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MEDFORD, Ore. — Along with naming a new chief financial officer, Lithia Motors announced strong vehicle sales performances of both used and new units resulted in net income gains during the second quarter.

Revealed last week during its regular financial report, Lithia indicated its 2010 adjusted second-quarter net income from continuing operations came in at 27 cents per diluted share. This marked an increase from the same period a year ago when the company's net income level stood at 22 cents per diluted share.

The company mentioned the results include approximately 4.9 million additional shares this year as compared to 2009. It's primarily due to the equity offering Lithia orchestrated at the end of last year.

In other elements of their financial report, executives calculated second-quarter revenue from continuing operations totaled $534 million. Again, they highlighted a significant jump since the year-ago revenue amount was $444 million.

Lithia emphasized the enhanced revenue performance mainly was driven by improved vehicle sales.

The company determined total same-store sales increased 19 percent when compared to the same quarter last year. Meanwhile, Lithia also pointed out that same-store retail new-vehicle sales increased 26 percent. On the used side, same-store retail used-vehicle sales climbed 15 percent. Each improvement was derived as a comparison to the same quarter last year.

Also, Lithia indicated service, body and parts for same-store sales were essentially flat compared to the same quarter of last year.

"Our operational results exceeded our expectations due to a strong April and May," stated Sid DeBoer, Lithia's chairman and chief executive officer.

"We have focused on maintaining our service, body and parts sales volumes despite fewer units in operation and lower warranty revenues," DeBoer continued.

Management noted its second-quarter adjusted results exclude non-core charges of 33 cents per share on asset impairments and expenses related to reserves offset by gains on disposal of assets. Executives also said 2009 second-quarter adjusted results from continuing operations exclude non-core charges of 10 cents per share on asset impairments, offset by a one-time gain related to debt extinguishment.

As a result, Lithia computed the unadjusted, net loss from continuing operations for the most recent quarter was $1.5 million, or 6 cents per diluted share. A year ago, the company posted a net income figure of $2.5 million or 12 cents per diluted share.

Also in the second quarter, Lithia said it recorded an after-tax charge of approximately $8.0 million or 31 cents per share related to real estate held for future development. Executives explained this charge reflects continued weakness in local market conditions, increasing vacancy rates and challenges in obtaining lender financing.

The company believes this real estate incurs annual holding costs of approximately 12 to 15 cents per share.

"Selling our remaining non-operating real estate allows us to mitigate risk and re-deploy the capital generated," stated Bryan DeBoer, Lithia's president and chief operating officer.

"We are acting aggressively to price these assets to sell considering updated market conditions," DeBoer continued. "While it is difficult to sell these assets in the current environment, we believe that it is an attractive time for other investment opportunities."

Delving further into the quarterly financials and looking into the first six months of the year, Lithia determined its total revenues increased from $849 million during the same period last year to $993 million, a rise of 17 percent.

Elsewhere, the company revealed same-store new-vehicle sales increased 19 percent, retail used-vehicle sales increased 18 percent and service, body and parts sales decreased 3 percent.

For the first six months of its calendar year, Lithia noted its adjusted income from continuing operations, net of tax, and excluding non-core charges and gains was 37 cents per share. It marked a jump from 20 cents per share in 2009.

Balance Sheet Update

Lithia detailed that it ended the period with $118.2 million in immediately available funds, including $15.4 million in cash, $71.2 million in availability on its revolving credit facility and $31.6 million in unfinanced new vehicle inventory.

As of June 30, the company said it was in compliance with all debt covenants. Furthermore management recently announced the extension of its revolving credit facility through June 2013 and has no mortgage maturities until November 2011.

Selection of Chief Financial Officer

Lithia decided to promote Chris Holzshu to senior vice president and chief financial officer upon the departure of Jeff DeBoer at the end of October.

The company indicated Holzshu has held a number of positions with increasing responsibility at Lithia during the past eight years, most recently as vice president of financial planning and analysis.

"For the last two years, Chris has been responsible for our budgeting and performance monitoring. In this role, he has been focused on identifying opportunities to improve store operations," Sid DeBoer indicated.

"I am pleased that Chris will continue this focus as our new CFO," DeBoer went on to say. "Our top priority is improving store profitability, and Chris will deliver on this objective."

Lithia recounted Holzshu joined the company in 2003 to manage the corporate accounting department, and was subsequently promoted to leadership roles in internal audit/compliance and business development.

Prior to his posts at Lithia, Holzshu, a licensed CPA, spent several years working at KPMG, an independent public accounting firm.

Outlook for the Remainder of 2010

Lithia provided a 2010 third quarter earnings guidance within a range of 27 to 29 cents per diluted share. The company indicated its full-year 2010 adjusted earnings guidance has been increased for the effect of announced acquisitions and dispositions and is projected within a range of 72 to 77 cents per diluted share.

Executives believe both projections are based on the following revised assumptions:

—Total revenues in range of $1.95 to $2.0 billion.

—New-vehicle same-store sales increasing 12.4 percent.

—New-vehicle gross margin ranging from 8.0 to 8.3 percent.

—Used-vehicle same-store sales increasing 14.1 percent.

—Used-vehicle gross margin ranging from 14.2 to 14.5 percent.

—Service body and parts for same-store sales decreasing 2 percent.

—Service body and parts gross margin ranging from 48.1 percent to 48.7 percent.

—F&I gross profit of $955 per unit.

—Tax rate of 38.5 percent.

—Estimated average diluted shares outstanding of 26.2 million.

—Capital expenditures of approximately $3.5 million.

—Chrysler market share consistent with full year 2009 levels.

—Guidance excludes the impact of future acquisitions, dispositions, and any potential non-core items.