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Lithia reports record quarter By GREG STILES Lithia Motors Inc. reported another record quarter for sales and profits Wednesday. The Medford-based automobile seller, with 61 stores and 119 franchises in eight western states, reported net earnings of $7.7 million, or 56 cents per share for 13.8 million outstanding shares. The previous third-quarter net earnings record was $7.5 million in 2000. The company exceeded its estimated per-share earnings by 13 cents as Lithia rode strong finance and insurance sales along with used car performance. Domestic parts and service sales also bolstered the company's bottom line. "We believe it is unique for hard goods retailers like Lithia Motors to have increasing gross margins in the midst of a slowing economic environment," said Sid DeBoer, chairman and chief executive officer. "Our domestic brands continue to be our most profitable, and on average earn a higher gross profit per unit than our import brands. While new vehicle sales growth has slowed, the growth in new vehicle gross profits has remained strong. "Despite the ongoing slowdown in the economy, we have been successful in executing our acquisition plans and strategic internal (efficiency) initiatives." Not only did the company beat projected earnings for the 20th straight quarter since going public in 1996, but there are signs that money managers might be considering Lithia's growth potential at a time when many companies are having a tough time turning a profit. Four fund managers were numbered along with analysts, investors and reporters during the company's 70-minute quarterly conference call on Wednesday. "Fund managers ask good questions, but they tend to be quiet," said Jeff DeBoer, executive vice president and chief financial officer. "They don't want other fund managers to know they're interested." Morgan Stanley has provided most of the securities analysis of Lithia in recent months, but they were joined on Wednesday with analysts from Union Bank Switzerland Warburg, Paine Webber's parent company; Stephens Inc.; and Doty & Co., which specializes in small cap (less than $1 billion market capitalization) stocks. "They're looking for a place to put money in long-term," Jeff DeBoer said. "A lot of companies are not improving and growing and (fund managers) are looking for companies with good growth plans. Tech stocks are down year over year and our earnings are up, year over year, and we're saying next year we'll be up double-digits." If money managers' actions push the company's stock price up, it wouldn't affect day to day operations but would allow the company to raise more money for acquisitions. Lithia's initial public offering at $11 per share raised $28 million in 1996 and a secondary offering at $14.50 in 1998 raised $45 million. While many dealerships concentrate on new car sales, selling relatively few used units, Lithia has long found used cars as a central part in its revenue formula. Before Lithia went public, it sold two used cars for every new unit. During its expansion phase, it has taken over many dealerships where the ratio was 0.5:1 The company reported that it now has a 0.98:1 ratio with a desire to reach 1.5:1 in the near future. "We generally finance more used cars ourselves than new," Jeff DeBoer said. Lithia reported total sales increased 6.4 percent to $471.3 million in the third quarter from $443.1 million in the third quarter of 2000. Total gross profits grew by 12.6 percent. In line with slower new-vehicle sales, the auto seller said total same-store retail sales declined by 6.7 percent for the quarter. Year-to-date same-store retail sales have declined 4.7 percent. However, Lithia noted that lower interest rates cushioned the effect of slower sales, and the company has been able to increase total sales and earnings through acquisitions and operational improvements this quarter. Even with very conservative assumptions for a continued decline in same-store sales of new vehicles, Lithia said it is forecasting continued sales and earnings growth in 2002. It expects to add $300-600 million in new acquisition revenues. Lithia raised its earnings per-share estimate for the full year 2001 to $1.44 to $1.46 a share, and left its previous estimate for the fourth quarter unchanged at 31 cents to 33 cents a share. The company expects revenue of $430 million to $450 million for the fourth quarter and $1.78 billion to $1.80 billion for 2001. Lithia's stock dropped slightly in Wednesday's trading to close at 17.15. Reach reporter Greg Stiles at 776-4463 or e-mail [email protected] Mail Tribune Home | Ottaway Newspapers, Inc. | Dow Jones & Co., Inc. | Privacy | Contact Us Copyright � 2001 Mail Tribune, Inc.