EX-99.1 2 f8kladea4thqex991.htm EXHIBIT 99.1 f8klad040108ea4thqupdate.htm -- Converted by SEC Publisher, created by BCL Technologies Inc., for SEC Filing

LITHIA ANNOUNCES RESULTS OF INVESTIGATION; REVISES PREVIOUSLY RELEASED PRELIMINARY 2007 EARNINGS

MEDFORD, OREGON, April 1st, 2008 (For immediate release) – Lithia Motors, Inc. (NYSE: LAD) Lithia Motors, Inc. announced that the previously reported investigation has been completed and special legal counsel, together with Ernst & Young LLP, the independent external accounting firm assisting special counsel, have issued their final report to the company’s Audit Committee which has accepted the report. The investigation examined certain irregularities in the reporting of car sales for purposes of manufacturer sponsored volume-based incentive programs. The report’s conclusions were that occurrences of misconduct were found only in a limited number of stores; the financial impact of known instances is inconsequential, the most significant instances of misconduct were previously detected by the company or through manufacturer audits; and the misconduct arose only at the store level and was not directed or encouraged by senior management. The financial impact of the irregularities detected by the investigation did not materially change from those identified in the Company’s March 17th Form 12b-25.

CEO Sid DeBoer stated, “We are pleased that the investigation is completed and our reporting problems were isolated and had minimal financial impact.”

Mr. DeBoer continued, “As the final investigative report was not delivered until March 29, KPMG LLP, our independent public accounting firm, has not had adequate time to review the results of the investigation. Accordingly, we are not able to file our Annual Report on Form 10-K within the time allotted; however, we are expecting to file our Annual Report in the near term.”

The Company also reported revised financial results for 2007, subject to completion of the independent public accountants’ final audit procedures. A copy of the company’s unaudited results and financial condition as of December 31, 2007 follows. Previously, the company had announced diluted EPS of $1.24 for the year-end 2007. As revised, unaudited diluted EPS increased $0.02 to $1.26 per share. The difference primarily results from a decision by management and the board of directors to not pay the cash bonuses earned under the Company’s 2007 Annual Bonus Plan to any of its senior executives because of the disappointing financial results for the year. The forfeiture of bonuses by senior management more than offset final year-end adjustments and accruals including a reserve established with respect to matters identified in the investigation. As a result of an analysis performed by the Company over revenue cutoff, revenue and income for the period were also adjusted to properly reflect the recognition of vehicle sales in accordance with Generally Accepted Accounting Principles. This resulted in certain vehicle sales initially recorded in the fourth quarter of 2007 to be recognized in the first quarter of 2008. The impact of this revenue cutoff matter was determined to be immaterial in prior periods.

About Lithia

Lithia Motors, Inc. is a Fortune 700 and Russell 2000 Company. Lithia sells 28 brands of new and all brands of used vehicles at 110 stores which are located in 46 markets within 15 states. Internet sales are centralized at www.Lithia.com, or through the recently launched www.L2Auto.com. Lithia also sells used vehicles; arranges finance, warranty, and credit insurance contracts; and provides vehicle parts, maintenance, and repair services at all of its locations. Lithia retailed 105,108 new and used vehicles and had $3.22 billion in total revenue in 2007. Lithia is publicly traded (NYSE:LAD) and is available on the web at www.Lithia.com.

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, which management believes are a benefit to shareholders. These statements are necessarily subject to risk and uncertainty and actual results could differ materially due to certain risk factors including, without limitation, the risk factors set in the company's filings with the SEC. Forward-looking statements are based on certain assumptions and analyses made by the company in light of its experience and its perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances. We make forward-looking statements in this press release about the company’s projected earnings and financial results for 2007 and the anticipated filing date of the Annual Report on Form 10-K. Specific risks in this press release include the completion by its independent accounting firm of its audit procedures.

Additional Information

For additional information on Lithia Motors, contact the Investor Relations Department: 541-618-5770 or log-on to: www.lithia.com - go to Investor Relations

(In Thousands except per share                                                 
and unit data)                                                 
 
 
Lithia Motors, Inc.                                                 
Unaudited       

Three Months Ended

             

 

      
        December 31,                  %      

Increase

 

Increase

 
       

2007

               

2006

        (Decrease)     (Decrease)      
                               
New vehicle sales   $   400,650             $   412,220     $   (11,570)     (2.8 )  

%
Used vehicle sales        179,074                 182,254         (3,180 )    (1.7 )     
Finance and insurance        23,568                 25,957         (2,389 )    (9.2 )     
Service, body and parts sales        95,291                 86,986         8,305     9.5      
Fleet and other revenues        1,041                 1,563         (522 )    (33.4 )     
Total revenues        699,624                 708,980         (9,356 )    (1.3 )     
Cost of sales        584,047                 587,031         (2,984 )    (0.5 )     
Gross Profit        115,577                 121,949         (6,372 )    (5.2 )     
Selling, general and administrative        103,183                 95,148         8,035     8.4      
expense                                                 
Depreciation and amortization        5,733                 4,446         1,287     28.9      
Operating income        6,661                 22,355         (15,694 )    (70.2 )     
Floorplan interest expense        (6,809 )                (7,738 )        (929 )    (12.0 )     
Other interest expense        (5,376 )                (4,427 )        949     21.4      
Other income, net        319                 191         128     67.0      
Income (loss) from continuing        (5,205 )                10,381         (15,586 )    NM      
operations before income taxes                                                 
Income tax expense (benefit)        (2,002 )                3,688         (5,690 )    NM      
Income Tax Rate        38.5 %                35.5 %                     
Income (loss) from continuing        (3,203 )                6,693         (9,896 )    NM      
operations                                                 
Discontinued Operations:                                                 
   Loss from operations, net of        (415 )                (610 )        195     (32.0 )     
   income tax                                                 
   Loss on disposal activities, net of        (1,088 )                (554 )        (534 )    96.4      
   income tax                                                 
Net income (loss)    $   (4,706 )            $   5,529     $   (10,235 )    NM      
 
Diluted net income (loss) per share:                                                 
Continuing operations    $   (0.16 )            $   0.33     $   (0.49 )    NM      
Discontinued operations:                                                 
Loss from operations, net of income tax    $   (0.02 )            $   (0.03 )                     
Loss on disposal activities, net of    $   (0.06 )            $   (0.03 )                     
income tax                                                 
Net income (loss) per share    $   (0.24 )            $   0.27     $   (0.51 )    NM      
Diluted shares outstanding        19,597 (A)                22,041         (2,444 )    (11.1 )    % 

(A) Excludes shares issuable upon conversion of the convertible debt as well as common stock equivalents, as their effect on EPS would be antidilutive.
NM – Not Meaningful
                                     
Lithia Motors, Inc.        Three Months Ended                             
(Continuing Operations)            December 31,                        %      

Increase

    

Increase

  
Unaudited       

2007

           

2006 

          (Decrease)         (Decrease)      
Unit Sales:                                                   
New vehicle        13,421             14,302            (881 )        (6.2 )    % 
Used - retail vehicle        8,263             8,869            (606 )        (6.8 )     
Used - wholesale        5,466             5,821            (355 )        (6.1 )     
Total Units Sold        27,150             28,992            (1,842 )        (6.4 )     
 
Average Selling Price:                                                   
New vehicle    $   29,852         $   28,823        $   1,029         3.6     % 
Used - retail vehicle    $   17,338         $   16,445        $   893         5.4      
Used - wholesale    $   6,552         $   6,254        $   298         4.8      
 
Key Financial Data:                                                   
Gross Profit Margin        16.5     %        17.2    %        -70     bps           
SG&A as a % of Gross Profit        89.3     %        78.0    %        +1,130     bps           
Operating Margin        1.0     %        3.2    %        -220     bps           
Pre-Tax Margin        (0.7 )    %        1.5    %        -220     bps           
 
Gross Margin/Profit Data                                                   
New vehicle retail        7.1     %        7.8    %        -70     bps           
Used vehicle retail        13.4     %        14.6    %        -120     bps           
Used vehicle wholesale        0.2     %        1.4    %        -120     bps           
Service, body & parts        46.0     %        47.8    %        -180     bps           
Finance & insurance        100.0     %        100.0    %        0     bps           
New retail gross profit/unit    $   2,117         $   2,250        $   (133 )               
Used retail gross profit/unit    $   2,324         $   2,406        $   (82 )               
Used wholesale gross profit/unit    $   15         $   90        $   (75 )               
Finance & insurance/retail unit    $   1,087         $   1,120        $   (33 )               

Lithia Motors, Inc.                                         
(In Thousands except per share and                                         
unit data)                                         
Unaudited       

Twelve Months Ended

                     
       

December 31,

             

%

     
       
       

Increase

   

Increase

     
        2007         2006         (Decrease)     (Decrease)      
 
 
 
New vehicle sales    $   1,848,273     $   1,773,132     $   75,141     4.2     % 
Used vehicle sales        862,912         823,991         38,921     4.7      
Finance and insurance        119,056         116,506         2,550     2.2      
Service, body and parts sales        383,380         331,564         51,816     15.6      
Fleet and other revenues        5,380         5,344         36     0.7      
Total revenues        3,219,001         3,050,537         168,464     5.5      
Cost of sales        2,674,349         2,529,543         144,806     5.7      
Gross Profit        544,652         520,994         23,658     4.5      
Selling, general and administrative expense        430,343         392,574         37,769     9.6      
Depreciation and amortization        20,882         16,498         4,384     26.6      
Operating income        93,427         111,922         (18,495 )    (16.5 )     
Floorplan interest expense        (30,879 )        (32,957 )        (2,078 )    (6.3 )     
Other interest expense        (19,943 )        (14,244 )        5,699     40.0      
Other income, net        788         956         (168 )    (17.6 )     
Income from continuing operations        43,393         65,677         (22,284 )    (33.9 )     
before income taxes                                         
Income tax expense        17,409         25,358         (7,949 )    (31.3 )     
Income Tax Rate        40.1 %        38.6 %                     
Income from continuing operations        25,984         40,319         (14,335 )    (35.6 )    % 
Discontinued Operations:                                         
Loss from operations, net of income tax        (1,129 )        (2,461 )        1,332     (54.1 )     
   Loss on disposal activities, net of        (3,306 )        (554 )        (2,752 )    496.8      
   income tax                                         
Net income    $   21,549     $   37,304         (15,755 )    (42.2 )    % 
 
Diluted net income per share:                                         
Continuing operations    $   1.26     $   1.91     $   (0.65 )    (34.0 )    % 
Discontinued operations:                                         
Loss from operations, net of income tax    $   (0.05 )    $   (0.11 )                     
Loss on disposal activities, net of income tax    $   (0.15 )    $   (0.03 )                     
Net income per share    $   1.06     $   1.77     $   (0.71 )    (40.1 )     
Diluted shares outstanding        22,082         22,102         (20 )    (0.1 )    % 

Lithia Motors, Inc.        Twelve Months Ended                             
(Continuing Operations) Unaudited        December 31,                        %      
   
      Increase         Increase      
        2007            2006            (Decrease)         (Decrease)      
   
     
 
Unit Sales:                                                 
New vehicle        63,470            63,960            (490 )        (0.8 )    % 
Used - retail vehicle        41,638            41,808            (170 )        (0.4 )     
Used - wholesale        25,517            24,213            1,304         5.4      
Total Units Sold        130,625            129,981            644         0.5      
 
Average Selling Price:                                                 
New vehicle    $   29,120        $   27,723        $   1,397         5.0     % 
Used - retail vehicle    $   16,739        $   16,175        $   564         3.5      
Used - wholesale    $   6,503        $   6,102        $   401         6.6      
 
Key Financial Data:                                                 
Gross Profit Margin        16.9    %        17.1    %        -20     bps           
SG&A as a % of Gross Profit        79.0    %        75.4    %        +360     bps           
Operating Margin        2.9    %        3.7    %        -80     bps           
Pre-Tax Margin        1.3    %        2.2    %        -90     bps           
 
Gross Margin/Profit Data                                                 
New vehicle retail        7.4    %        7.7    %        -30     bps           
Used vehicle retail        14.8    %        15.3    %        -50     bps           
Used vehicle wholesale        1.9    %        2.5    %        -60     bps           
Service, body & parts        47.0    %        48.2    %        -120     bps           
Finance & insurance        100.0    %        100.0    %        0     bps           
New retail gross profit/unit    $   2,162        $   2,124        $   38                
Used retail gross profit/unit    $   2,483        $   2,473        $   10                
Used wholesale gross profit/unit    $   122        $   154        $   (32 )               
Finance & insurance/retail unit    $   1,133        $   1,102        $   31                

Balance Sheet Highlights (Dollars in Thousands)            
Unaudited                     
        December 31, 2007         December 31, 2006  
Cash & Cash Equivalents    $   21,665     $   26,600  
Trade Receivables*        109,387         118,528  
Inventory        601,759         603,306  
Assets held for sale        23,807         15,485  
Other Current Assets        21,920         15,721  
Total Current Assets        778,538         779,640  
 
Real Estate, net        363,391         327,890  
Equipment & Leases, net        98,355         89,213  
Goodwill, net        311,527         307,424  
Other Assets        74,924         75,190  
Total Assets    $   1,626,735     $   1,579,357  
 
Floorplan Notes Payable    $   451,590     $   499,679  
Liabilities held for sale        17,857         11,610  
Other Current Liabilities        115,644         118,650  
Total Current Liabilities        585,091         629,939  
 
Used Vehicle Flooring        122,550         95,614  
Real Estate Debt        179,160         155,890  
Other Long-Term Debt        153,785         140,879  
Other Liabilities        77,937         63,642  
Total Liabilities    $   1,118,523     $   1,085,964  
 
Shareholders' Equity        508,212         493,393  
 
Total Liabilities & Shareholders' Equity    $   1,626,735     $   1,579,357  
 
*Note: Includes contracts-in-transit of $48,474 and $56,211 for 2007 and            
2006                     
 
Other Balance Sheet Date (Dollars in                     
Thousands)                     
 
Current Ratio        1.3 x        1.2 x 
LT Debt/Total Cap. (Excludes Real Estate)        35 %        32 % 
Working Capital    $   193,447     $   149,701  
Book Value per Basic Share        26.02         25.32