Business Wire | Oct 21, 2020 07:00AM EDT

Lithia Reports Highest Quarterly Net Income in Company History

Oct. 21, 2020

MEDFORD, Ore.--(BUSINESS WIRE)--Oct. 21, 2020--Lithia Motors, Inc. (NYSE: LAD) today reported the highest third quarter revenue and earnings per share in company history.

Third quarter 2020 revenue increased 9% to $3.6 billion from $3.3 billion in the third quarter of 2019.

Third quarter 2020 net income per diluted share was $6.86, an 88% increase from $3.64 per diluted share reported in the third quarter of 2019. Adjusted third quarter 2020 net income per diluted share was $6.89, a 103% increase compared to adjusted net income of $3.39 per diluted share in the same period of 2019.

Third quarter 2020 net income was $159 million, an 86% increase compared to net income of $85 million in the same period of 2019. Adjusted third quarter 2020 net income was $160 million, a 101% increase compared to adjusted net income of $79 million for the same period of 2019.

As shown in the attached non-GAAP reconciliation tables, the 2020 third quarter adjusted results exclude a $0.03 net non-core charge related to insurance reserves and acquisition expenses. The 2019 third quarter adjusted results exclude a $0.25 net non-core benefit due to a net gain on sale of stores, partially offset by insurance reserves and acquisition expenses.

Third Quarter-over-Quarter Operating Highlights:

* Total company revenues increased 8.6% * Same store used vehicle retail sales increased 11.2% * Same store F&I per unit increased 9.8% to $1,617 * Same store total vehicle gross profit per unit increased 28.0% to $4,690 * Adjusted SG&A as a percentage of gross profit improved by 920 basis points to 59.6%

"Our strong used vehicle performance and sequential improvements in service, body and parts throughout the quarter, coupled with our strategic cost saving measures taken earlier in the year, led us to the highest quarterly earnings per share in our company's history, more than doubling our adjusted earnings per share compared to the third quarter of last year," said Bryan DeBoer, President and CEO. "This record performance and profitability demonstrate the high performance being achieved at our existing stores and only the very beginning of the benefits to be realized through the activation of Driveway, our ecommerce digital home solution."

For the first nine months of 2020 revenues decreased 2% to $9.2 billion, compared to $9.4 billion in 2019.

Net income for the first nine months of 2020 was $12.18 per diluted share, compared to $8.72 per diluted share in 2019, an increase of 40%. Adjusted net income per diluted share for the first nine months of 2020 increased 43% to $12.59 from $8.81 in the same period of 2019.

Corporate Development

During the quarter, we announced the acquisitions of San Francisco BMW, the John Eagle Auto Group in Texas and a Chrysler Jeep Dodge Ram store in Knoxville, Tennessee. In addition, earlier this month we completed the acquisition of Latham Ford in the Albany, New York area. These acquisitions are anticipated to generate $1.46 billion in annualized steady state revenues. For the year, this brings our total anticipated annualized revenue from acquired locations to $1.75 billion and expands our density in key geographic areas.

Balance Sheet Update

We ended the third quarter with over $694 million in cash and availability on our revolving lines of credit.

Earlier this month, we raised $805 million of gross proceeds through to the sale of 3,659,091 shares of Class A common stock, no par value per share, which includes the exercise in full by the Underwriters of their option to purchase up to 477,272 additional shares of Class A common stock. Concurrently, we completed an issuance of $550 million in aggregate principal amount of 4.375% senior notes due 2031 in a private offering that is exempt from the registration requirements of the Securities Act of 1933, as amended. We intend to use the net proceeds for general corporate purposes, which may include financing acquisitions, capital expenditures, working capital and repaying or refinancing debt.

Together, this brings our current total cash and available credit to over $2 billion. In addition, our unfinanced real estate could provide additional liquidity of approximately $225 million.

"With the significant amount of capital raised in October, we continue to accelerate the build out of our coast-to-coast network, expanding our ability to provide consumers with convenient, affordable solutions throughout their vehicle ownership lifecycle," said DeBoer. "Together, with our Driveway digital home channel, we are providing the most transparent and comprehensive offerings wherever, whenever and however consumers desire."

Dividend Payment

Our Board of Directors approved a dividend of $0.31 per share related to third quarter 2020 financial results. We expect to pay the dividend on November 27, 2020 to shareholders of record on November 13, 2020.

Third Quarter Earnings Conference Call and Updated Presentation

The third quarter 2020 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 2020 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 a growth company powered by people and innovation with a 5-year plan to profitably consolidate the largest retail sector in the country. They are a leading provider of personal transportation solutions in the United States and are among the fastest-growing companies in the Fortune 500 (#6 on 10-Year EPS Growth, #4 10-Year TSR in 2020). By providing a wide array of products throughout the entire lifecycle of the consumer's vehicle ownership experience, they build magnetic brand loyalty. Operational excellence is achieved by focusing the business on convenient and transparent consumer experiences supported by proprietary data science to increase market share, consumer loyalty and team performance. Lithia's omni-channel strategy will continue to pragmatically disrupt the industry by leveraging experienced teams, vast owned inventories, technology, and its physical network. By purchasing strong businesses, they further strengthen this network, leveraging their national digital home channel Driveway and building upon their massive regenerating capital engine. Together, these endeavors create a unique and compelling high-growth strategy that provides transportation solutions wherever, whenever and however consumers desire.

Siteswww.lithia.com www.lithiainvestorrelations.com www.lithiacareers.com www.driveway.com

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

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

Forward-Looking Statements

Certain statements in this presentation, and at times made by our officers and representatives, constitute forward-looking statements within the meaning of the "Safe Harbor" provisions of the Private Securities Litigation Reform Act of 1995. Generally, you can identify forward-looking statements by terms such as "project", "outlook", "target", "may", "will", "would", "should", "seek", "expect", "plan", "intend", "forecast", "anticipate", "believe", "estimate", "predict", "potential", "likely", "goal", "strategy", "future", "maintain", and "continue" or the negative of these terms or other comparable terms. Examples of forward-looking statements in this presentation include, among others, statements regarding:

* Future market conditions, including anticipated car sales levels; * Anticipated impacts on consumer demand or governmental restrictions related to the COVID-19 pandemic or otherwise; * Expected level of business interruption due to shelter in place policies or lifting of those restrictions, and when volumes and consumer demand will return; * Continuation of our sales and services, including in-store appointments and home deliveries; * Expected growth from our ecommerce home solutions and digital strategies; * Expected operating results, such as improved store performance; continued improvement of selling, general and administrative expenses ("SG&A") as a percentage of gross profit and all projections; * Anticipated integration, success and growth of acquired stores; * Anticipated ability to capture additional market share; * Anticipated ability to find accretive acquisitions; * Expected revenues from acquired stores; * Anticipated synergies, ability to monetize our investment in digital innovation; * Anticipated additions of dealership locations to our portfolio in the future; * Anticipated financial condition and liquidity, including from our cash, availability on our credit facility and unfinanced real estate; * Anticipated use of proceeds from our financings; * Anticipated allocations, uses and levels of capital expenditures in the future; * Expectations regarding compliance with financial and restrictive covenants in our credit facility and other debt agreements; * Statements regarding furloughed employees and cost reductions; and * Our strategies for customer retention, growth, market position, financial results and risk management.

Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. 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 presentation. Therefore, you should not rely on any of these forward-looking statements. 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), including as a result of the COVID-19 pandemic; * 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); * The adequacy of our cash flow and earnings and other conditions which may affect our ability to pay our quarterly dividend at the planned level; * Disruptions to our technology network including computer systems and software, as well as natural events such as severe weather, fires, floods and earthquakes or man-made or other disruptions of our operating systems, structures, facilities or equipment; and * Government regulations and legislation, and other risks 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 in "Part II, Item 1A. Risk Factors" of our Quarterly Reports on Form 10-Q, and from time to time in our other filings with the SEC.

Any forward-looking statement made by us in this presentation is based only on information currently available to us and speaks only as of the date on which it is made. Except as required by law, we undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

Non-GAAP Financial Measures

This presentation contains 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 revenue and gross profit, adjusted pre-tax margin and net profit margin, EBITDA, adjusted EBITDA, leveraged EBITDA 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 millions except per share data)

Three months ended % Nine months ended % September 30, September 30, Increase Increase

2020 2019 (Decrease) 2020 2019 (Decrease)

Revenues:

New vehicle $ 1,883.3 $ 1,824.8 3.2 % $ 4,624.6 $ 4,993.3 (7.4 )%retail

Used vehicle 1,093.2 916.3 19.3 2,889.7 2,632.4 9.8 retail

Used vehicle 98.8 74.4 32.8 216.8 233.5 (7.2 )wholesale

Finance and 160.5 136.3 17.8 407.2 382.7 6.4 insurance

Service,body and 359.5 340.5 5.6 964.9 993.3 (2.9 )parts

Fleet and 24.9 40.1 (37.9 ) 79.3 168.6 (53.0 )other

Total 3,620.2 3,332.4 8.6 % 9,182.5 9,403.8 (2.4 )%revenues

Cost of sales:

New vehicle 1,743.2 1,724.8 1.1 4,314.2 4,711.9 (8.4 )retail

Used vehicle 948.4 816.6 16.1 2,556.8 2,355.0 8.6 retail

Used vehicle 91.2 73.3 24.4 206.5 229.7 (10.1 )wholesale

Service,body and 163.6 169.0 (3.2 ) 456.5 492.2 (7.3 )parts

Fleet and 22.2 37.8 (41.3 ) 71.6 159.8 (55.2 )other

Total cost 2,968.6 2,821.5 5.2 7,605.6 7,948.6 (4.3 )of sales

Gross profit 651.6 510.9 27.5 % 1,576.9 1,455.2 8.4 %

Asset - - NM 7.9 0.5 NMimpairments

SG&A expense 389.1 343.2 13.4 1,039.6 1,021.5 1.8

Depreciationand 22.9 20.9 9.6 67.3 60.9 10.5 amortization

Income from 239.6 146.8 63.2 % 462.1 372.3 24.1 %operations

Floor planinterest (6.1 ) (17.9 ) (65.9 ) (28.3 ) (55.5 ) (49.0 )expense

Otherinterest (16.6 ) (14.8 ) 12.2 (50.4 ) (45.0 ) 12.0 expense

Other 2.2 3.3 NM 8.2 8.9 NMincome, net

Incomebefore 219.1 117.4 86.6 % 391.6 280.7 39.5 %income taxes

Income tax (60.3 ) (32.2 ) 87.3 (108.9 ) (77.2 ) 41.1 expense

Income tax 27.5 % 27.4 % 27.8 % 27.5 % rate

Net income $ 158.8 $ 85.2 86.4 % $ 282.7 $ 203.5 38.9 %



Diluted netincome per share:

Net income $ 6.86 $ 3.64 88.5 % $ 12.18 $ 8.72 39.7 %per share



Dilutedshares 23.1 23.4 (1.3 )% 23.2 23.3 (0.4 )%outstanding

NM - notmeaningful

Lithia Motors, Inc.

Key Performance Metrics (Unaudited)

Three months ended September 30,

%

Nine months ended September 30,

%

Increase

Increase

2020

2019

(Decrease)

2020

2019

(Decrease)

Gross margin

New vehicle retail

7.4

%

5.5

%

190

bps

6.7

%

5.6

%

110

bps

Used vehicle retail

13.2

10.9

230

11.5

10.5

100

Finance and insurance

100.0

100.0

-

100.0

100.0

-

Service, body and parts

54.5

50.5

400

52.7

50.4

230

Gross profit margin

18.0

15.3

270

17.2

15.5

170

Unit sales

New vehicle retail

47,923

48,508

(1.2

)%

118,699

134,090

(11.5

)%

Used vehicle retail

49,363

44,143

11.8

135,499

127,683

6.1

Total retail units sold

97,286

92,651

5.0

254,198

261,773

(2.9

)

Average selling price

New vehicle retail

$

39,298

$

37,618

4.5

%

$

38,960

$

37,238

4.6

%

Used vehicle retail

22,145

20,756

6.7

21,326

20,617

3.4

Average gross profit per unit

New vehicle retail

$

2,922

$

2,061

41.8

%

$

2,615

$

2,098

24.6

%

Used vehicle retail

2,932

2,258

29.8

2,457

2,173

13.1

Finance and insurance

1,649

1,471

12.1

1,602

1,462

9.6

Total vehicle(1)

4,655

3,638

28.0

4,173

3,611

15.6

Revenue mix

New vehicle retail

52.0

%

54.8

%

50.4

%

53.1

%

Used vehicle retail

30.2

27.5

31.5

28.0

Used vehicle wholesale

2.7

2.2

2.4

2.5

Finance and insurance, net

4.4

4.1

4.4

4.1

Service, body and parts

9.9

10.2

10.5

10.6

Fleet and other

0.8

1.2

0.8

1.7

Gross Profit Mix

New vehicle retail

21.5

%

19.6

%

19.7

%

19.3

%

Used vehicle retail

22.2

19.5

21.1

19.1

Used vehicle wholesale

1.2

0.2

0.7

0.3

Finance and insurance, net

24.6

26.7

25.8

26.3

Service, body and parts

30.1

33.5

32.2

34.4

Fleet and other

0.4

0.5

0.5

0.6

Lithia Motors, Inc.

Key Performance Metrics (Unaudited)

Three months ended % Nine months ended % September 30, September 30, Increase Increase

2020 2019 (Decrease) 2020 2019 (Decrease)

Gross margin

Newvehicle 7.4 % 5.5 % 190 bps 6.7 % 5.6 % 110 bpsretail

Usedvehicle 13.2 10.9 230 11.5 10.5 100 retail

Financeand 100.0 100.0 - 100.0 100.0 - insurance

Service,body and 54.5 50.5 400 52.7 50.4 230 parts

Grossprofit 18.0 15.3 270 17.2 15.5 170 margin



Unit sales

Newvehicle 47,923 48,508 (1.2 )% 118,699 134,090 (11.5 )%retail

Usedvehicle 49,363 44,143 11.8 135,499 127,683 6.1 retail

Totalretail 97,286 92,651 5.0 254,198 261,773 (2.9 )units sold



Averageselling price

Newvehicle $ 39,298 $ 37,618 4.5 % $ 38,960 $ 37,238 4.6 %retail

Usedvehicle 22,145 20,756 6.7 21,326 20,617 3.4 retail



Averagegross profit perunit

Newvehicle $ 2,922 $ 2,061 41.8 % $ 2,615 $ 2,098 24.6 %retail

Usedvehicle 2,932 2,258 29.8 2,457 2,173 13.1 retail

Financeand 1,649 1,471 12.1 1,602 1,462 9.6 insurance

Totalvehicle^ 4,655 3,638 28.0 4,173 3,611 15.6 (1)



Revenue mix

Newvehicle 52.0 % 54.8 % 50.4 % 53.1 % retail

Usedvehicle 30.2 27.5 31.5 28.0 retail

Usedvehicle 2.7 2.2 2.4 2.5 wholesale

Financeand 4.4 4.1 4.4 4.1 insurance,net

Service,body and 9.9 10.2 10.5 10.6 parts

Fleet and 0.8 1.2 0.8 1.7 other



Gross Profit Mix

Newvehicle 21.5 % 19.6 % 19.7 % 19.3 % retail

Usedvehicle 22.2 19.5 21.1 19.1 retail

Usedvehicle 1.2 0.2 0.7 0.3 wholesale

Financeand 24.6 26.7 25.8 26.3 insurance,net

Service,body and 30.1 33.5 32.2 34.4 parts

Fleet and 0.4 0.5 0.5 0.6 other

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

2020

2019

2020

2019

2020

2019

2020

2019

SG&A as a % of revenue

10.7

%

10.5

%

10.7

%

10.3

%

11.3

%

10.8

%

11.3

%

10.9

%

SG&A as a % of gross profit

59.6

68.8

59.7

67.2

65.5

70.0

65.9

70.2

Operating profit as a % of revenue

6.6

4.2

6.6

4.4

5.2

4.0

5.0

4.0

Operating profit as a % of gross profit

36.9

27.1

36.8

28.7

30.2

25.8

29.3

25.6

Pretax margin

6.1

3.3

6.1

3.5

4.4

3.0

4.3

3.0

Net profit margin

4.4

2.4

4.4

2.6

3.2

2.2

3.1

2.2

(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

Adjusted As reported Adjusted As reported

Three months Three months Nine months Nine months ended September ended September ended September ended September 30, 30, 30, 30,

Other 2020 2019 2020 2019 2020 2019 2020 2019metrics

SG&A as a% of 10.7 % 10.5 % 10.7 % 10.3 % 11.3 % 10.8 % 11.3 % 10.9 %revenue

SG&A as a% of 59.6 68.8 59.7 67.2 65.5 70.0 65.9 70.2 grossprofit

Operatingprofit as 6.6 4.2 6.6 4.4 5.2 4.0 5.0 4.0 a % ofrevenue

Operatingprofit asa % of 36.9 27.1 36.8 28.7 30.2 25.8 29.3 25.6 grossprofit

Pretax 6.1 3.3 6.1 3.5 4.4 3.0 4.3 3.0 margin

Netprofit 4.4 2.4 4.4 2.6 3.2 2.2 3.1 2.2 margin

^(1) Includes the sales and gross profit related to new, used retail, usedwholesale 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

2020

2019

(Decrease)

2020

2019

(Decrease)

Revenues

New vehicle retail

$

1,714.1

$

1,793.7

(4.4

)%

$

4,265.0

$

4,886.6

(12.7

)%

Used vehicle retail

998.3

897.9

11.2

2,693.9

2,566.4

5.0

Finance and insurance

142.5

133.7

6.6

372.9

373.7

(0.2

)

Service, body and parts

324.3

334.1

(2.9

)

891.5

966.4

(7.8

)

Total revenues

3,294.7

3,272.7

0.7

8,501.1

9,185.4

(7.4

)

Gross profit

New vehicle retail

$

130.0

$

98.9

31.4

%

$

287.8

$

276.5

4.1

%

Used vehicle retail

133.9

98.7

35.7

309.6

273.0

13.4

Finance and insurance

142.5

133.7

6.6

372.9

373.7

(0.2

)

Service, body and parts

174.9

168.3

3.9

467.7

488.4

(4.2

)

Total gross profit

591.0

503.1

17.5

1,455.4

1,424.2

2.2

Gross margin

New vehicle retail

7.6

%

5.5

%

210

bps

6.7

%

5.7

%

100

bps

Used vehicle retail

13.4

11.0

240

11.5

10.6

90

Finance and insurance

100.0

100.0

-

100.0

100.0

-

Service, body and parts

53.9

50.4

350

52.5

50.5

200

Gross profit margin

17.9

15.4

250

17.1

15.5

160

Unit sales

New vehicle retail

43,029

47,548

(9.5

)%

108,370

130,721

(17.1

)%

Used vehicle retail

45,066

43,180

4.4

126,160

124,147

1.6

Average selling price

New vehicle retail

$

39,836

$

37,725

5.6

%

$

39,356

$

37,382

5.3

%

Used vehicle retail

22,151

20,794

6.5

21,353

20,672

3.3

Average gross profit per unit

New vehicle retail

$

3,022

$

2,079

45.4

%

$

2,656

$

2,115

25.6

%

Used vehicle retail

2,971

2,286

30.0

2,454

2,199

11.6

Finance and insurance

1,617

1,473

9.8

1,590

1,466

8.5

Total vehicle(1)

4,690

3,663

28.0

4,178

3,637

14.9

(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 % Nine months ended % September 30, September 30, Increase Increase

2020 2019 (Decrease) 2020 2019 (Decrease)

Revenues

Newvehicle $ 1,714.1 $ 1,793.7 (4.4 )% $ 4,265.0 $ 4,886.6 (12.7 )%retail

Usedvehicle 998.3 897.9 11.2 2,693.9 2,566.4 5.0 retail

Financeand 142.5 133.7 6.6 372.9 373.7 (0.2 )insurance

Service,body and 324.3 334.1 (2.9 ) 891.5 966.4 (7.8 )parts

Total 3,294.7 3,272.7 0.7 8,501.1 9,185.4 (7.4 )revenues



Gross profit

Newvehicle $ 130.0 $ 98.9 31.4 % $ 287.8 $ 276.5 4.1 %retail

Usedvehicle 133.9 98.7 35.7 309.6 273.0 13.4 retail

Financeand 142.5 133.7 6.6 372.9 373.7 (0.2 )insurance

Service,body and 174.9 168.3 3.9 467.7 488.4 (4.2 )parts

Totalgross 591.0 503.1 17.5 1,455.4 1,424.2 2.2 profit



Gross margin

Newvehicle 7.6 % 5.5 % 210 bps 6.7 % 5.7 % 100 bpsretail

Usedvehicle 13.4 11.0 240 11.5 10.6 90 retail

Financeand 100.0 100.0 - 100.0 100.0 - insurance

Service,body and 53.9 50.4 350 52.5 50.5 200 parts

Grossprofit 17.9 15.4 250 17.1 15.5 160 margin



Unit sales

Newvehicle 43,029 47,548 (9.5 )% 108,370 130,721 (17.1 )%retail

Usedvehicle 45,066 43,180 4.4 126,160 124,147 1.6 retail



Averageselling price

Newvehicle $ 39,836 $ 37,725 5.6 % $ 39,356 $ 37,382 5.3 %retail

Usedvehicle 22,151 20,794 6.5 21,353 20,672 3.3 retail



Averagegross profitper unit

Newvehicle $ 3,022 $ 2,079 45.4 % $ 2,656 $ 2,115 25.6 %retail

Usedvehicle 2,971 2,286 30.0 2,454 2,199 11.6 retail

Financeand 1,617 1,473 9.8 1,590 1,466 8.5 insurance

Totalvehicle^ 4,690 3,663 28.0 4,178 3,637 14.9 (1)

^(1) Includes the sales and gross profit related to new, used retail, usedwholesale 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,

2020

2019

2019

Days Supply(1)

New vehicle inventory

50

71

77

Used vehicle inventory

64

65

67

(1) Days supply calculated based on current inventory levels, excluding in-transit vehicles, and a 30-day historical cost of sales level.

Lithia Motors, Inc.

Other Highlights (Unaudited)

As of

September 30, December 31, September 30,

2020 2019 2019

Days Supply^(1)

New vehicle inventory 50 71 77

Used vehicle inventory 64 65 67

^(1) Days supply calculated based on current inventory levels, excludingin-transit vehicles, and a 30-day historical cost of sales level.

Financial covenants

Requirement

As of September 30, 2020

Current ratio

Not less than 1.10 to 1

1.38 to 1

Fixed charge coverage ratio

Not less than 1.20 to 1

3.33 to 1

Leverage ratio

Not more than 5.75 to 1

2.33 to 1

Financial covenants

Requirement As of September 30, 2020

Current ratio Not less than 1.10 to 1 1.38 to 1

Fixed charge coverage ratio Not less than 1.20 to 1 3.33 to 1

Leverage ratio Not more than 5.75 to 1 2.33 to 1

Lithia Motors, Inc.

Condensed Consolidated Balance Sheets (Unaudited)

(In millions)

September 30, 2020

December 31, 2019

Cash and cash equivalents

$

57.1

$

84.0

Trade receivables, net

511.7

505.0

Inventories, net

2,128.7

2,433.7

Other current assets

52.9

47.8

Total current assets

$

2,750.4

$

3,070.5

Property and equipment, net

1,798.3

1,611.7

Intangibles

947.7

761.3

Other non-current assets

899.3

640.4

Total assets

$

6,395.7

$

6,083.9

Floor plan notes payable

1,603.5

2,067.6

Other current liabilities

608.9

501.5

Total current liabilities

$

2,212.4

$

2,569.1

Long-term debt

1,799.0

1,430.6

Other long-term liabilities and deferred revenue

689.9

616.5

Total liabilities

$

4,701.3

$

4,616.2

Stockholder's Equity

1,694.4

1,467.7

Total liabilities & stockholders' equity

$

6,395.7

$

6,083.9

Lithia Motors, Inc.

Condensed Consolidated Balance Sheets (Unaudited)

(In millions)

September 30, December 31, 2020 2019

Cash and cash equivalents $ 57.1 $ 84.0

Trade receivables, net 511.7 505.0

Inventories, net 2,128.7 2,433.7

Other current assets 52.9 47.8

Total current assets $ 2,750.4 $ 3,070.5



Property and equipment, net 1,798.3 1,611.7

Intangibles 947.7 761.3

Other non-current assets 899.3 640.4

Total assets $ 6,395.7 $ 6,083.9



Floor plan notes payable 1,603.5 2,067.6

Other current liabilities 608.9 501.5

Total current liabilities $ 2,212.4 $ 2,569.1



Long-term debt 1,799.0 1,430.6

Other long-term liabilities and deferred 689.9 616.5 revenue

Total liabilities $ 4,701.3 $ 4,616.2



Stockholder's Equity 1,694.4 1,467.7

Total liabilities & stockholders' equity $ 6,395.7 $ 6,083.9

Lithia Motors, Inc.

Summarized Cash Flow from Operations (Unaudited)

(In millions)

Nine months ended September 30,

2020

2019

Net income

$

282.7

$

203.5

Adjustments to reconcile net income to net cash provided by operating activities:

Asset impairments

7.9

0.5

Depreciation and amortization

67.3

60.9

Stock-based compensation

17.2

11.8

Gain on disposal of assets

(0.5

)

-

Gain on sale of franchises

(1.4

)

(9.1

)

Deferred income taxes

6.8

39.5

(Increase) decrease:

Trade receivables, net

(11.3

)

69.7

Inventories

457.0

(4.1

)

Other assets

7.8

22.3

Increase (decrease):

Floor plan notes payable, net

(128.0

)

83.1

Trade payables

25.0

0.1

Accrued liabilities

23.6

(36.5

)

Other long-term liabilities and deferred revenue

46.5

11.8

Net cash provided by operating activities

$

800.6

$

453.5

Lithia Motors, Inc.

Summarized Cash Flow from Operations (Unaudited)

(In millions)

Nine months ended September 30,

2020 2019

Net income $ 282.7 $ 203.5

Adjustments to reconcile net income to net cash provided by operating activities:

Asset impairments 7.9 0.5

Depreciation and amortization 67.3 60.9

Stock-based compensation 17.2 11.8

Gain on disposal of assets (0.5 ) -

Gain on sale of franchises (1.4 ) (9.1 )

Deferred income taxes 6.8 39.5

(Increase) decrease:

Trade receivables, net (11.3 ) 69.7

Inventories 457.0 (4.1 )

Other assets 7.8 22.3

Increase (decrease):

Floor plan notes payable, net (128.0 ) 83.1

Trade payables 25.0 0.1

Accrued liabilities 23.6 (36.5 )

Other long-term liabilities and deferred revenue 46.5 11.8

Net cash provided by operating activities $ 800.6 $ 453.5

Lithia Motors, Inc.

Reconciliation of Non-GAAP Cash Flow from Operations (Unaudited)

(In millions)

Nine months ended September 30,

Net cash provided by operating activities

2020

2019

As reported

$

800.6

$

453.5

Floor plan notes payable, non-trade, net

(317.8

)

(114.0

)

Less: Borrowings on floor plan notes payable, non-trade associated with acquired new vehicle inventory

(133.6

)

(46.0

)

Adjusted

$

349.2

$

293.5

Lithia Motors, Inc.

Reconciliation of Non-GAAP Cash Flow from Operations (Unaudited)

(In millions)

Nine months ended September 30,

Net cash provided by operating activities 2020 2019

As reported $ 800.6 $ 453.5

Floor plan notes payable, non-trade, net (317.8 ) (114.0 )

Less: Borrowings on floor plan notes payable, non-trade (133.6 ) (46.0 )associated with acquired new vehicle inventory

Adjusted $ 349.2 $ 293.5

Lithia Motors, Inc.

Reconciliation of Certain Non-GAAP Financial Measures (Unaudited)

(In millions, except for per share data)

Three Months Ended September 30, 2020

As reported

Insurance reserves

Acquisition expenses

Adjusted

Selling, general and administrative

$

389.1

$

(0.3

)

$

(0.6

)

$

388.2

Operating income

239.6

0.3

0.6

240.5

Income before income taxes

219.1

0.3

0.6

220.0

Income tax (provision) benefit

(60.3

)

-

(0.1

)

(60.4

)

Net income

$

158.8

$

0.3

$

0.5

$

159.6

Diluted earnings per share

$

6.86

$

0.01

$

0.02

$

6.89

Diluted share count

23.1

Lithia Motors, Inc.

Reconciliation of Certain Non-GAAP Financial Measures (Unaudited)

(In millions, except for per share data)

Three Months Ended September 30, 2020

As Insurance Acquisition Adjusted reported reserves expenses

Selling, general and $ 389.1 $ (0.3 ) $ (0.6 ) $ 388.2 administrative



Operating income 239.6 0.3 0.6 240.5



Income before income 219.1 0.3 0.6 220.0 taxes

Income tax (provision) (60.3 ) - (0.1 ) (60.4 )benefit

Net income $ 158.8 $ 0.3 $ 0.5 $ 159.6



Diluted earnings per $ 6.86 $ 0.01 $ 0.02 $ 6.89 share

Diluted share count 23.1

Three Months Ended September 30, 2019

As reported

Disposal gain on sale of stores

Insurance reserves

Acquisition expenses

Adjusted

Selling, general and administrative

$

343.2

$

9.4

$

(1.1

)

$

(0.2

)

$

351.3

Operating income

146.8

(9.4

)

1.1

0.2

138.7

Income before income taxes

117.4

(9.4

)

1.1

0.2

109.3

Income tax (provision) benefit

(32.2

)

2.7

(0.3

)

(0.1

)

(29.9

)

Net income

$

85.2

$

(6.7

)

$

0.8

$

0.1

$

79.4

Diluted earnings per share

$

3.64

$

(0.28

)

$

0.03

$

-

$

3.39

Diluted share count

23.4

Three Months Ended September 30, 2019

As Disposal Insurance Acquisition reported gain on sale reserves expenses Adjusted of stores

Selling,general and $ 343.2 $ 9.4 $ (1.1 ) $ (0.2 ) $ 351.3 administrative



Operating 146.8 (9.4 ) 1.1 0.2 138.7 income



Income before 117.4 (9.4 ) 1.1 0.2 109.3 income taxes

Income tax(provision) (32.2 ) 2.7 (0.3 ) (0.1 ) (29.9 )benefit

Net income $ 85.2 $ (6.7 ) $ 0.8 $ 0.1 $ 79.4



Dilutedearnings per $ 3.64 $ (0.28 ) $ 0.03 $ - $ 3.39 share

Diluted share 23.4 count

Lithia Motors, Inc.

Reconciliation of Certain Non-GAAP Financial Measures (Unaudited)

(In millions, except for per share data)

Nine Months Ended September 30, 2020

As reported

Disposal gain on sale of stores

Asset impairment

Insurance reserves

Acquisition expenses

Tax attribute

Adjusted

Asset impairments

$

7.9

$

-

$

(7.9

)

$

-

$

-

$

-

$

-

Selling, general and administrative

1,039.6

1.4

-

(6.1

)

(1.6

)

-

1,033.3

Operating income

462.1

(1.4

)

7.9

6.1

1.6

-

476.3

Income before income taxes

391.6

(1.4

)

7.9

6.1

1.6

-

405.8

Income tax (provision) benefit

(108.9

)

0.4

(2.3

)

(1.6

)

(0.4

)

(0.8

)

(113.6

)

Net income

$

282.7

$

(1.0

)

$

5.6

$

4.5

$

1.2

$

(0.8

)

$

292.2

Diluted earnings per share

$

12.18

$

(0.04

)

$

0.24

$

0.19

$

0.05

$

(0.03

)

$

12.59

Diluted share count

23.2

Lithia Motors, Inc.

Reconciliation of Certain Non-GAAP Financial Measures (Unaudited)

(In millions, except for per share data)

Nine Months Ended September 30, 2020

Disposal As gain on Asset Insurance Acquisition Tax Adjusted reported sale of impairment reserves expenses attribute stores

Asset $ 7.9 $ - $ (7.9 ) $ - $ - $ - $ - impairments



Selling,general and 1,039.6 1.4 - (6.1 ) (1.6 ) - 1,033.3 administrative



Operating 462.1 (1.4 ) 7.9 6.1 1.6 - 476.3 income



Income before 391.6 (1.4 ) 7.9 6.1 1.6 - 405.8 income taxes

Income tax(provision) (108.9 ) 0.4 (2.3 ) (1.6 ) (0.4 ) (0.8 ) (113.6 )benefit

Net income $ 282.7 $ (1.0 ) $ 5.6 $ 4.5 $ 1.2 $ (0.8 ) $ 292.2



Dilutedearnings per $ 12.18 $ (0.04 ) $ 0.24 $ 0.19 $ 0.05 $ (0.03 ) $ 12.59 share

Diluted share 23.2 count

Nine Months Ended September 30, 2019

As reported

Disposal gain on sale of stores

Asset impairment

Insurance reserves

Acquisition expenses

Adjusted

Asset impairments

$

0.5

$

-

$

(0.5

)

$

-

$

-

$

-

Selling, general and administrative

1,021.5

9.1

-

(9.5

)

(1.9

)

1,019.2

Operating income

372.3

(9.1

)

0.5

9.5

1.9

375.1

Income before income taxes

280.7

(9.1

)

0.5

9.5

1.9

283.5

Income tax (provision) benefit

(77.2

)

2.6

(0.1

)

(2.6

)

(0.5

)

(77.8

)

Net income

$

203.5

$

(6.5

)

$

0.4

$

6.9

$

1.4

$

205.7

Diluted earnings per share

$

8.72

$

(0.28

)

$

0.02

$

0.29

$

0.06

$

8.81

Diluted share count

23.3

Nine Months Ended September 30, 2019

Disposal As gain on Asset Insurance Acquisition Adjusted reported sale of impairment reserves expenses stores

Asset $ 0.5 $ - $ (0.5 ) $ - $ - $ - impairments



Selling,general and 1,021.5 9.1 - (9.5 ) (1.9 ) 1,019.2 administrative



Operating 372.3 (9.1 ) 0.5 9.5 1.9 375.1 income



Income before 280.7 (9.1 ) 0.5 9.5 1.9 283.5 income taxes

Income tax(provision) (77.2 ) 2.6 (0.1 ) (2.6 ) (0.5 ) (77.8 )benefit

Net income $ 203.5 $ (6.5 ) $ 0.4 $ 6.9 $ 1.4 $ 205.7



Dilutedearnings per $ 8.72 $ (0.28 ) $ 0.02 $ 0.29 $ 0.06 $ 8.81 share

Diluted share 23.3 count

Lithia Motors, Inc.

Adjusted EBITDA and Net Debt to Adjusted EBITDA (Unaudited)

(In millions)

Three months ended September 30,

%

Nine months ended September 30,

%

Increase

Increase

2020

2019

(Decrease)

2020

2019

(Decrease)

EBITDA and Adjusted EBITDA

Net income

$

158.8

$

85.2

86.4

%

$

282.7

$

203.5

38.9

%

Flooring interest expense

6.1

17.9

(65.9

)

28.3

55.5

(49.0

)

Other interest expense

16.6

14.8

12.2

50.4

45.0

12.0

Income tax expense

60.3

32.2

87.3

108.9

77.2

41.1

Depreciation and amortization

22.9

20.9

9.6

67.3

60.9

10.5

EBITDA

$

264.7

$

171.0

54.8

%

$

537.6

$

442.1

21.6

%

Other adjustments:

Less: flooring interest expense

$

(6.1

)

$

(17.9

)

(65.9

)

$

(28.3

)

$

(55.5

)

(49.0

)

Less: used vehicle line of credit interest

(0.1

)

(1.2

)

(91.7

)

(0.5

)

(3.9

)

(87.2

)

Add: acquisition expenses

0.6

0.2

200.0

1.6

1.9

(15.8

)

Less: gain on divestitures

-

(9.4

)

(100.0

)

(1.4

)

(9.1

)

(84.6

)

Add: insurance reserve

0.3

1.1

(72.7

)

6.1

9.5

(35.8

)

Add: asset impairment

-

-

NM

7.9

0.5

NM

Adjusted EBITDA

$

259.4

$

143.8

80.4

%

$

523.0

$

385.5

35.7

%

NM - not meaningful

Lithia Motors, Inc.

Adjusted EBITDA and Net Debt to Adjusted EBITDA (Unaudited)

(In millions)

Three months ended % Nine months ended % September 30, September 30, Increase Increase

2020 2019 (Decrease) 2020 2019 (Decrease)

EBITDA andAdjusted EBITDA

Net income $ 158.8 $ 85.2 86.4 % $ 282.7 $ 203.5 38.9 %

Flooringinterest 6.1 17.9 (65.9 ) 28.3 55.5 (49.0 )expense

Otherinterest 16.6 14.8 12.2 50.4 45.0 12.0 expense

Income tax 60.3 32.2 87.3 108.9 77.2 41.1 expense

Depreciationand 22.9 20.9 9.6 67.3 60.9 10.5 amortization

EBITDA $ 264.7 $ 171.0 54.8 % $ 537.6 $ 442.1 21.6 %



Other adjustments:

Less:flooring $ (6.1 ) $ (17.9 ) (65.9 ) $ (28.3 ) $ (55.5 ) (49.0 )interestexpense

Less: usedvehicle line (0.1 ) (1.2 ) (91.7 ) (0.5 ) (3.9 ) (87.2 )of creditinterest

Add:acquisition 0.6 0.2 200.0 1.6 1.9 (15.8 )expenses

Less: gainon - (9.4 ) (100.0 ) (1.4 ) (9.1 ) (84.6 )divestitures

Add:insurance 0.3 1.1 (72.7 ) 6.1 9.5 (35.8 )reserve

Add: asset - - NM 7.9 0.5 NMimpairment

Adjusted $ 259.4 $ 143.8 80.4 % $ 523.0 $ 385.5 35.7 %EBITDA

NM - not meaningful

As of

%

September 30,

Increase

Net Debt to Adjusted EBITDA

2020

2019

(Decrease)

Floor plan notes payable: non-trade

$

1,293.2

$

1,594.5

(18.9

)%

Floor plan notes payable

310.3

407.5

(23.9

)

Used and service loaner vehicle inventory financing facility

357.0

332.0

7.5

Revolving lines of credit

35.0

69.0

NM

Real estate mortgages

628.8

585.1

7.5

5.250% Senior notes due 2025

300.0

300.0

-

4.625% Senior notes due 2027

400.0

-

NM

Other debt

147.5

33.5

340.3

Unamortized debt issuance costs

(12.8

)

(5.5

)

132.7

Total debt

$

3,459.0

$

3,316.1

4.3

%

Less: Floor plan related debt

$

(1,960.5

)

$

(2,334.0

)

(16.0

)%

Less: Cash and cash equivalents

(57.1

)

(27.1

)

110.7

Less: Availability on used vehicle and service loaner financing facility

(72.0

)

-

NM

Net Debt

$

1,369.4

$

955.0

43.4

%

TTM Adjusted EBITDA

$

655.3

$

498.6

31.4

%

Net debt to Adjusted EBITDA

2.09

x

1.92

x

8.9

%

View source version on businesswire.com: https://www.businesswire.com/news/home/20201021005301/en/

CONTACT: Eric Pitt VP, Investor Relations and Treasurer EPitt@lithia.com (541) 864-1748