite 15.2% decline in revenues 20

21 Q4 09 FINANCIAL UPDATE AdjustedEBITDA ($M) SAAR 13.2 $95.9 $ $ $73.6 Significant improvement in adjusted EBITDA from 2008 despite a declining SAAR Unlock leverage in cost structure as SAAR increases Restructured to match current SAAR levels See appendix for reconciliation of adjusted EBITDA 21

22 STABLE BALANCE SHEET Solid liquidity and minimal debt maturities Immediately Available Funds ($K) 12/31/09 Book value per basic share of $13.93 Cash and Cash Equivalents $12,776 Availability on Line of Credit 25,682 Unfloored Vehicles 35,728 Total $74, Future Mortgage Debt Maturities ($M) Current Ratio of % LT debt to total capitalization, excluding mortgages Avg Annual Adj Cash Flow from Ops Beyond No significant near term mortgage maturities Note: Average annual adjusted cash flow from operations is the average for 2007 to See appendix for reconciliation of adjusted cash flow from operations 22

23 GUIDANCE Projected earnings of $0.04 $0.06 for Q1 09 and $0.55 $0.63 for 2009 Assumptions Total Revenues at $1.80 to $1.85 billion New Vehicle same store sales increasing 3.5% New Vehicle gross margin from 8.1% to 8.3% Used Vehicle same store sales increasing 7.2% Used Vehicle gross margin from 14.2% to 14.5% Service Body and Parts same store sales decreasing 1.0% Service Body and Parts gross margin from 47.5% to 47.7% Finance and Insurance gross profit of $955 per unit Tax rate of 40.0% Estimated average diluted shares outstanding of 26.2 million Maintenance capital expenditures of approximately $2.7 million Chrysler market share consistent with full year 2009 levels 23

24 APPENDIX 24

25 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 they refer us to their families and friends Respect Everyone Treat everyone with ihthe utmost respect and integrity. i Our reputation is our competitive advantage protect it. Be proud of the work you do and the services we provide to our communities Improve Constantly We work together as a team sharing ideas and best practices to make our customers experience easier and faster. Never quit trying to improve your performance Have Fun Our enthusiasm to sell and repair vehicles will set us above our competitors 25

26 EBITDA 12/31/ /31/ /31/ /31/2006 Income from continuing operations 10,703 (335,227) 36,635 50,921 Addback: Taxes 4,639 (108,721) 14,865 19,626 Other interest exp 14,063 17,878 16,273 12,206 Depreciation - building 5,439 5,039 4,567 3,581 Depreciation and amortization - other 12,809 11,904 11,918 9,588 Adjustments: Asset impairments 7, ,767 1, Gain on extinguishment of debt (1,317) (5,248) - - Adjusted EBITDA 54,267 (73,608) 85,473 95,941 GAAP RECONCILIATION Adjusted EBITDA 26

27 12/31/09 12/31/08 12/31/07 12/31/06 Pre-tax income from continuing operations 10,703 (335,227) 36, ,921 Adjustments Asset impairments 7, ,767 1, Reserve adjustments 1, Gain on extinguishment of debt (1,317) (5,248) - - Total Proforma Adj 8, ,519 1, Adjusted Pre-tax Income from Continuing Operations 18, ,850 50,940 Implied Tax Rate 41.1% 1% 12.7% 39.8% 38.6% Adjusted Income from Continuing Operations 11, ,777 31,297 Diluted Shares 22,037 20,195 22,204 22,207 Adjusted Diluted EPS GAAP RECONCILIATION GAAP RECONCILIATION Adjusted Annual Diluted EPS 27

28 Q4 09 Q3 09 Q2 09 Q1 09 Pre-tax income from continuing operations (2,993) 11,217 3,763 (1,284) Adjustments Asset impairments 1,729 1,664 2,956 1,153 Reserve adjustments 1, Gain on extinguishment of debt - - (231) (1,086) Total Proforma Adj 3,583 1,664 2, Adjusted Pre-tax Income from Continuing Operations ,881 6,488 (1,217) Implied Tax Rate 77.6% 39.9% 40.7% 44.1% Adjusted Income from Continuing Operations 132 7,737 3,848 (680) Diluted Shares 25,113 21,448 21,096 20,750 Adjusted Diluted EPS (0.03) 03) GAAP RECONCILIATION GAAP RECONCILIATION Adjusted Quarterly 2009 Diluted EPS 28

29 Q4 08 Q3 08 Q2 08 Q1 08 Pre-tax income from continuing operations (2,674) 2, (333,317) 317) (1,515) Adjustments Asset impairments 1,147 2, ,515 - Gain on extinguishment of debt (3,605) (1,643) - - Total Proforma Adj (2,458) ,515 - Adjusted Pre-tax Income from Continuing Operations (5,132) 2,741 4,198 (1,515) Implied Tax Rate 37.7% 31.3% 42.9% 45.2% Adjusted d Income from Continuing i Operations (3,196) 1,882 2,399 (830) Diluted Shares 20,519 20,371 20,073 19,873 Adjusted Diluted EPS (0.16) (0.04) GAAP RECONCILIATION GAAP RECONCILIATION Adjusted Quarterly 2008 Diluted EPS 29

30 12/31/ /31/ /31/2007 Cash flows from operations 9,934 85,165 (49,211) Flooring notes payable: non-trade 31,417 (16,803) 69,540 Adjusted cash flow from operations 41,351 68,362 20,329 GAAP RECONCILIATION GAAP RECONCILIATION Adjusted Cash Flow from Operations 30