Business Wire | Feb 3, 2021 05:00AM EST

LAD Reports Highest Fourth Quarter and Full Year Earnings in Company History

Feb. 03, 2021

MEDFORD, Ore.--(BUSINESS WIRE)--Feb. 03, 2021--Lithia Motors & Driveway (NYSE: LAD) today reported the highest fourth quarter revenue and earnings per share in company history.

Fourth quarter 2020 revenue increased 21% to $3.9 billion from $3.3 billion in the fourth quarter of 2019.

Fourth quarter 2020 net income per diluted share was $7.02, a 143% increase from $2.89 per diluted share reported in the fourth quarter of 2019. Adjusted fourth quarter 2020 net income per diluted share was $5.46, an 85% increase compared to adjusted net income of $2.95 per diluted share in the same period of 2019.

Fourth quarter 2020 net income was $188 million, a 176% increase compared to net income of $68 million in the same period of 2019. Adjusted fourth quarter 2020 net income was $146 million, a 110% increase compared to adjusted net income of $70 million for the same period of 2019.

As shown in the attached non-GAAP reconciliation tables, the 2020 fourth quarter adjusted results exclude a $1.56 per diluted share net non-core benefit related to non-cash unrealized investment gains and a net gain on sale of stores, partially offset by acquisition expenses. The 2019 fourth quarter adjusted results exclude a $0.06 per diluted share net non-core charge due to asset impairments and acquisition expenses, partially offset by a net gain on sale of stores.

Fourth Quarter-over-Quarter Operating Highlights:

* Total company revenues increased 20.6% * New vehicle retail sales increased 19.0% * Used vehicle retail sales increased 23.9% * F&I per unit increased 13.1% to $1,723 * Total vehicle gross profit per unit increased 18.0% to $4,371 * Adjusted SG&A as a percentage of gross profit improved by 860 basis points to 62.0%

"This was a historic year for Lithia & Driveway and the results for the fourth quarter demonstrate the ability of our team to deliver unparalleled performance and profitability through any economic cycle," said Bryan DeBoer, President and CEO. "The high performance being achieved at our existing stores, coupled with the acquisitions in 2020 anticipated to generate over $3.5 billion in annualized steady state revenue and the successful launch of our national e-commerce home solution Driveway, gives us increased confidence in our five-year plan to reach $50 billion in revenue and $50 in earnings per share."

Full year 2020 revenue increased 4% to a record $13.1 billion from $12.7 billion in 2019.

Full year 2020 net income per diluted share increased 68% to $19.53 from $11.60 for 2019. Adjusted net income per diluted share increased 55% to $18.19 from $11.76 for 2019. Full year 2020 net income increased 73% to $470 million from $271 million for 2019. Adjusted net income increased 59% to $438 million for 2020 from $275 million for 2019.

As shown in the attached non-GAAP reconciliation tables, the 2020 adjusted results exclude a cumulative net non-core benefit of $1.34 per diluted share related to non-cash unrealized investment gains, a net gain on sale of stores, and tax attribute, offset by asset impairments, insurance reserves and acquisition expenses. The 2019 adjusted results exclude a cumulative net non-core charge of $0.16 per diluted share from insurance reserves, asset impairments, and acquisition expenses, offset by a net gain on sale of stores.

Full Year-over-Year Operating Highlights:

* Record full year revenues of $13.1 billion * Used vehicle retail sales increased 13.4% * F&I per unit increased 10.7% to $1,636 * Total vehicle gross profit per unit increased 16.4% to $4,229 * Adjusted SG&A as a percentage of gross profit improved by 570 basis points to 64.5%

Corporate Development

During the quarter, we completed the acquisitions of Latham Ford in the Albany, New York area; Keyes Automotive Group in Southern California and Phoenix, Arizona; Sterling Luxury Group in the Washington D.C. area; and Ramsey Subaru/Mazda in Des Moines, Iowa. These strategic acquisitions in key geographic locations are anticipated to generate $1.8 billion in annualized steady state revenues. For the year, this brings our total anticipated annualized revenue from acquired locations to $3.5 billion, $3.3 billion since the beginning of our five-year plan on July 1, 2020.

"We expanded our network at a record pace during 2020 and are just getting started," said DeBoer. "With our strong balance sheet and over $350 million of adjusted operating cash flows, we are well positioned for accelerated growth with the ability to add over $7 billion of additional revenue to our network this year."

Balance Sheet Update

We ended the fourth quarter with approximately $1.4 billion in cash, unfloored inventory and availability on our revolving lines of credit. In addition, our unfinanced real estate could provide additional liquidity of approximately $471 million.

Dividend Payment

Our Board of Directors approved a dividend of $0.31 per share related to fourth quarter 2020 financial results. We expect to pay the dividend on March 26, 2021 to shareholders of record on March 12, 2021.

Fourth Quarter Earnings Conference Call and Updated Presentation

The fourth 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 fourth 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 & Driveway

Lithia & Driveway 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 through various consumer channels, 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 physical network. By purchasing strong businesses, they further strengthen this network, leveraging their national digital home channel Driveway and building upon the 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 of the continued COVID-19 pandemic on the U.S. and local economies in which we operate, our business operations and consumer demand; * Continuation of our sales and services, including in-store appointments and home deliveries; * Expected growth from our e-commerce 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; * Expectations regarding programs and initiatives for employee recruitment, training, and retention; 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 % Twelve months ended %

December 31, Increase December 31, Increase

2020 2019 (Decrease) 2020 2019 (Decrease)

Revenues:

New vehicle retail $ 2,149.4 $ 1,805.8 19.0 % $ 6,773.9 $ 6,799.1 (0.4 ) %

Used vehicle retail 1,108.7 894.7 23.9 3,998.4 3,527.2 13.4

Used vehicle 91.8 67.7 35.6 308.7 301.2 2.5 wholesale

Finance and 172.6 136.0 26.9 579.8 518.6 11.8 insurance

Service, body and 383.9 331.8 15.7 1,348.7 1,325.1 1.8 parts

Fleet and other 35.4 33.0 7.3 114.8 201.5 (43.0 )

Total revenues 3,941.8 3,269.0 20.6 % 13,124.3 12,672.7 3.6 %

Cost of sales:

New vehicle retail 1,998.8 1,701.5 17.5 6,313.0 6,413.5 (1.6 )

Used vehicle retail 995.7 804.6 23.8 3,552.4 3,159.6 12.4

Used vehicle 90.2 67.8 33.0 296.7 297.5 (0.3 ) wholesale

Service, body and 175.5 165.3 6.2 631.9 657.5 (3.9 ) parts

Fleet and other 32.9 31.2 5.4 104.7 190.8 (45.1 )

Total cost of sales 3,293.1 2,770.4 18.9 10,898.7 10,718.9 1.7

Gross profit 648.7 498.6 30.1 % 2,225.6 1,953.8 13.9 %

Asset impairments - 2.1 NM 7.9 2.6 NM

SG&A expense 388.6 352.2 10.3 1,428.3 1,373.8 4.0

Depreciation and 25.2 21.5 17.2 92.3 82.4 12.0 amortization

Income from 234.9 122.8 91.3 % 697.1 495.0 40.8 %operations

Floor plan interest (6.2 ) (17.2 ) (64.0 ) (34.4 ) (72.8 ) (52.7 ) expense

Other interest (22.7 ) (15.7 ) 44.6 (73.1 ) (60.6 ) 20.6 expense

Other income, net 50.8 4.8 NM 58.9 13.8 NM

Income before income 256.8 94.7 171.2 % 648.5 375.4 72.7 %taxes

Income tax expense (69.2 ) (26.7 ) 159.2 (178.2 ) (103.9 ) 71.5

Income tax rate 26.9 % 28.2 % 27.5 % 27.7 %

Net income $ 187.6 $ 68.0 175.9 % $ 470.3 $ 271.5 73.2 %



Diluted net income per share:

Net income per share $ 7.02 $ 2.89 142.9 % $ 19.53 $ 11.60 68.4 %



Diluted shares 26.7 23.5 13.6 % 24.1 23.4 3.0 %outstanding

NM - not meaningful

Lithia Motors, Inc.

Key Performance Metrics (Unaudited)

Three months ended

December 31,

%

Twelve months ended

December 31,

%

Increase

Increase

2020

2019

(Decrease)

2020

2019

(Decrease)

Gross margin

New vehicle retail

7.0

%

5.8

%

120

bps

6.8

%

5.7

%

110

bps

Used vehicle retail

10.2

10.1

10

11.2

10.4

80

Finance and insurance

100.0

100.0

-

100.0

100.0

-

Service, body and parts

54.3

50.2

410

53.1

50.4

270

Gross profit margin

16.5

15.3

120

17.0

15.4

160

Unit sales

New vehicle retail

52,469

46,442

13.0

%

171,168

180,532

(5.2

)

%

Used vehicle retail

47,731

42,740

11.7

183,230

170,423

7.5

Total retail units sold

100,200

89,182

12.4

354,398

350,955

1.0

Average selling price

New vehicle retail

$

40,965

$

38,884

5.4

%

$

39,575

$

37,661

5.1

%

Used vehicle retail

23,229

20,934

11.0

21,822

20,697

5.4

Average gross profit per unit

New vehicle retail

$

2,870

$

2,246

27.8

%

$

2,693

$

2,136

26.1

%

Used vehicle retail

2,369

2,109

12.3

2,434

2,157

12.8

Finance and insurance

1,723

1,524

13.1

1,636

1,478

10.7

Total vehicle(1)

4,371

3,704

18.0

4,229

3,634

16.4

Revenue mix

New vehicle retail

54.5

%

55.2

%

51.6

%

53.7

%

Used vehicle retail

28.1

27.4

30.5

27.8

Used vehicle wholesale

2.3

2.1

2.4

2.4

Finance and insurance, net

4.4

4.2

4.4

4.1

Service, body and parts

9.7

10.1

10.3

10.5

Fleet and other

1.0

1.0

0.8

1.5

Gross Profit Mix

New vehicle retail

23.2

%

20.9

%

20.7

%

19.7

%

Used vehicle retail

17.4

18.1

20.0

18.8

Used vehicle wholesale

0.3

-

0.5

0.2

Finance and insurance, net

26.6

27.3

26.1

26.5

Service, body and parts

32.1

33.3

32.2

34.3

Fleet and other

0.4

0.4

0.5

0.5

Lithia Motors, Inc.

Key Performance Metrics (Unaudited)

Three months ended % Twelve months ended %

December 31, Increase December 31, Increase

2020 2019 (Decrease) 2020 2019 (Decrease)

Gross margin

Newvehicle 7.0 % 5.8 % 120 bps 6.8 % 5.7 % 110 bpsretail

Usedvehicle 10.2 10.1 10 11.2 10.4 80 retail

Financeand 100.0 100.0 - 100.0 100.0 - insurance

Service,body and 54.3 50.2 410 53.1 50.4 270 parts

Grossprofit 16.5 15.3 120 17.0 15.4 160 margin



Unit sales

Newvehicle 52,469 46,442 13.0 % 171,168 180,532 (5.2 ) %retail

Usedvehicle 47,731 42,740 11.7 183,230 170,423 7.5 retail

Totalretail 100,200 89,182 12.4 354,398 350,955 1.0 units sold



Averageselling price

Newvehicle $ 40,965 $ 38,884 5.4 % $ 39,575 $ 37,661 5.1 %retail

Usedvehicle 23,229 20,934 11.0 21,822 20,697 5.4 retail



Averagegross profit perunit

Newvehicle $ 2,870 $ 2,246 27.8 % $ 2,693 $ 2,136 26.1 %retail

Usedvehicle 2,369 2,109 12.3 2,434 2,157 12.8 retail

Financeand 1,723 1,524 13.1 1,636 1,478 10.7 insurance

Totalvehicle^ 4,371 3,704 18.0 4,229 3,634 16.4 (1)



Revenue mix

Newvehicle 54.5 % 55.2 % 51.6 % 53.7 % retail

Usedvehicle 28.1 27.4 30.5 27.8 retail

Usedvehicle 2.3 2.1 2.4 2.4 wholesale

Financeand 4.4 4.2 4.4 4.1 insurance,net

Service,body and 9.7 10.1 10.3 10.5 parts

Fleet and 1.0 1.0 0.8 1.5 other



Gross Profit Mix

Newvehicle 23.2 % 20.9 % 20.7 % 19.7 % retail

Usedvehicle 17.4 18.1 20.0 18.8 retail

Usedvehicle 0.3 - 0.5 0.2 wholesale

Financeand 26.6 27.3 26.1 26.5 insurance,net

Service,body and 32.1 33.3 32.2 34.3 parts

Fleet and 0.4 0.4 0.5 0.5 other

Adjusted

As reported

Adjusted

As reported

Three months ended

December 31,

Three months ended

December 31,

Twelve months ended

December 31,

Twelve months ended

December 31,

Other metrics

2020

2019

2020

2019

2020

2019

2020

2019

SG&A as a % of revenue

10.2

%

10.8

%

9.9

%

10.8

%

10.9

%

10.8

%

10.9

%

10.8

%

SG&A as a % of gross profit

62.0

70.6

59.9

70.6

64.5

70.2

64.2

70.3

Operating profit as a % of revenue

5.6

3.8

6.0

3.8

5.3

3.9

5.3

3.9

Operating profit as a % of gross profit

34.1

25.0

36.2

24.6

31.3

25.6

31.3

25.3

Pretax margin

5.1

3.0

6.5

2.9

4.6

3.0

4.9

3.0

Net profit margin

3.7

2.1

4.8

2.1

3.3

2.2

3.6

2.1

Adjusted As reported Adjusted As reported

Three months Three months Twelve months Twelve months ended ended ended ended

December 31, December 31, December 31, December 31,

Other 2020 2019 2020 2019 2020 2019 2020 2019metrics

SG&A as a% of 10.2 % 10.8 % 9.9 % 10.8 % 10.9 % 10.8 % 10.9 % 10.8 %revenue

SG&A as a% of 62.0 70.6 59.9 70.6 64.5 70.2 64.2 70.3 grossprofit

Operatingprofit as 5.6 3.8 6.0 3.8 5.3 3.9 5.3 3.9 a % ofrevenue

Operatingprofit asa % of 34.1 25.0 36.2 24.6 31.3 25.6 31.3 25.3 grossprofit

Pretax 5.1 3.0 6.5 2.9 4.6 3.0 4.9 3.0 margin

Netprofit 3.7 2.1 4.8 2.1 3.3 2.2 3.6 2.1 margin

(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.

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

Lithia Motors, Inc.

Same Store Operating Highlights (Unaudited)

Three months ended

December 31,

%

Twelve months ended

December 31,

%

Increase

Increase

2020

2019

(Decrease)

2020

2019

(Decrease)

Revenues

New vehicle retail

$

1,745.6

$

1,739.2

0.4

%

$

5,943.6

$

6,548.6

(9.2

)

%

Used vehicle retail

938.8

865.0

8.5

3,594.8

3,390.7

6.0

Finance and insurance

135.7

130.6

3.9

504.2

499.8

0.9

Service, body and parts

310.9

319.9

(2.8

)

1,188.8

1,271.0

(6.5

)

Total revenues

3,237.5

3,152.4

2.7

11,611.5

12,193.8

(4.8

)

Gross profit

New vehicle retail

$

128.2

$

101.0

26.9

%

$

411.8

$

373.5

10.3

%

Used vehicle retail

99.6

87.6

13.7

405.9

357.3

13.6

Finance and insurance

135.7

130.6

3.9

504.2

499.8

0.9

Service, body and parts

166.2

160.3

3.7

626.2

640.6

(2.2

)

Total gross profit

533.2

481.0

10.9

1,968.6

1,885.7

4.4

Gross margin

New vehicle retail

7.3

%

5.8

%

150

bps

6.9

%

5.7

%

120

bps

Used vehicle retail

10.6

10.1

50

11.3

10.5

80

Finance and insurance

100.0

100.0

-

100.0

100.0

-

Service, body and parts

53.5

50.1

340

52.7

50.4

230

Gross profit margin

16.5

15.3

120

17.0

15.5

150

Unit sales

New vehicle retail

42,398

44,640

(5.0

)

%

149,203

173,561

(14.0

)

%

Used vehicle retail

40,564

41,266

(1.7

)

165,097

163,443

1.0

Average selling price

New vehicle retail

$

41,171

$

38,962

5.7

%

$

39,835

$

37,731

5.6

%

Used vehicle retail

23,144

20,961

10.4

21,774

20,745

5.0

Average gross profit per unit

New vehicle retail

$

3,023

$

2,263

33.6

%

$

2,760

$

2,152

28.3

%

Used vehicle retail

2,456

2,122

15.7

2,459

2,186

12.5

Finance and insurance

1,635

1,520

7.6

1,604

1,483

8.2

Total vehicle(1)

4,398

3,715

18.4

4,240

3,664

15.7

Lithia Motors, Inc.

Same Store Operating Highlights (Unaudited)

Three months ended % Twelve months ended %

December 31, Increase December 31, Increase

2020 2019 (Decrease) 2020 2019 (Decrease)

Revenues

Newvehicle $ 1,745.6 $ 1,739.2 0.4 % $ 5,943.6 $ 6,548.6 (9.2 ) %retail

Usedvehicle 938.8 865.0 8.5 3,594.8 3,390.7 6.0 retail

Financeand 135.7 130.6 3.9 504.2 499.8 0.9 insurance

Service,body and 310.9 319.9 (2.8 ) 1,188.8 1,271.0 (6.5 ) parts

Total 3,237.5 3,152.4 2.7 11,611.5 12,193.8 (4.8 ) revenues



Gross profit

Newvehicle $ 128.2 $ 101.0 26.9 % $ 411.8 $ 373.5 10.3 %retail

Usedvehicle 99.6 87.6 13.7 405.9 357.3 13.6 retail

Financeand 135.7 130.6 3.9 504.2 499.8 0.9 insurance

Service,body and 166.2 160.3 3.7 626.2 640.6 (2.2 ) parts

Totalgross 533.2 481.0 10.9 1,968.6 1,885.7 4.4 profit



Gross margin

Newvehicle 7.3 % 5.8 % 150 bps 6.9 % 5.7 % 120 bpsretail

Usedvehicle 10.6 10.1 50 11.3 10.5 80 retail

Financeand 100.0 100.0 - 100.0 100.0 - insurance

Service,body and 53.5 50.1 340 52.7 50.4 230 parts

Grossprofit 16.5 15.3 120 17.0 15.5 150 margin



Unit sales

Newvehicle 42,398 44,640 (5.0 ) % 149,203 173,561 (14.0 ) %retail

Usedvehicle 40,564 41,266 (1.7 ) 165,097 163,443 1.0 retail



Averageselling price

Newvehicle $ 41,171 $ 38,962 5.7 % $ 39,835 $ 37,731 5.6 %retail

Usedvehicle 23,144 20,961 10.4 21,774 20,745 5.0 retail



Averagegross profitper unit

Newvehicle $ 3,023 $ 2,263 33.6 % $ 2,760 $ 2,152 28.3 %retail

Usedvehicle 2,456 2,122 15.7 2,459 2,186 12.5 retail

Financeand 1,635 1,520 7.6 1,604 1,483 8.2 insurance

Totalvehicle^ 4,398 3,715 18.4 4,240 3,664 15.7 (1)

(1)

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

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

Lithia Motors, Inc.

Other Highlights (Unaudited)

As of

December 31,

December 31,

December 31,

2020

2019

2018

Days Supply(1)

New vehicle inventory

50

71

71

Used vehicle inventory

65

65

66

Lithia Motors, Inc.

Other Highlights (Unaudited)

As of

December 31, December 31, December 31,

2020 2019 2018

Days Supply^(1)

New vehicle inventory 50 71 71

Used vehicle inventory 65 65 66

(1)

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

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

Financial covenants

Requirement

As of December 31, 2020

Current ratio

Not less than 1.10 to 1

1.48 to 1

Fixed charge coverage ratio

Not less than 1.20 to 1

3.91 to 1

Leverage ratio

Not more than 5.75 to 1

2.74 to 1

Financial covenants

Requirement As of December 31, 2020

Current ratio Not less than 1.10 to 1 1.48 to 1

Fixed charge coverage ratio Not less than 1.20 to 1 3.91 to 1

Leverage ratio Not more than 5.75 to 1 2.74 to 1

Lithia Motors, Inc.

Condensed Consolidated Balance Sheets (Unaudited)

(In millions)

December 31, 2020

December 31, 2019

Cash and cash equivalents

$

160.2

$

84.0

Trade receivables, net

614.0

505.0

Inventories, net

2,492.9

2,433.7

Other current assets

70.5

47.8

Total current assets

$

3,337.6

$

3,070.5

Property and equipment, net

2,197.5

1,611.7

Intangibles

943.2

761.3

Other non-current assets

1,423.8

640.4

Total assets

$

7,902.1

$

6,083.9

Floor plan notes payable

1,797.2

2,067.6

Other current liabilities

682.5

501.5

Total current liabilities

$

2,479.7

$

2,569.1

Long-term debt

2,064.7

1,430.6

Other long-term liabilities and deferred revenue

696.2

616.5

Total liabilities

$

5,240.6

$

4,616.2

Stockholder's Equity

2,661.5

1,467.7

Total liabilities & stockholders' equity

$

7,902.1

$

6,083.9

Lithia Motors, Inc.

Condensed Consolidated Balance Sheets (Unaudited)

(In millions)

December 31, December 31, 2020 2019

Cash and cash equivalents $ 160.2 $ 84.0

Trade receivables, net 614.0 505.0

Inventories, net 2,492.9 2,433.7

Other current assets 70.5 47.8

Total current assets $ 3,337.6 $ 3,070.5



Property and equipment, net 2,197.5 1,611.7

Intangibles 943.2 761.3

Other non-current assets 1,423.8 640.4

Total assets $ 7,902.1 $ 6,083.9



Floor plan notes payable 1,797.2 2,067.6

Other current liabilities 682.5 501.5

Total current liabilities $ 2,479.7 $ 2,569.1



Long-term debt 2,064.7 1,430.6

Other long-term liabilities and deferred 696.2 616.5 revenue

Total liabilities $ 5,240.6 $ 4,616.2



Stockholder's Equity 2,661.5 1,467.7

Total liabilities & stockholders' equity $ 7,902.1 $ 6,083.9

Lithia Motors, Inc.

Summarized Cash Flow from Operations (Unaudited)

(In millions)

Twelve months ended December 31,

2020

2019

Net income

$

470.3

$

271.5

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

Asset impairments

7.9

2.6

Depreciation and amortization

92.4

82.4

Stock-based compensation

23.2

16.2

Gain on disposal of assets

(1.7

)

(0.1

)

Gain on sale of franchises

(16.6

)

(9.7

)

Unrealized investment gains

(43.4

)

-

Deferred income taxes

17.2

40.1

Amortization of operating lease right-of-use assets

28.9

31.6

(Increase) decrease:

Trade receivables, net

(113.5

)

24.4

Inventories

228.8

(19.7

)

Other assets

(103.6

)

5.4

Increase (decrease):

Floor plan notes payable, net

(204.1

)

100.7

Trade payables

28.2

(1.8

)

Accrued liabilities

113.1

(7.8

)

Other long-term liabilities and deferred revenue

15.1

(11.3

)

Net cash provided by operating activities

$

542.2

$

524.5

Lithia Motors, Inc.

Summarized Cash Flow from Operations (Unaudited)

(In millions)

Twelve months ended December 31,

2020 2019

Net income $ 470.3 $ 271.5

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

Asset impairments 7.9 2.6

Depreciation and amortization 92.4 82.4

Stock-based compensation 23.2 16.2

Gain on disposal of assets (1.7 ) (0.1 )

Gain on sale of franchises (16.6 ) (9.7 )

Unrealized investment gains (43.4 ) -

Deferred income taxes 17.2 40.1

Amortization of operating lease right-of-use assets 28.9 31.6

(Increase) decrease:

Trade receivables, net (113.5 ) 24.4

Inventories 228.8 (19.7 )

Other assets (103.6 ) 5.4

Increase (decrease):

Floor plan notes payable, net (204.1 ) 100.7

Trade payables 28.2 (1.8 )

Accrued liabilities 113.1 (7.8 )

Other long-term liabilities and deferred revenue 15.1 (11.3 )

Net cash provided by operating activities $ 542.2 $ 524.5

Lithia Motors, Inc.

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

(In millions)

Twelve months ended December 31,

Net cash provided by operating activities

2020

2019

As reported

$

542.2

$

524.5

Floor plan notes payable, non-trade, net

(20.6

)

(54.6

)

Add: Temporary pay down of outstanding borrowings on floor plan notes payables, non-trade

113.4

-

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

(255.0

)

(80.0

)

Adjusted

$

380.0

$

389.9

Lithia Motors, Inc.

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

(In millions)

Twelve months ended December 31,

Net cash provided by operating activities 2020 2019

As reported $ 542.2 $ 524.5

Floor plan notes payable, non-trade, net (20.6 ) (54.6 )

Add: Temporary pay down of outstanding borrowings 113.4 - on floor plan notes payables, non-trade

Less: Borrowings on floor plan notes payable,non-trade associated with acquired new vehicle (255.0 ) (80.0 ) inventory

Adjusted $ 380.0 $ 389.9

Lithia Motors, Inc.

Reconciliation of Certain Non-GAAP Financial Measures (Unaudited)

(In millions, except for per share data)

Three Months Ended December 31, 2020

As reported

Net disposal

gain on sale

of stores

Investment

gains

Acquisition

expenses

Adjusted

Selling, general and administrative

$

388.6

$

15.2

$

-

$

(1.4

)

$

402.4

Operating income

234.9

(15.2

)

-

1.4

221.1

Other income (expense), net

50.8

-

(43.8

)

-

7.0

Income before income taxes

256.8

(15.2

)

(43.8

)

1.4

199.2

Income tax (provision) benefit

(69.2

)

4.2

12.1

(0.4

)

(53.3

)

Net income

$

187.6

$

(11.0

)

$

(31.7

)

$

1.0

$

145.9

Diluted earnings per share

$

7.02

$

(0.41

)

$

(1.19

)

$

0.04

$

5.46

Diluted share count

26.7

Lithia Motors, Inc.

Reconciliation of Certain Non-GAAP Financial Measures (Unaudited)

(In millions, except for per share data)

Three Months Ended December 31, 2020

Net disposal Investment Acquisition As reported gain on Adjusted sale gains expenses

of stores

Selling,general and $ 388.6 $ 15.2 $ - $ (1.4 ) $ 402.4 administrative



Operating 234.9 (15.2 ) - 1.4 221.1 income



Other income 50.8 - (43.8 ) - 7.0 (expense), net



Income before 256.8 (15.2 ) (43.8 ) 1.4 199.2 income taxes

Income tax(provision) (69.2 ) 4.2 12.1 (0.4 ) (53.3 ) benefit

Net income $ 187.6 $ (11.0 ) $ (31.7 ) $ 1.0 $ 145.9



Dilutedearnings per $ 7.02 $ (0.41 ) $ (1.19 ) $ 0.04 $ 5.46 share

Diluted share 26.7 count

Three Months Ended December 31, 2019

As reported

Net disposal

gain on sale

of stores

Asset

impairment

Acquisition

expenses

Adjusted

Asset impairments

$

2.1

$

-

$

(2.1

)

$

-

$

-

Selling, general and administrative

352.2

0.6

-

(0.6

)

352.2

Operating income

122.8

(0.6

)

2.1

0.6

124.9

Income before income taxes

94.7

(0.6

)

2.1

0.6

96.8

Income tax (provision) benefit

(26.7

)

0.2

(0.6

)

(0.2

)

(27.3

)

Net income

$

68.0

$

(0.4

)

$

1.5

$

0.4

$

69.5

Diluted earnings per share

$

2.89

$

(0.02

)

$

0.06

$

0.02

$

2.95

Diluted share count

23.5

Three Months Ended December 31, 2019

Net disposal As Asset Acquisition reported gain on Adjusted sale impairment expenses

of stores

Asset $ 2.1 $ - $ (2.1 ) $ - $ - impairments



Selling,general and 352.2 0.6 - (0.6 ) 352.2 administrative



Operating 122.8 (0.6 ) 2.1 0.6 124.9 income



Income before 94.7 (0.6 ) 2.1 0.6 96.8 income taxes

Income tax(provision) (26.7 ) 0.2 (0.6 ) (0.2 ) (27.3 ) benefit

Net income $ 68.0 $ (0.4 ) $ 1.5 $ 0.4 $ 69.5



Dilutedearnings per $ 2.89 $ (0.02 ) $ 0.06 $ 0.02 $ 2.95 share

Diluted share 23.5 count

Lithia Motors, Inc.

Reconciliation of Certain Non-GAAP Financial Measures (Unaudited)

(In millions, except for per share data)

Twelve Months Ended December 31, 2020

As reported

Net disposal

gain on sale

of stores

Asset

impairment

Investment

gains

Insurance

reserves

Acquisition

expenses

Tax attribute

Adjusted

Asset impairments

$

7.9

$

-

$

(7.9

)

$

-

$

-

$

-

$

-

$

-

Selling, general and administrative

1,428.3

16.6

-

-

(6.1

)

(3.0

)

-

1,435.8

Operating income

697.1

(16.6

)

7.9

-

6.1

3.0

-

697.5

Other income (expense), net

58.9

-

-

(43.8

)

-

-

-

15.1

Income before income taxes

648.5

(16.6

)

7.9

(43.8

)

6.1

3.0

-

605.1

Income tax (provision) benefit

(178.2

)

4.6

(2.3

)

12.1

(1.6

)

(0.8

)

(0.8

)

(167.0

)

Net income

$

470.3

$

(12.0

)

$

5.6

$

(31.7

)

$

4.5

$

2.2

$

(0.8

)

$

438.1

Diluted earnings per share

$

19.53

$

(0.50

)

$

0.23

$

(1.32

)

$

0.19

$

0.09

$

(0.03

)

$

18.19

Diluted share count

24.1

Lithia Motors, Inc.

Reconciliation of Certain Non-GAAP Financial Measures (Unaudited)

(In millions, except for per share data)

Twelve Months Ended December 31, 2020

Net disposal Asset Investment Insurance Acquisition Tax As reported gain on attribute Adjusted sale impairment gains reserves expenses

of stores

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



Selling,general and 1,428.3 16.6 - - (6.1 ) (3.0 ) - 1,435.8 administrative



Operating 697.1 (16.6 ) 7.9 - 6.1 3.0 - 697.5 income



Other income 58.9 - - (43.8 ) - - - 15.1 (expense), net



Income before 648.5 (16.6 ) 7.9 (43.8 ) 6.1 3.0 - 605.1 income taxes

Income tax(provision) (178.2 ) 4.6 (2.3 ) 12.1 (1.6 ) (0.8 ) (0.8 ) (167.0 ) benefit

Net income $ 470.3 $ (12.0 ) $ 5.6 $ (31.7 ) $ 4.5 $ 2.2 $ (0.8 ) $ 438.1



Dilutedearnings per $ 19.53 $ (0.50 ) $ 0.23 $ (1.32 ) $ 0.19 $ 0.09 $ (0.03 ) $ 18.19 share

Diluted share 24.1 count

Twelve Months Ended December 31, 2019

As reported

Net disposal

gain on sale

of stores

Asset

impairment

Insurance

reserves

Acquisition

expenses

Adjusted

Asset impairments

$

2.6

$

-

$

(2.6

)

$

-

$

-

$

-

Selling, general and administrative

1,373.8

9.7

-

(9.5

)

(2.5

)

1,371.5

Operating income

495.0

(9.7

)

2.6

9.5

2.5

499.9

Income before income taxes

375.4

(9.7

)

2.6

9.5

2.5

380.3

Income tax (provision) benefit

(103.9

)

2.8

(0.7

)

(2.6

)

(0.7

)

(105.1

)

Net income

$

271.5

$

(6.9

)

$

1.9

$

6.9

$

1.8

$

275.2

Diluted earnings per share

$

11.60

$

(0.30

)

$

0.08

$

0.30

$

0.08

$

11.76

Diluted share count

23.4

Twelve Months Ended December 31, 2019

Net disposal Asset Insurance Acquisition As reported gain on Adjusted sale impairment reserves expenses

of stores

Asset $ 2.6 $ - $ (2.6 ) $ - $ - $ - impairments



Selling,general and 1,373.8 9.7 - (9.5 ) (2.5 ) 1,371.5 administrative



Operating 495.0 (9.7 ) 2.6 9.5 2.5 499.9 income



Income before 375.4 (9.7 ) 2.6 9.5 2.5 380.3 income taxes

Income tax(provision) (103.9 ) 2.8 (0.7 ) (2.6 ) (0.7 ) (105.1 ) benefit

Net income $ 271.5 $ (6.9 ) $ 1.9 $ 6.9 $ 1.8 $ 275.2



Dilutedearnings per $ 11.60 $ (0.30 ) $ 0.08 $ 0.30 $ 0.08 $ 11.76 share

Diluted share 23.4 count

Lithia Motors, Inc.

Adjusted EBITDA and Net Debt to Adjusted EBITDA (Unaudited)

(In millions)

Three months ended

December 31,

%

Twelve months ended

December 31,

%

Increase

Increase

2020

2019

(Decrease)

2020

2019

(Decrease)

EBITDA and Adjusted EBITDA

Net income

$

187.6

$

68.0

175.9

%

$

470.3

$

271.5

73.2

%

Flooring interest expense

6.2

17.2

(64.0

)

34.4

72.8

(52.7

)

Other interest expense

22.7

15.7

44.6

73.1

60.6

20.6

Income tax expense

69.2

26.7

159.2

178.2

103.9

71.5

Depreciation and amortization

25.2

21.5

17.2

92.3

82.4

12.0

EBITDA

$

310.9

$

149.1

108.5

%

$

848.3

$

591.2

43.5

%

Other adjustments:

Less: flooring interest expense

$

(6.2

)

$

(17.2

)

(64.0

)

$

(34.4

)

$

(72.8

)

(52.7

)

Less: used vehicle line of credit interest

-

(1.6

)

(100.0

)

(0.5

)

(5.5

)

(90.9

)

Add: acquisition expenses

1.4

0.6

133.3

3.0

2.5

20.0

Less: gain on divestitures

(15.2

)

(0.6

)

2,433.3

(16.6

)

(9.7

)

71.1

Less: Investment gains

(43.8

)

-

NM

(43.8

)

-

NM

Add: insurance reserves

-

-

NM

6.1

9.5

(35.8

)

Add: asset impairment

-

2.1

(100.0

)

7.9

2.6

NM

Adjusted EBITDA

$

247.1

$

132.4

86.6

%

$

770.0

$

517.8

48.7

%

NM - not meaningful

Lithia Motors, Inc.

Adjusted EBITDA and Net Debt to Adjusted EBITDA (Unaudited)

(In millions)

Three months ended % Twelve months ended %

December 31, Increase December 31, Increase

2020 2019 (Decrease) 2020 2019 (Decrease)

EBITDA andAdjusted EBITDA

Net income $ 187.6 $ 68.0 175.9 % $ 470.3 $ 271.5 73.2 %

Flooringinterest 6.2 17.2 (64.0 ) 34.4 72.8 (52.7 ) expense

Otherinterest 22.7 15.7 44.6 73.1 60.6 20.6 expense

Income tax 69.2 26.7 159.2 178.2 103.9 71.5 expense

Depreciationand 25.2 21.5 17.2 92.3 82.4 12.0 amortization

EBITDA $ 310.9 $ 149.1 108.5 % $ 848.3 $ 591.2 43.5 %



Other adjustments:

Less:flooring $ (6.2 ) $ (17.2 ) (64.0 ) $ (34.4 ) $ (72.8 ) (52.7 ) interestexpense

Less: usedvehicle line - (1.6 ) (100.0 ) (0.5 ) (5.5 ) (90.9 ) of creditinterest

Add:acquisition 1.4 0.6 133.3 3.0 2.5 20.0 expenses

Less: gainon (15.2 ) (0.6 ) 2,433.3 (16.6 ) (9.7 ) 71.1 divestitures

Less:Investment (43.8 ) - NM (43.8 ) - NM gains

Add:insurance - - NM 6.1 9.5 (35.8 ) reserves

Add: asset - 2.1 (100.0 ) 7.9 2.6 NM impairment

Adjusted $ 247.1 $ 132.4 86.6 % $ 770.0 $ 517.8 48.7 %EBITDA

NM - not meaningful

As of

%

December 31,

Increase

Net Debt to Adjusted EBITDA

2020

2019

(Decrease)

Floor plan notes payable: non-trade

$

1,563.0

$

1,642.4

(4.8

)

%

Floor plan notes payable

234.2

425.2

(44.9

)

Used and service loaner vehicle inventory financing facility

-

149.0

(100.0

)

Revolving lines of credit

39.0

-

NM

Real estate mortgages

611.5

597.7

2.3

Finance lease obligations

246.4

30.5

707.9

5.250% Senior notes due 2025

300.0

300.0

-

4.625% Senior notes due 2027

400.0

400.0

-

4.625% Senior notes due 2027

550.0

-

NM

Other debt

2.4

3.1

(22.6

)

Unamortized debt issuance costs

(18.6

)

(10.4

)

78.8

Total debt

$

3,927.9

$

3,537.5

11.0

%

Less: Floor plan related debt

$

(1,797.2

)

$

(2,216.6

)

(18.9

)

%

Less: Temporary pay down of outstanding borrowings on floor plan notes payables, non-trade

(113.4

)

-

-

Less: Cash and cash equivalents

(160.2

)

(84.0

)

90.7

Less: Availability on used vehicle and service loaner financing facilities

(491.0

)

(239.8

)

104.8

Net Debt

$

1,366.1

$

997.1

37.0

%

TTM Adjusted EBITDA

$

770.0

$

517.8

48.7

%

Net debt to Adjusted EBITDA

1.77

x

1.93

x

(8.3

)

%

View source version on businesswire.com: https://www.businesswire.com/news/home/20210203005322/en/

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