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

Feb 14, 2018 • 10:00 am ET

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

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Presentation
Executive
Bryan DeBoer

improvement.

With that, I'd like to turn the call over to John.

Executive
John North

Thanks Bryan. I'd like to provide more detail on the results in the quarter. All numbers from this point forward will be on a same-store basis. In the quarter, new vehicle revenue increased 3%, our unit sales increased 1%, better than national results, which decreased 2% from the prior year.

Our average selling price increased 2% compared to the fourth quarter of 2016. Gross profit per new vehicle retailed was $2,182 compared to $1,910 in the fourth quarter of '16, an increase of $272. Retailed used vehicle revenues increased 2%; of which, 3% was due to greater unit sales offset by a 1% decrease in selling prices. Our used-to-new ratio was 0.80 to 1.00. Gross profit per unit was $2,003 compared to $2,209 last year, a decrease of $206.

Our F&I per vehicle was $1,342 compared to $1,258 last year or an increase of $84. For the vehicles we sold in the quarter, we arranged financing on 71%, total service contracts in 44% and total lifetime oil products in 25%. Our penetration rates decreased 170 basis points for financing, increased 20 basis points for service contracts and increased 70 basis points for lifetime oil contracts. In the fourth quarter, our funded overall gross profit per unit was $3,451 compared to $3,297 last year, an increase of $154 per unit.

Our service, body and parts revenue increased 4% over the fourth quarter of 2016. Customer pay work increased 4%, warranty increased 4%, wholesale parts increased 1% and our body shops increased 6%. Our total gross margin was 14.8%, a decrease of 20 basis points from the same period last year.

As of December 31st, consolidated new vehicle inventories were at days supply of 69, an increase of one day from a year ago. Used vehicle inventories were at days supply of 67, an increase of 11 days. At December 31st, 2017, we had approximately $280 million in cash and available credit as well as unfinanced real estate that could provide another $236 million in 60 days to 90 days for an estimated total liquidity of over $0.5 billion.

At the end of the fourth quarter, we were in compliance with all of our debt covenants. Our leverage EBITDA, defined as adjusted EBITDA less used floor plan interest and capital expenditures was $80 million for the fourth quarter of '17 and was $328 million for the year. Our free cash flow, as we define in our investor presentation, was $32 million for the fourth quarter of 2017 and was $159 million for the full-year.

Our net debt to EBITDA is 2.0 times, which remains among the lowest in our sector and within our targeted range of 2.0 times to 2.5 times. As Bryan previously mentioned, our 2018 earnings outlook has been updated to adjust for the recently-passed tax legislation, anticipated interest rate increases and changing consumer behaviors on the east and west coast due to limitation on deductibility of state