Lithia Motors Inc (NYSE:LAD) Q4 2017 Earnings Conference Call - Preliminary Transcript

Feb 14, 2018 • 10:00 am ET

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Lithia Motors Inc (NYSE:LAD) Q4 2017 Earnings Conference Call - Preliminary Transcript

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Q & A
Operator
Operator

[Operator Instructions] Our first question comes from the line of Steven Dyer with Craig-Hallum. Please go ahead.

Analyst
Steven Dyer

Thanks good morning guys. Wondering if you guys could elaborate on the self deduction comment, I guess I wouldn't have necessarily put two and two together. But maybe what are you seeing or what do you anticipate seeing in terms of change in behavior?

Executive
John North

Yeah Steve this is John. We'll talk a little bit more broadly about our guidance overall. We're going through our outlook for 2018 based on current store performance and market conditions. And certainly the tax reform is going to be accretive to us but we also anticipate like the increases in interest rates this year, we are talking about 3 to even 4 interest rate increases.

I'd remind you that 1% move in interest rate is $50 million pre-tax for us or about $0.40. And then we're temporary actually there is a lot of bit on the coasts, where the majority of our sales are a limitation of the self as you mentioned.

We also didn't see a lot of the benefit as it appears many of our peers had from replacement demand due to hurricane Harvey. And when we look at our current trends in the market, we're taking the opportunity to utilize some of the tax savings to invest in our team members and improve service employee benefits.

So we kind of put that all together, it appears the market is stable. You know we're certainly not seeing and as Bryan mentioned an increasing start in 2018. And I think it's too soon to tell any more about what the ultimate impact might be on the coast.

Analyst
Steven Dyer

Alright that's helpful John and then, I mean as it relates I guess drilling down a little bit more on the tax deductibility limitations et cetera. I mean are you expecting just overall demand softness. Are you expecting people just sort of trading down, buying less car concept what are you -- I guess sort of baking in your expectations there generally?

Executive
John North

I think it's more that we haven't seen a real acceleration and if you look at how the fourth quarter ended, I mean saw end of the quarter at 78 which was up pretty dramatically. But it appears that a lot of that was concentrated in the middle part of the U.S particularly around kind of hurricane replacement. We estimate make 200,000 to 300,000 cars were lost there.

As we look at our coastal performance, that appears things are pretty steady and kind of upper 16, low 17-million-unit range and we think that some of that's a function of the fact that those are in a high state income tax locations that might be affected.

So I wouldn't say that we've seen a big shift. I think it's more that we saw pretty consistent performance in the quarter. But it appears that underline demand is a little softer than it might have indicated in Q4, based on some of