Lithia Motors released its fourth-quarter and full-year 2013 results on Wednesday, showing the highest Q4 adjusted net income and the largest annual revenue in company history, as well as double-digit boosts in new and used sales.

President and chief executive officer Bryan DeBoer also noted in the company’s conference call to discuss financial results on Wednesday that the company has reached one of its company milestones: surpassing $4 in consolidated earnings per share this past year.

He explained later in the call what role acquisitions will play in reaching further milestones during the next few years.

Outlining the company’s full-year results, total revenues came in at just above $4 billion.

And Q4’s record-breaking adjusted net income from continuing operations came in at $25.7 million, compared to $19.3 million during the same period of 2012.

"For the third consecutive quarter, we exceeded $1.0 billion in revenue," said DeBoer.

"We also exceeded $4.0 billion in annual revenue for the first time in company history. We grew same store revenue 15 percent in 2013, on top of total same store revenue increases of 23 percent in 2012, 22 percent in 2011 and 18 percent in 2010," he added.

"We've been able to maintain cost discipline over the last four years of growth, resulting in expanding operating margin each year. Our store leaders continue to challenge their teams to improve store performance while earning customers for life. Significant opportunities remain to increase used-car sales and to capture the coming wave of service work from greater vehicle sales  volumes over the last few years," he continued.

Part of these boosts came from impressive results in the used department.

Used-vehicle retail revenue came in at just above $1 billion this past year. This significant number is due to the 57,061 used vehicles retailed by Lithia dealers in 2013.

Average gross profit per used vehicle was also up this year. Average gross profit per used retail unit came in at $2,644, up from $2,538 in 2012.

High used-car prices across the nation is a trend also evident in dealership group full-year results.

The average selling price of a used vehicle at a Lithia dealership was $18,090 in 2013, up from an average of $17,377 in 2012.

Contributing to its strong full-year results, Lithia posted double-digit increases in used sales during the last quarter of the year, as well.

The company announced overall used-vehicle retail revenue came in at $253.8 million, up from $208.4 million during Q4 2012. The company retailed 13,830 used vehicles in Q4, up 15.8 percent from the 11,943 retailed during the same period of last year.

Lithia’s used vehicle retail same store sales increased by 16 percent with 13,137 units retailed.

This brought same-store used-vehicle retail revenue to $242 million, up from $208 million during the same period of 2012.

Perhaps contributing to these increases in used sales across the board is loosening pre-owned supply.

As of Dec. 31, Lithia's used vehicle inventory sat at 63 days supply, up from 56 during the same period of 2012. This marks a 7-percent year-over-year increase in used supply, perhaps boosted from the influx of off-lease vehicles and rental units in the lanes.

And it doesn’t seem recent inclement weather has put any damper on Lithia dealers.

After being asked about weather impact during the question and answer period of the call, DeBoer said, "We did have some weather issues, primarily in the Northwest and Midwest stores … We did have four days in the Northwest that was a little bit tough with snow on the ground at about 20 stores, and I think it vapor-locked things for about three of four days.

"It appears, though, that we have recaptured most of that, and there were pent-up sales we have seen for the past couple of days, so it looks like we are back on track," he added.

Acquisitions Drive Effort to Reach Company Milestones

DeBoer also explained during the conference call how acquisitions will push the company forward toward achieving its goals in the next few years.

"We remain focused on achieving the three milestones for long-term growth that we laid out in 2012, which doubles our size in three to nine years. I am pleased to announce that we achieved our first milestone by surpassing $4 in consolidated earnings per share this year,” he said. “We anticipate to achieve our second milestone of approximately $5 per share, and our third milestone or approximately $6 per share, over the next several years.”

DeBoer pointed out the next two milestone achievements will be driven more by acquisitions than organic growth.

“The acquisition market is as active as I have ever seen, and there are a number of acquisitions in play at any given week or month. We continue to look for domestic and import franchises in mid-size rural markets and exclusive luxury franchises in metropolitan markets.”

During Q4 2013, Lithia Motors purchased a total of three stores, all in California, making up part of the seven total store acquisitions made during 2013. Last year's aquisitions represent 273 million in estimated annual revenues.

This year, Lithia has already purchased a store in Hawaii and another in California.

When asked what type of stores Lithia is looking out for, DeBoer responded: "When we look at acquisitions, because our hurdle rates are so high, we typically are able to buy average performing stores. We are not typically able to buy the high performers.

"Fortunately, there are a lot of dealerships out there that are average performers, and with our model, we need them to perform at about half their potential for us to be able to buy them … right now it appears that these last two years a of a lot of deals really sitting in our size market; things are loosening up a lot more than expected," he added.

Just how does this strategy work for the company?

"When you are able to buy earnings at half their potential today, and there is potential for top-line growth of 20 to 30 percent on top of it, and now you have throughput calculation, you have the potential for active returns. Those are going to be very hard not to say yes to," DeBoer explained.

What’s In Store for 2014

During Wednesday’s conference call, the company also outlined its predictions for 2014.

The company expects total revenues of $4.5 to $4.6 billion with used-vehicle same-store sales increasing by 8 percent.

The company also expects service body and parts same store sales to increase by 7 percent, with gross margin of 48.2 percent to 48.4 percent.