MEDFORD, Ore. -

Fueled by across the board gains on the used-vehicle side, Lithia Motors on Wednesday reported the highest quarterly adjusted net income from continuing operations in company history.

Lithia also enjoyed a 27-percent year-over-year increase in adjusted net income per share from continuing operations for the third quarter.

Executives shared that Lithia’s Q3 adjusted income from continuing operations came in at $29.6 million or $1.13 per diluted share. A year earlier, the company generated income from continuing operations of $23.1 million or $0.89 per diluted share.

Lithia’s unadjusted net income from continuing operations for the third quarter was $30.9 million or $1.18 per diluted share.

Q3 Used-Vehicle Performance

Lithia determined its used-vehicle retail same store sales increased 17 percent year-over-year during the third quarter.

The group’s dealerships turned 15,496 units while the company wholesaled 6,059 vehicles, a figure also 17 percent higher than the third quarter of last year.

While other publicly traded dealer groups watched their used-vehicle gross profits get pinched during the third quarter, Lithia lifted this metric by 6.7 percent in Q3. The figure moved up to $2,687 from $2,519 a year earlier.

As a result, Lithia’s gross margins on used vehicles increased during the third quarter by 20 basis points to 14.8 percent, a level on par for the company’s outlook for 2013.

Other Q3 and Nine-Month Operating Highlights

Lithia leadership mentioned other operational areas that flourished during the third quarter, including:

—New-vehicle same store sales increased 16 percent.

—Service, body and parts same store sales increased 6 percent.

—SG&A expense as a percentage of gross profit decreased 120 basis points to 65.6 percent.

“Our stores delivered another solid quarter of sales growth that outpaced the national rate of recovery,” Lithia president and chief executive officer Bryan DeBoer said.

“However, opportunities continue to exist for our team to improve new and used vehicle sales volumes and new vehicle gross margin levels,” DeBoer continued. “Our focus is on capturing the benefit of additional unit sales for future business — both through the sale of trade-in vehicles, incremental F&I income and the annuity value of future service work on vehicles sold today.”

For the first nine months of this year, Lithia reported that its adjusted net income per diluted share from continuing operations increased 36 percent to $3.02, up from $2.22 for the same span last year.

Unadjusted, Lithia’s net income from continuing operations was $2.98 per diluted share for the first nine months of this year, compared to $2.28 per diluted share for the first nine months of last year.

“Adjusted SG&A expense as a percentage of gross profit was a record low 65.6 percent in the quarter and 66.8 percent for the first nine months of 2013,” Lithia senior vice president and chief financial officer Chris Holzshu said.

“Our same-store incremental throughput, or the percentage of additional gross profit we retain after selling costs, was 41 percent in the third quarter,” Holzshu continued. “Our target of 50 percent incremental throughput remains unchanged, and we believe it is achievable despite the shortfall in the quarter.

“Our stores remain focused on leveraging our cost structure as we grow organically and through acquisitions,” he added.

Corporate Development, Balance Sheet Update and Dividend Payment

Back on Oct. 7, Lithia acquired Stockton Nissan Kia in Stockton, Calif., with estimated annualized revenues of $45 million.

“We are pleased to add another store to the family, bringing the total number of new locations in 2013 to five,” DeBoer said.  “As the improvement in new vehicle sales growth moderates, acquisitions will become an increasingly important component in our strategic plan.”

The company determined it ended the third quarter with $16 million in cash and $165 million in available credit on its credit facilities.

Additionally, approximately $160 million of Lithia’s operating real estate is currently unfinanced, which executives estimate could provide up to an additional $120 million in available liquidity, for total liquidity of $301 million.

Lithia also announced that its board of directors approved a dividend of $0.13 per share related to third quarter financial results.

Lithia will pay the dividend Nov. 22 to shareholders of record on Nov. 8.

Increased Outlook for 2013

Lithia is projecting fourth-quarter earnings of $0.88 to $0.90 per diluted share and full-year earnings of $3.90 to $3.92 per diluted share.

Executives indicated both projections are based on the following annual assumptions:

—Total revenues of $3.9 to $4.0 billion

—New-vehicle same store sales increasing 16.6 percent.

—New-vehicle gross margin of 6.4 percent to 6.6 percent.

—Used-vehicle same store sales increasing 17.2 percent.

—Used-vehicle gross margin of 14.6 percent to 14.8 percent.

—Service body and parts same store sales increasing 6.3 percent.

—Service body and parts gross margin of 48.3 percent to 48.5 percent.

—Finance and insurance gross profit of $1,100 per unit.

—Tax rate of 39.5 percent.

—Average diluted shares outstanding of 26.2 million.

—Capital expenditures of $55 million.

“Guidance excludes the impact of future acquisitions, dispositions, and any potential non-core items,” Lithia said.

Outlook for 2014

Looking further ahead, Lithia is projecting first-quarter earnings of $0.91 to $0.93 per diluted share and full-year 2014 earnings of $4.15 to $4.25 per diluted share. Both projections are based on the following annual assumptions:

—Total revenues of $4.3 to $4.4 billion.

—New-vehicle same store sales increasing 8.2 percent

—New-vehicle gross margin of 6.2 percent to 6.4 percent.

—Used-vehicle same store sales increasing 7.6 percent.

—Used-vehicle gross margin of 14.5 percent to 14.7 percent.

—Service body and parts same store sales increasing 6.0 percent.

—Service body and parts gross margin of 48.0 percent to 48.2 percent.

—Finance and insurance gross profit of $1,100 per unit.

—Tax rate of 39.5 percent.

—Average diluted shares outstanding of 26.4 million.

—Capital expenditures of $63 million

Lithia reiterated that “Guidance excludes the impact of future acquisitions, dispositions, and any potential non-core items.”

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