Post on 24-Jul-2020
1 LITHIA MOTORS FEBRUARY 2016
Q4'15 COMPANYUPDATE
2 LITHIA MOTORS FEBRUARY 2016
DISCLOSUREForward-Looking StatementsThis presentation includes “forward-looking statements” within the meaning of the "Safe-Harbor" provisions of the Private Securities Litigation Reform Act of 1995. Forward looking statementsinclude statements regarding our goals, plans, projections and guidance regarding our financial position, results of operations, market position, pending and potential future acquisitions andbusiness 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; generating 2016 first quarter earnings per share of $1.47 to $1.51 per diluted share and 2016 fullyear earnings of $7.30 to $7.50 per diluted share and all projections set forth under the headings “2016 Outlook”;
• The increase in our annual revenues that we estimate will result from dealerships that we acquired;• Anticipated ability to improve store performance; • Anticipated additions of dealership locations to our portfolio in the future; 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 maydiffer 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 fromestimated or projected results include, without limitation, future economic and financial conditions (both nationally and locally), changes in customer demand, our relationship with, and thefinancial and operational stability of, vehicle manufacturers and other suppliers, risks associated with our indebtedness (including available borrowing capacity, compliance with financialcovenants and ability to refinance or repay indebtedness on favorable terms), government regulations, legislation and others set forth throughout Part II, Item 7. Management's Discussionand 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 filingswith 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 presentation. Non-GAAP Financial Measures This presentation contains non-GAAP financial measures such as adjusted net income and diluted earnings per share from continuing operations, adjusted SG&A as a percentage of revenuesand gross profit, adjusted operating margin, adjusted operating profit as a percentage of gross profit, and adjusted pre-tax margin. Non-GAAP measures do not have definitions under GAAPand 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 areview 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 themwith 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 thevisibility 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 thisrelease. 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.
3 LITHIA MOTORS FEBRUARY 2016
LITHIA MOTORS OVERVIEWNationwide Geographic Footprint
4 LITHIA MOTORS FEBRUARY 2016
▪ Two growth paths: exclusive markets for Lithia,metro markets for DCH
▪ Performance-based entrepreneurial culture
LITHIA MOTORS OVERVIEW139 Dealerships in the United States
NATIONAL MARKETSHARE LITHIA NEW VEHICLE UNIT MIX
Import 47% 54%
Honda 20%
Toyota 19%
Subaru 7%
Nissan 4%
Other Import* 4%
Domestic 45% 33%Chrysler 19%
GM 9%
Ford 5%
Luxury 8% 13%
BMW 6%
Mercedes 2%
Lexus 1%
Other Luxury** 4%Note: 2015 national market share for December 2015 from the “Auto Unit Sales & SAAR” report published by Stephens Inc.; Lithia market share based on new vehicle unit sales for the twelve months endedDecember 31, 2015.
* Other import includes Hyundai, Volkswagen, Kia, Mazda and Mitsubishi
** Other luxury includes Porsche and Volvo
5 LITHIA MOTORS FEBRUARY 2016
CORNERSTONES OF SUCCESS
OPERATIONALGROWTH
New vehicle recovery continues
Used market 3x bigger than newmarket
Service work driven by SAARrecovery
ACQUISITIONOPPORTUNITIES
Unconsolidated industry
Target 20% after tax ROE peryear
FINANCALDISCIPLINE
Balance investment andshareholder return
Ample liquidity to deploy
Path to $8.00 Earnings Per Share
OPERATIONALGROWTH
FINANCIAL
DISCIPLINE ACQ
UISI
TIO
N
OPP
ORT
UNIT
IES
6 LITHIA MOTORS FEBRUARY 2016
Milestone 5$5.1
GROWTH MILESTONES
▪ Achieved withorganic growth andacquisitions
▪ Completed firstMilestone in 2013;Milestone 2 in2014; Milestones 3and 4 in 2015
▪ Target completingMilestone 5 in 1-3years
Delivers $8.00 Earnings Per Share
Note: See appendix for reconciliation of adjusted earnings per share.
ADJUSTED EARNINGS PER SHARE
ORGANIC REVENUE GROWTH ($B)
ACQUISITION REVENUE GROWTH ($B)
Milestone 1$4.00
Milestone 2$5.00
Milestone 3$6.00
Milestone 4$7.00
Milestone 5$8.00
Milestone 1$4.0
Milestone 2$4.3
Milestone 3$4.5
Milestone 4$4.9
Milestone 1$.01
Milestone 2$1.0
Milestone 3$2.3
Milestone 4$3.1
Milestone 5$4.1
$2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00
FCST 2016
FY 2015
FY 2014
2012 Base
$7.50$7.02
$5.11$2.72
$3.0 $3.5 $4.0 $4.5 $5.0
FCST 2016
FY 2015
FY 2014
2012 Base
$5.1$4.8
$4.5$3.4
$0.0 $1.0 $2.0 $3.0 $4.0
FCST 2016
FY 2015
FY 2014
2012 Base
$3.4$3.1
$0.9
OPERATIONALGROWTH
8 LITHIA MOTORS FEBRUARY 2016
STABLE, PROFITABLE INDUSTRYFour Separate Diversified Businesses
▪ Recession-tested
▪ Variable coststructure
▪ Diverse andcomplimentarygross profit mix
▪ Service businessconsistent
Note: Used vehicles includes both used retail and wholesale vehicles.
2015 Revenue Mix 2015 Gross ProfitMix
New vehicles 58% 24%
Used vehicles 28% 21%
Service, body and parts 9% 31%
F&I and other 5% 24%
PROFITABILITY MIX
PROFITABILITY AND SAAR
Peer Group PTI % SAAR Growth Rate
20.0%
10.0%
0.0%
-10.0%
-20.0%
-30.0%
2.0% 1.9% 1.5% 2.1% 2.5% 2.6% 2.8% 2.7%
-3%
-18%-21%
11% 11% 13%
7% 6%
Note: Margin based on reported adjusted pre-tax income as a percentage of revenue. Peer group average includes Lithia,AutoNation, Sonic, Asbury, Penske, and Group 1.
2007 2008 2009 2010 2011 2012 2013 2014
9 LITHIA MOTORS FEBRUARY 2016
CA NY/NJ OR TX MT WA AK IA NV ID HI ND NM
22%
18% 17%15%
6% 5% 5%3% 3% 3% 2% 2% 1%
NEW VEHICLE MARKETOpportunities Remain Despite Recovery
▪ After recessionaryperiods, SAARperformed abovethe long-runaverage
▪ Geographic andeconomicdiversification
2015 NEW VEHICLE UNIT STATE MIX
HISTORICAL NEW VEHICLE SAAR PERFORMANCE
Source: US Department of Commerce, Bureau of Economic Analysis, data as of February 3, 2016
Recovery spikes above long-run average
SAAR Trend Live
20
15
10
1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015
10 LITHIA MOTORS FEBRUARY 2016
PrivateParty, 28%
IndependentDealers, 34%
FranchisedDealers,37%
CarMax,1%
New Used
2008 2009 2010 2011 2012
13.210.4 11.6 12.7 14.4
36.5 35.5 36.9 38.8 40.5
USED VEHICLE MARKETLargest Future Opportunity
▪ Used vehiclemarket 3x largerthan new
▪ Franchiseddealers 37% ofused vehiclemarket
▪ 75% of 2015 usedretail salesoriginate from newvehicle sale
Source: WardsAuto Group “U.S. Market Used Vehicle Sales“ report
USED MARKET SIZE USED MARKET SHARE
Source: 2012 data from WardsAuto Group “U.S. Market Used VehicleSales“ reportLITHIA USED WATERFALL
Same store sale in Units Retail Sale Retailed Trade-ins% Sold w/
Retailed Trade
2015 New Vehicles 96,556 38,622 40%
1st Trade-in Retailed 38,622 14,483 15%
2nd Trade-in Retailed 14,483 4,828 5%
3rd Trade-in Retailed 4,828 1,931 2%
Aggregate Retailed Trades 57,9332015 Used Retail 77,552
75%
Ret
ail U
nits
sol
d(in
Mill
ions
)
2.7x 3.4x 3.2x 3.1x 2.8x
11 LITHIA MOTORS FEBRUARY 2016
<=25 26-25 51-75 76-100 100+
Store Distribution of Average Used retail Units Sold per Month
13
4439
27
13
Core,51%
ValueAuto,26%
CPO,23%
USED VEHICLE GROWTH
▪ Achieving 75 unitgoal increases unitsales 21%
▪ 71% of stores sellless than 75 unitgoal
Target 75 Used Units Per Store Per Month
2015 AVERAGE USED RETAIL UNITS SOLD PER MONTH
Average:62 units
2015 SAME STORE USED UNIT MIX 2015 USED MIX DETAILS
CPO: Manufacturer certified pre-owned vehiclesCore: 3 to 7 year old vehiclesValue Auto: Vehicles over 80,000 miles
Goal:75 units
CPO Core Value Auto
Same Store Revenue Growth
17%
12%
9%
12 LITHIA MOTORS FEBRUARY 2016
* Total vehicle metrics include sales and gross profit for new, used retail, used wholesale and F&I and new and used retail units
Lithia Peer Average
$1,196
$1,337 2013 2014 2015
Service Contracts Lifetime Oil Contracts
42%
36%
42%
37%
43%
25%
VEHICLE SALES GROWTH
▪ F&I per unit $141lower than peeraverage
▪ F&I productsincrease serviceretention
▪ Total gross profitper unit of $3,583up $68 from 2014
Opportunity Exists in F&I
Note: Peer average includes AutoNation, Sonic, Asbury,Penske, and Group 1.
F&I PENETRATION RATES
Note: Penetration rates are on a same store basis. 2015 LOF penetration ratesdiluted by DCH, as product offering at DCH stores started in 2015.
2015 F&I PER UNIT
2015 VEHICLE SALES SAME STORE DETAILS
RevenueGrowth Unit Growth
Gross ProfitGrowth
GP per RetailUnit
GP per RetailUnit
Y-o-Y Change
New 9% 7% 5% $2,131 $(42)
Used retail 13% 9% 11% $2,545 $37
F&I 15% NA 15% $1,244 $73
Total vehicle* 10% 8% 10% $3,583 $68
13 LITHIA MOTORS FEBRUARY 2016
10 - Year Avg SB&P Y-o-Y SS Sales Growth*
130,000
120,000
110,000
100,000
90,000
80,000
70,000
60,000
50,000
10%
5%
0%
-5%
-10%
2009 2010 2011 2012 2013 2014 2015 2016E
74,825 74,668 75,025 76,220 79,14985,431
95,145
112,134
-4.3%
0.7%
4.5%6.5% 6.7%
11.3% 10.3%
5%
SERVICE MARKETTailwind as Units in Operation Expand
▪ Service growthcorrelated withSAAR growth
▪ Increasing servicework as installedunits grow
Note: Forecasted same store service, body and parts growth for FY 2016
TRAILING SAAR/SERVICE GROWTH
LITHIA MARKET UIO OPPORTUNITY
Trailing 5-year SAAR Growth Trailing 3-year Industry SB&P Growth
15
10
5
0
-5
-101981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011
14 LITHIA MOTORS FEBRUARY 2016
$ (Millions)
Avg GPAcross AllUnits Sold
Avg GPper Sold
UnitsRetained
$76
$193
$140
$265
$126
$284
$105
$298
$86
$311
$75
$314
$64
$312
$52
$310
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8
46%
65%
56%
45%
35%30%
26%21%
32%39%
31%25%
20% 17% 14% 11%
SERVICE GROWTHImproving Retention Increases Service Revenue
▪ Average 41% newand 24% usedretention in serviceover 8 years
▪ Across all vehiclessold, cumulativeservice GP per unitis $724
▪ Ex defections,cumulative GP perunit is $2,287
% NewVehicle
% Used Vehicle
Total$724
Total$2,287
% OF VEHICLES SOLD RETURNING FOR SERVICE
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8
CUMULATIVE SERVICE GROSS PROFIT PER VEHICLE
15 LITHIA MOTORS FEBRUARY 2016
2008 2009 2010 2011 2012 2013 2014 2015
4.0 4.4 4.5 4.8 4.9 4.9 4.9 5.0
SERVICE GROWTHRetaining Customers Longer
▪ Service revenueincreasing due tomore units inoperation
▪ Average age ofvehicles servicedincreased 1 yearsince 2008
SAME STORE SALES YEAR-OVER-YEAR COMPARISON
2010 2011 2012 2013 2014 2015
Customer Pay 4.8% 3.9% 6.9% 5.2% 9.1% 7.9%
Warranty (8.5)% (4.2)% (2.7)% 13.9% 23.4% 25.3%
Wholesale Parts (0.6)% 9.8% 8.7% 7.2% 8% 4.6%
Body Shop (2.2)% 14.0% 15.1% 3.8% 10.5% 3.7%
Total 0.7% 4.5% 6.5% 6.7% 11.4% 10.3%
Avg # of Veh Srvper month 0-1 Yrs 2-3 Yrs 4-5 Yrs 6-7 Yrs 8-9 Yrs 10+ Yrs
2012 67,695 21% 21% 23% 15% 9% 11%
2013 71,957 24% 16% 21% 16% 10% 13%
2014 78,288 26% 18% 15% 16% 11% 14%
2015 83,357 28% 22% 13% 10% 11% 17%
Serv
iced
Vehi
cle
Mix
SAME STORE SALES YEAR-OVER-YEAR COMPARISON
16 LITHIA MOTORS FEBRUARY 2016
LEVERAGING COST STRUCTURE
▪ Throughput isincremental % ofgross profit tooperating incomeafter SG&Aexpenses
▪ 2014 and 2015SG&A as a % ofgross profitimpacted by DCHacquisition
Target Throughput of 45% to 50% on a Same Store Basis
$MM 2014 % of GP 2015 % of GP $ Change
Personnel $375 45.5% $538 45.7% $163
Advertising 47 5.7 70 6.0 23
Rent 17 2.1 24 2.0 7
Facility Cost 34 4.1 46 3.9 12
Other 85 10.3 121 10.3 36
Total $558 67.7% $799 67.9% $241
Gross Profit $823 $1,176 353
Throughput % 32%Same store throughput % 50%
ADJUSTED SG&A DETAILS
Note: See appendix for reconciliation of adjusted SG&A expense
Target45-50%
ADJUSTED SG&A AS A % OF GROSS PROFIT SAME STORE THROUGHPUT
2012 2013 2014 2015
69.4%
67.2%67.7% 67.9%
2012 2013 2014 2015
51% 51%43%
50%
ACQUISITIONOPPORTUNITIES
18 LITHIA MOTORS FEBRUARY 2016
UNCONSOLIDATED INDUSTRY
▪ Over 17,800dealerships in thecountry
▪ 10 largest dealersown 1,300 stores
Abundant Acquisition Opportunities
DEALERSHIPS IN THE US
HIGHLY FRAGMENTED MARKET
Source: Automotive News, number of Light Vehicle Dealerships in the U.S.
Source: Automotive News 2014 Top 150 Dealership Groups
2007 2008 2009 2010 2011 2012 2013 2014
21,761 21,461 20,45318,607 17,653 17,767 17,851 17,838
Top 10Dealers
7%
All Other93%
19 LITHIA MOTORS FEBRUARY 2016
FUTURE GROWTH STRATEGYTwo Growth Paths, Over Double the Acquisition Targets
Micro Small Medium Large Extra Large Mega
Vehicle Registrations in Market 0-5K 5K-25K 25K-50K 50K-100K 100K-200K 200K+
Est. Store Count in US 3,950 3.5 1,600 1,700 2,400 4,650
Domestic
Import
Luxury
Est. Acq Targets 210 680 310 30 470 960
1,230 1,430
▪ Lithia: exclusive franchises in medium markets for domestic/importstores and large markets for luxury stores
▪ DCH: extra large and mega markets to cluster domestic, import andluxury stores
20 LITHIA MOTORS FEBRUARY 2016
2010 2011 2012 2013 2014 2015
3%19%
36%54%
83%
201%
ACQUISITION GROWTH
▪ 75-100% 5-year aftertax ROE
▪ 3x-5x EV/EBITDA
▪ 10%-20% of annualrevenues
Targeting 20% After Tax Return on Equity
ACCUMULATED RETURN ON EQUITY
INVESTMENT METRICS
▪ Improveperformancethrough commonsystems andmeasurements
*Equity defined as investment costs, excluding new vehicles and assuming all real estate is leased at actual rent or if owned, a 7% capitalization rate**Assumes steady state revenues 2 years after acquisition, EBITDA adjusted to include flooring interest as an operating expense
2012 2013 2014 2015
$MM Multiple $MM Multiple $MM Multiple $MM Multiple
# of Store 6 8 36 8
Equity* $26 $33 $320 $31
Est. EBITDA** $8 3.3x $9 3.7x $69 4.7x $8 3.7x
Est. Rev** $265 10% $273 12% $2,715 12% $270 12%
ACQUISITION METRICS
Note: Return based on net income assuming all real estate is leased at actual rent or, if owned, at 7% capitalization rate. Years are based oncalendar years. Acquisition year reflects partial year results from acquisition date forward and most recent period results are year-to-datethrough December 31, 2015
Year 5
Year 4
Year 3
Year 2
Year 1
Acq Year
FINANCIALDISCIPLINE
22 LITHIA MOTORS FEBRUARY 2016
$(M
illio
ns)
2016 2017 2018 2019 2020 2021 Beyond
$—$25 $31 $34 $27 $29
$242
FINANCIAL DISCIPLINE
▪ Leverageincreased in 2014due to DCHacquisition
▪ Ample liquiditylevels with minimalnear term debtmaturities
Positioned for Continued Growth
FUNDS FOR GROWTH
$MM Q4 2015
Cash and Cash Equivalents $45
Availability on Line of Credit 134
Unfinanced Real Estate* 159
Total $338
BALANCE SHEET LEVERAGE
FUTURE MORTGAGE MATURITIES
*Unfinanced real estate represents 80% of the net book value of unfinanced realestate used in operations.
Note: Total capital includes outstanding debt excluding vehicle floor plan financing and total shareholder’s equity. Adjusted EBITDA is definedas earnings before interest excluding floor plan interest, taxes, depreciation and amortization. Debt to adjusted EBITDA calculation is based onoutstanding debt as of the end of the period and TTM adjusted EBITDA
Note: Outstanding mortgage amounts as of December 31, 2015
65.0%
55.0%
45.0%
35.0%
25.0%
Deb
tto
Tota
lCap
ital
3.0
2.5
2.0
1.5
1.0
0.5
0.0
Deb
t/A
djus
ted
EBIT
DA
2011 2012 2013 2014 2015
44% 41%32%
49%44%
2.5x
1.9x
1.3x
2.5x
1.8x
23 LITHIA MOTORS FEBRUARY 2016
Share Repurchases Price per Share
$60.0
$50.0
$40.0
$30.0
$20.0
$10.0
$0.0
$MM
$120
$100
$80
$60
$40
$20
$0
$pe
rSha
re
2012 2013 2014 2015 YTD 2016
$21$5
$16$32
$47$24.41
$40.76
$70.52
$102.84
$79.11
Free Cash Flow** Acquisition Equity Value
2011 2012 2013 2014 2015
$28 $34
$130$87
$164
$41 $26 $33
$320
$31
FINANCIAL DISCIPLINEBalance Investment and Shareholder Return
CAPITAL EXPENDITURES
DIVIDENDS PAID
FREE CASH FLOW AND ACQUISITIONS
SHARE REPURCHASES
$MM 2013 2014 2015 FCST2016
Post-Acq. Improv. $12 $21 $33 $40
Facilities for Open Points 5 7 3 —
Lease Buy-outs 7 25 10 17
Existing Facility Improv. 14 20 20 19
Maintenance 12 13 17 24
Total $50 $86 $83 $100
# of Shares 848,092 127,900 226,729*Q4’12 dividend was accelerated and paid in December 2012 rather in2013. Data has been normalized to include the $0.10 dividend in 2013
**Free cash flow defined as earnings before interest, taxes, depreciation and amortization (EBITDA) add backstock compensation less cash paid for taxes, interest, dividends and capital expenditures.
595,000
Dividends Paid Dividend per Share
$20.0
$15.0
$10.0
$5.0
$0.0
$MM
$0.8
$0.6
$0.4
$0.2
$0.0
$pe
rSha
re
2011 2012 2013 2014 2015
$7$10
$13$16
$20$0.26$0.37
$0.49
$0.61
$0.76
306,386
Q4 2015 UPDATE
25 LITHIA MOTORS FEBRUARY 2016
Adjusted DilutedEPS
Q4 2014 Q4 2015
$1.42$1.74
Gross Profit($MM)
Q4 2014 Q4 2015
$261$293
Revenue ($MM)
Q4 2014 Q4 2015
$1,793
$1,993
Income Statement SummaryQ4’15 FINANCIAL RESULTS
▪ Increased revenue11% and EPS 23%
▪ Grew total samestore sales 9%
Revenue Gross Profit
New vehicles 7% 8%
Used retail vehicles 12% 11%
F&I 13% 13%
Service, parts and body 10% 11%
Total 9% 10%
SAME STORE QUARTER-OVER-QUARTER GROWTH
Q4 2015 HIGHLIGHTS
12% 23% 11%
Note: See appendix for reconciliation of adjusted diluted EPS
26 LITHIA MOTORS FEBRUARY 2016
Lithia AutoNation Asbury Group1 Sonic Penske
70.3%
67.9%
70.0%
72.7%
76.2%
79.2%
68.2%
70.0% 70.5%
75.3% 75.5%
79.6%
90
Q4’15 FINANCIAL RESULTS
SAME STORE GROSS PROFIT GROWTH
SAME STORE SALES GROWTH
ADJUSTED NET PROFIT MARGIN
ADJUSTED SG&A AS A % OF GROSS PROFIT
Note: See appendix for reconciliation of adjusted net profit margin
LAD ABG AN GPI PAG SAH
New Vehicles 6.5% 6.4% 2.1% (0.2)% 1.7% 4.4%
Used Vehicles 12.2% 6.4% 2.2% 7.9% 6.2% 7.2%
F&I 13.0% 8.6% 7.4% 3.0% 15.4% 9.7%
SB&P 10.2% 7.3% 3.9% 2.7% 3.2% 8.1%
Total 8.8% 6.5% 2.6% 1.9% 4.6% 5.5% bps reduction(increase)
(210) (50) (260)
Note: See appendix for reconciliation of adjusted SG&A
Peer Comparisons
(70) (40)
Q4 2014 Q4 2015
Lithia Sonic Asbury Penske Group1 AutoNation
10.3%
4.4% 4.1%2.7%
0.8% 0.6%
Lithia AutoNation Asbury Penske Group1 Sonic
2.3%
2.0% 2.0%
1.4%1.3%
1.2%
27 LITHIA MOTORS FEBRUARY 2016
2016 GUIDANCE
▪ Q1’16: $1.47 - $1.51▪ FY’16: $7.30 - $7.50
PROJECTED EARNINGS RANGE*:
2016 PERFORMANCE ASSUMPTIONS:
*Excludes the impact of future acquisitions, dispositions and any potential non-core items
Annual Assumptions
Total Revenues $8.4 to $8.5 billion
New vehicle sales increase 5.5%
Used vehicle sales increase 6.0%
Service body and parts sales increase 5.0%
Finance and insurance per unit $1,210 per unit
New vehicle margins 5.8% to 6.0%
Used vehicle margins 12.4% to 12.6%
Service body and parts margins 49.0% to 49.4%
Tax rate 40.0%
Average diluted shares outstanding 26.0 million
APPENDIX
29 LITHIA MOTORS FEBRUARY 2016
SUPPLEMENTAL INFORMATIONBalance Sheet
$KAs of
December 31,2015
As of December 31,
2014
Cash and cash equivalents 45,008 29,898
Accounts receivable 308,462 295,379
Inventories, net 1,470,987 1,249,659
Other current assets 54,408 32,010
Assets held for sale — 8,563
Total current assets 1,878,865 1,615,509
Property and equipment, net 876,660 816,745
Goodwill 213,220 199,375
Franchise value 157,699 150,892
Other non-current assets 100,855 98,411
Total assets 3,227,299 2,880,932
$KAs of
December 31, 2015
As of December 31,
2014
Floor plan notes payable 48,083 41,047
Floor plan notes payable: non-trade 1,265,872 1,137,632
Current maturities of long-term debt 38,891 31,912
Trade payables 70,871 70,853
Accrued liabilities 167,108 153,661
Deferred income taxes — 2,603
Liabilities related to assets held for sale — 4,892
Total current liabilities 1,590,825 1,442,600
Long-term debt, less current maturities 606,463 609,066
Deferred revenue 66,734 54,403
Deferred income taxes 53,129 42,795
Other long-term liabilities 81,984 58,963
Total liabilities 2,399,135 2,207,827
Total stockholders’ equity 828,164 673,105
Total liabilities and stockholder’sequity 3,227,299 2,880,932
30 LITHIA MOTORS FEBRUARY 2016
SUPPLEMENTAL INFORMATION2015 Income Statement
$K Q4 2015 Q3 2015 Q2 2015 Q1 2015 FY 2015
New vehicle 1,167,893 1,227,080 1,149,512 $ 1,007,816 4,552,301Used vehicle 469,399 505,885 488,801 462,931 1,927,016Wholesale used vehicles 63,054 69,472 66,796 62,208 261,530Finance and insurance 69,318 76,633 72,463 64,604 283,018Service, body and parts 193,024 189,796 182,695 173,475 738,990Fleet and other 30,594 15,979 36,680 18,144 101,397 Total revenues 1,993,282 2,084,845 1,996,947 1,789,178 7,864,252
New vehicle 72,097 77,157 69,342 61,774 280,370Used vehicle 56,827 62,287 62,693 59,442 241,249Wholesale used vehicles 310 580 1,406 2,161 4,457Finance and insurance 69,318 76,633 72,463 64,604 283,018Service, body and parts 94,783 93,950 90,749 84,439 363,921Fleet and other 88 580 996 955 2,619 Total gross profit 293,423 311,187 297,649 273,375 1,175,634
Asset impairment charges 5,733 4,131 6,130 4,130 20,124Selling, general and administrative 200,219 223,728 195,610 191,618 811,175Depreciation and amortization 11,056 10,531 10,287 9,726 41,600 Operating Income 76,415 72,797 85,622 67,901 302,735
Floor plan interest expense 5,279 4,951 4,655 4,649 19,534Other interest expense 4,791 4,900 4,972 4,828 19,491Other income, net (25) 307 356 368 1,006 Income (loss) before taxes 66,370 62,639 75,639 58,056 262,704Income tax expense (benefit) 18,638 19,248 24,416 17,403 79,705 Income (loss) from continuing operations 47,732 43,391 51,223 40,653 182,999
31 LITHIA MOTORS FEBRUARY 2016
SUPPLEMENTAL INFORMATION2014 Income Statement
$K Q4 2014 Q3 2014 Q2 2014 Q1 2014 FY 2014
New vehicle $1,071,543 $732,121 $694,484 $579,522 $3,077,670Used vehicle 409,591 340,522 310,475 301,893 1,362,481Wholesale used vehicles 59,867 48,853 44,286 42,693 195,699Finance and insurance 60,057 46,855 43,838 39,631 190,381Service, body and parts 172,398 120,772 114,337 104,617 512,124Fleet and other 19,851 7,988 14,382 9,750 51,971 Total revenues 1,793,307 1,297,111 1,221,802 1,078,106 5,390,326
New vehicle 65,518 47,648 45,994 39,024 198,184Used vehicle 50,492 43,898 44,067 40,796 179,253Wholesale used vehicles 307 504 1,504 1,331 3,646Finance and insurance 60,057 46,855 43,838 39,631 190,381Service, body and parts 84,301 58,421 56,182 50,832 249,739Fleet and other 446 514 715 447 2,122 Total gross profit 261,121 197,840 192,300 172,061 823,322
Asset impairment charges 1,853 - - - 1,853Selling, general and administrative 184,288 131,627 125,463 121,829 563,207Depreciation and amortization 8,964 6,067 5,825 5,507 26,363 Operating Income 66,016 60,146 61,012 44,725 231,899
Floor plan interest expense 4,535 3,127 3,215 2,984 13,861Other interest expense 4,848 2,051 1,869 1,974 10,742Other income, net (89) (1,027) (1,146) (937) (3,199) Income (loss) before taxes 56,722 55,995 57,074 40,704 210,495Income tax expense (benefit) 15,583 21,458 21,904 16,010 74,955 Income (loss) from continuing operations 41,139 34,537 35,170 24,694 135,540
32 LITHIA MOTORS FEBRUARY 2016
SUPPLEMENTAL INFORMATION2013 Income Statement
$K Q4 2013 Q3 2013 Q2 2013 Q1 2013 FY 2013
New vehicle $589,535 $604,135 $569,487 $493,441 $2,256,598Used vehicle 253,797 280,734 258,465 239,228 1,032,224Wholesale used vehicles 37,642 43,396 37,691 39,506 158,235Finance and insurance 35,994 37,132 34,218 31,663 139,007Service, body and parts 100,797 97,784 94,462 90,440 383,483Fleet and other 7,109 6,109 14,182 8,802 36,202 Total revenues 1,024,874 1,069,290 1,008,505 903,080 4,005,749
New vehicle 39,097 38,586 38,788 34,647 151,118Used vehicle 35,351 41,641 38,893 34,973 150,858Wholesale used vehicles 332 710 695 974 2,711Finance and insurance 35,994 37,132 34,218 31,663 139,007Service, body and parts 48,107 46,991 46,693 43,779 185,570Fleet and other 412 329 546 402 1,689 Total gross profit 159,293 165,389 159,833 146,438 630,953
Selling, general and administrative 108,416 108,570 109,283 101,131 427,400Depreciation and amortization 5,316 5,099 4,899 4,721 20,035 Operating Income 45,561 51,720 45,651 40,586 183,518
Floor plan interest expense 2,979 2,909 3,036 3,449 12,373Other interest expense 2,115 1,933 1,941 2,361 8,350Other income, net (773) (835) (584) (801) (2,993) Income (loss) before taxes 41,240 47,713 41,258 35,577 165,788Income tax expense (benefit) 14,080 16,822 15,977 13,695 60,574 Income (loss) from continuing operations 27,160 30,891 25,281 21,882 105,214
33 LITHIA MOTORS FEBRUARY 2016
SUPPLEMENTAL INFORMATIONQuarterly Same Store Revenue Changes
Q4 Q3 Q2 Q1 FY
2015New vehicle 6.5% 11.4% 7.7 % 11.5% 8.9%Used vehicle 12.2% 12.8% 16.3 % 11.7% 13.2%Wholesale used vehicles 4.1% 11.3% 11.6 % 5.8% 8.0%Finance and insurance 13.0% 16.1% 15.3 % 12.6% 14.7%Service, body and parts 10.2% 10.2% 9.6 % 11.1% 10.3%Fleet and other 53.7% 1.8% 53.3 % 26.2% 40.4% Total revenues 8.8% 11.7% 11 % 11.5% 10.6%
2014New vehicle 12.3% 11.1% 12.1 % 10.2% 11.5%Used vehicle 16.7% 13.8% 11.4 % 19.3% 15.2%Wholesale used vehicles 15% 6.9% 11.2 % 4.3% 9.2%Finance and insurance 14.5% 16.6% 17.5 % 18% 16.6%Service, body and parts 12.5% 13.1% 10.4 % 9.4% 11.4%Fleet and other 86.3% 2.2% (10.7)% 10.8% 15.7% Total revenues 14.1% 12% 11.6 % 12.5% 12.5%
2013New vehicle 10.7% 15.6% 18.5 % 21.8% 16.4%Used vehicle 16% 16.6% 18.5 % 22% 18.3%Wholesale used vehicles 2.7% 18.1% 1.5 % 12.5% 8.6%Finance and insurance 17.7% 14.6% 20.1 % 24.3% 18.9%Service, body and parts 7.9% 5.6% 7.1 % 6.6% 6.8%Fleet and other -4.7% 34.3% 25.3 % -31.8% 0% Total revenues 11.6% 15% 16.7 % 18.8% 15.3%
34 LITHIA MOTORS FEBRUARY 2016
SUPPLEMENTAL INFORMATIONQuarterly Gross Margins
Q4 Q3 Q2 Q1 FY
2015New vehicle 6.2% 6.3% 6.0% 6.1% 6.2%Used vehicle 12.1% 12.3% 12.8% 12.8% 12.5%Wholesale used vehicles 0.5% 0.8% 2.1% 3.5% 1.7%Finance and insurance 100.0% 100.0% 100.0% 100.0% 100.0%Service, body and parts 49.1% 49.5% 49.7% 48.7% 49.2%Fleet and other 0.3% 3.6% 2.7% 5.3% 2.6% Total revenues 14.7% 14.9% 14.9% 15.3% 14.9%
2014New vehicle 6.1% 6.5% 6.6% 6.7% 6.4%Used vehicle 12.3% 12.9% 14.2% 13.5% 13.2%Wholesale used vehicles 0.5% 1.0% 3.4% 3.1% 1.9%Finance and insurance 100.0% 100.0% 100.0% 100.0% 100.0%Service, body and parts 48.9% 48.4% 49.1% 48.6% 48.8%Fleet and other 2.2% 6.4% 5.0% 4.6% 4.1% Total revenues 15.5% 15.5% 15.8% 16.2% 15.8%
2013New vehicle 6.6% 6.4% 6.8% 7.0% 6.7%Used vehicle 13.9% 14.8% 15.0% 14.6% 14.6%Wholesale used vehicles 0.9% 1.6% 1.8% 2.5% 1.7%Finance and insurance 100.0% 100.0% 100.0% 100.0% 100.0%Service, body and parts 47.7% 48.1% 49.4% 48.4% 48.4%Fleet and other 5.8% 5.4% 3.8% 4.6% 4.7% Total revenues 15.5% 15.5% 15.8% 16.2% 15.8%
35 LITHIA MOTORS FEBRUARY 2016
SUPPLEMENTAL INFORMATION2015 Adjusted Income Statement Details
YTD 12/31/2015
Gain on sale of stores Asset impairment TransitionAgreement
Equity Investment YTD 12/31/2015
$K As Reported Q1 Q2 Q2 Q4 Q3 Q1 Q2 Q3 Q4 Adjusted
Asset impairments $ 20,124 — — (2,000) (1,603) — (4,130) (4,130) (4,131) (4,130) $ —
Selling, general and administrative $ 811,175 3,349 2,570 — — (18,296) — — — — $ 798,798
Income from operations $ 302,735 (3,349) (2,570) 2,000 1,603 18,296 4,130 4,130 4,131 4,130 $ 253,088
Other income $ (1,006) — — — — — 1,732 1,733 1,732 $1,733 $ 4,165
Income from continuing operationsbefore income taxes
$ 262,704 (3,349) (2,570) 2,000 1,603 18,296 5,862 5,863 5,863 5,863 $ 228,298
Income taxes $ (79,705) 1,004 1,305 (780) (605) (6,507) (7,250) (7,652) (7,414) (8,516) $ (88,361)
Net income from continuing operations $ 182,999 (2,345) (1,265) 1,220 998 11,789 (1,388) (1,789) (1,551) (2,653) $ 139,937
Diluted earnings per share fromcontinuing operations
$ 6.91 (0.09) (0.05) 0.05 0.03 0.45 (0.05) (0.07) (0.06) (0.10) $ 7.02
Diluted share count 26,490
36 LITHIA MOTORS FEBRUARY 2016
SUPPLEMENTAL INFORMATION2014 Adjusted Income Statement Details
YTD 12/31/2014
DisposalGain
Reserveadjustments
EquityInvestment Acquisition expenses Tax Attribute YTD
12/31/2014
$K AsReported
Q2 Q1 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Adjusted
Asset impairments $1,853 - - (1,853) - - - - - - -
Selling, general and administrative $563,207 - (3,931) - (163) (883) (819) - - - $557,411
Income from operations $231,899 - 3,931 1,853 163 883 819 - - - $239,548
Other income 3,199 1,160 $4,359
Income from continuing operations beforeincome taxes
$210,495 - 3,931 3,013 163 883 819 - - - $219,304
Income taxes ($74,955) - (1,545) (6,506) (63) (319) (338) (73) (194) (600) (84,593)
Net income from continuing operations $135,540 - 2,386 (3,493) 100 564 481 (73) (194) (600) $134,711
Net income from discontinued operations $3,180 (3,490) - - - - - - - - ($310)
Net income $138,720 (3,490) 2,386 (3,493) 100 564 481 (73) (194) (600) $134,401
Diluted earnings per share from continuingoperations
$5.14 - 0.09 (0.13) - 0.02 0.02 - (0.01) (0.02) $5.11
Diluted earnings per share from discontinuedoperations
$0.12 (0.13) - - - - - - - - ($0.01)
Diluted earnings per share $5.26 (0.13) 0.09 (0.13) - 0.02 0.02 - (0.01) (0.02) $5.1
Diluted share count 26,382
37 LITHIA MOTORS FEBRUARY 2016
SUPPLEMENTAL INFORMATION2013 Adjusted Income Statement Details
YTD 12/31/2013
Disposalgain Reserve adjustments Tax attribute YTD
12/31/2013
$K As Reported Q4 Q2 Q4 Q2 Q3 Q4 Adjusted
Selling, general and administrative $427,400 2,531 (3,812) (2,341) - - - $423,778
Income from operations $183,518 (2,531) 3,812 2,341 - - - $187,140
Income from continuing operations before income taxes $165,788 (2,531) 3,812 2,341 - - - $169,410
Income taxes (60,574) 968 (1,484) (869) (228) (1,284) (1,320) (64,791)
Net income from continuing operations $105,214 (1,563) 2,328 1,472 (228) (1,284) (1,320) $104,619
Net income from discontinued operations 786 - - - - - - 786
Net income $106,000 (1,563) 2,328 1,472 (228) (1,284) (1,320) $105,405
Diluted earnings per share from continuing operations $4.02 (0.06) 0.09 0.05 (0.01) (0.05) (0.05) $3.99
Diluted earnings per share from discontinued operations 0.03 - - - - - - 0.03
Diluted earnings per share $4.05 (0.06) 0.09 0.05 (0.01) (0.05) (0.05) $4.02
Diluted share count 26,191