TO OUR SHAREHOLDERS: Lithia Motors had a very successful ...
TO OUR SHAREHOLDERS:
Lithia Motors had a very successful year in 1997. During our first complete year as a public
company, we had significant growth in revenue due to the acquisition of quality automobile
dealerships. Ongoing margin improvements as a result of our operational model also contributed
to our financial success. Lithia Motors is on track to become one of the largest automobile
retailers in the United States.
During 1997 your company:
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Successfully completed the acquisition of ten automobile dealerships, raising the total
number of locations to seventeen in California, Nevada and Oregon.
Completed a $175 million syndicated credit facility with U.S. Bank.
More than doubled our sales while improving our gross margins.
Met or exceeded Wall Street consensus estimates for every quarter since our IPO.
The year 1997 was also one of financial success. Total revenues increased 124% to $319.8
million from $142.8 million in 1996. Earnings for the year increased 129% to $6.0 million
compared to $2.6 million in 1996 or $.82 per share on 7.3 million shares outstanding versus $.52
per share on 5.0 million shares in 1996. Lithia sold a total of 7,493 new vehicles and 7,148 retail
used vehicles in 1997 compared to 3,274 and 4,156, respectively, during 1996. In addition, samestore sales increased 4.8% during 1997.
The automotive retail industry remains poised to consolidate its ranks. Increasing capital
requirements, growing competition, and manufacturer consolidation plans are fueling the
consolidation trend. Lithia has positioned itself to take advantage of the trend by continuing to
raise acquisition capital, by hiring and training the best employees, and by working to refine its
operations and systems to maximize profitability.
We are very excited about our future as we look to what lies ahead in 1998. Lithia filed for a
secondary offering of 3 million shares of Class A Common Stock on March 6, 1998. We
anticipate completing this offering during the Spring of 1998. These additional shares should be
available from our network of supporting brokerage firms. With the additional capital, we will
continue our growth strategy by acquiring quality automotive dealerships in the western United
States.
All of us at Lithia Motors would like to express our appreciation to you for your support this
year. We are proud of our accomplishments and will make every effort in the coming year to
build on our success.
Sincerely,
LITHIA MOTORS, INC.
/s/ Sidney B. DeBoer
Sidney B. DeBoer
Chairman and
Chief Executive Officer
LITHIA MOTORS INC
( LAD )
360 E JACKSON ST
MEDFORD, OR, 97501
541?776?6899
10?K
Annual report pursuant to section 13 and 15(d)
Filed on 3/31/1998
Filed Period 12/31/1997
--------------------------------------------------------------------------------------------------------------------------------------------------------------UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
____________________
[X]
[ ]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended: December 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 000-21789
LITHIA MOTORS, INC.
(Exact name of registrant as specified in its charter)
OREGON
(State or other jurisdiction of incorporation
or organization)
360 E. JACKSON STREET, MEDFORD, OREGON
(Address of principal executive offices)
93-0572810
(I.R.S. Employer
Identification No.)
97501
(Zip Code)
541-776-6899
(Registrant's telephone number including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
CLASS A COMMON STOCK, WITHOUT PAR VALUE
(Title of Class)
____________________
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: Yes [X]
No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K, or any amendment to
this Form 10-K.
[ ]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant is $22,921,600 as of February 27, 1998 based upon the last sales
price ($16.00) as reported by the Nasdaq National Market System.
The number of shares outstanding of the Registrant's Common Stock as of February
27, 1998 was: Class A: 2,925,550 shares and Class B: 4,110,000 shares.
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant has incorporated into Part III of Form 10-K, by reference,
portions of its Information Statement, relating to the 1998 Annual Meeting of
Shareholders.
---------------------------------------------------------------------------------------------------------------------------------------------------------------
LITHIA MOTORS, INC.
1997 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Page
---PART I
Item 1.
Business
2
Item 2.
Properties
14
Item 3.
Legal Proceedings
16
Item 4.
Submission of Matters to a Vote of Security Holders
16
PART II
Item 5.
Market for Registrant's Common Equity and Related Stockholder
Matters
16
Item 6.
Selected Financial Data
17
Item 7.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
18
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
25
Item 8.
Financial Statements and Supplementary Data
25
Item 9.
Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
25
PART III
Item 10.
Directors and Executive Officers of the Registrant
26
Item 11.
Executive Compensation
26
Item 12.
Security Ownership of Certain Beneficial Owners and Management
26
Item 13.
Certain Relationships and Related Transactions
26
PART IV
Item 14.
Exhibits, Financial Statement Schedules and Reports on Form 8-K
Signatures
27
33
1
PART I
ITEM 1.
BUSINESS
FORWARD LOOKING STATEMENTS AND RISK FACTORS
This Form 10-K contains forward-looking statements. These statements are
necessarily subject to risk and uncertainty. Actual results could differ
materially from those projected in these forward looking statements. These risk
factors include, but are not limited to, the cyclical nature of automobile
sales, the intense competition in the automobile retail industry and the
Company's ability to negotiate profitable acquisitions and secure manufacturer
approvals for such acquisitions.
GENERAL
Lithia Motors is a leading automotive retailer offering a total of 21 brands in
22 locations in the western United States. The Company currently operates 12
dealerships in California, 7 in Oregon and 3 in Nevada. The Company sells new
and used cars and light trucks, sells replacement parts, provides vehicle
maintenance, warranty, paint and repair services, and arranges related financing
and insurance for its automotive customers. Since December 1996 when the
Company completed its initial public offering, Lithia has acquired
17 dealerships and is actively pursuing additional acquisitions.
In 1997, the Company generated record total sales, net income and unit sales of
new and used vehicles. Total sales increased to $319.8 million in 1997 from
$142.8 million in 1996, an increase of 124%. For the same period, net income
increased to $6.0 million from $2.6 million (pro forma), an increase of 129%.
In the fourth quarter of 1997, the Company's total sales and net income were
$113.1 million and $1.9 million, respectively, representing growth of 203% and
234% compared to the same period in 1996. New vehicle unit sales increased to
7,493 in 1997 from 3,274 in 1996, an increase of 129%, and retail used vehicle
unit retail sales increased from 4,156 to 7,148, an increase of 72%.
Lithia was founded in 1946 and its two senior executives have managed the
Company for over 27 years. Management has developed and implemented its
acquisition and operating strategies which have enabled the Company to
successfully identify, acquire and integrate dealerships, achieving
profitability superior to industry averages. In 1997, the Company was able to
achieve a gross profit margin of 16.7% and a pre-tax margin of 3.0%, versus
12.9% and 1.5%, respectively, for the industry (latest 1996 data).
The Company intends to continue to take advantage of the consolidation
opportunities in the $640 billion automotive retailing industry. According to
industry data, the number of franchised automobile dealerships has declined from
more than 36,000 dealerships in 1960 to approximately 22,000 in 1997. Currently,
the largest 100 dealer groups generate less than 10% of total industry sales and
control approximately 5% of all franchised automobile dealerships. Several
economic and industry factors are expected to lead to the further consolidation
of the automobile retailing industry, including increasing capital requirements
necessary to operate an automobile dealership, the fact that many dealerships
are owned by individuals nearing retirement age who are seeking exit
opportunities, and the desire of manufacturers to strengthen their dealer
networks through consolidation. The Company believes that it is well positioned
to continue to capitalize on the highly fragmented and consolidating automotive
retail industry.
2
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