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Lithia Motors Reports Adjusted EPS of $0.76 for Second Quarter

Lithia Motors Reports Adjusted EPS of $0.76 for Second Quarter 2012,
Revenue Up 26%; Increases 2012 Outlook 
Lithia Motors Declares $0.10 per Share Dividend for Second Quarter
2012 
MEDFORD, OR -- (Marketwire) -- 07/25/12 --  Lithia Motors, Inc.
(NYSE: LAD) today reported 2012 second quarter adjusted income from
continuing operations of $19.9 million, or $0.76 per diluted share.
This compares to a 2011 second quarter adjusted income from
continuing operations of $14.4 million, or $0.54 per diluted share.
Unadjusted net income from continuing operations for the second
quarter of 2012 was $20.5 million or $0.78 per diluted share,
compared to $14.7 million or $0.55 per diluted share for 2011.  
As shown in the attached non-GAAP reconciliation table, the 2012
second quarter adjusted income from continuing operations is reduced
to exclude a benefit of $0.02 per share for a non-core tax attribute.
The 2011 second quarter adjusted results from continuing operations
exclude a benefit of $0.01 per share for a tax item. 
Second quarter 2012 revenue from continuing operations increased
$174.6 million, or 26% to $847.1 million, compared to $672.5 million
in the second quarter of 2011.  
Second Quarter Year-over-Year Operating Highlights: 


 
--  New vehicle same store sales increased 34%
--  Used vehicle retail same store sales increased 20%
--  Service, body and parts same store sales increased 7%
--  SG&A expense as a percentage of gross profit was 69.6%, a
    reduction of 160 basis points
--  Earnings per share increased 41%; $0.76 is the highest second quarter
    EPS in company history

  
"We remain focused on improving our operations and increasing our
market share," said Bryan DeBoer, President and CEO. "I'm proud of
the results our team delivered in the second quarter. With that said,
we still have opportunities in all facets of our business and our
leaders continue to identify areas where performance can improve.
Additionally, in many of our western markets, the new vehicle sales
recovery has lagged national levels. This factor will serve as a
future catalyst for growth." 
For the first six months of 2012, revenue from continuing operations
increased 28% to $1.6 billion as compared to $1.3 billion in 2011.
Same store new vehicle sales i
ncreased 30%, used vehicle retail same
store sales increased 19% and service, body and parts same store
sales increased 6%. For the first six months of 2012 adjusted net
income from continuing operations was $1.36 per share as compared to
$0.87 per share in 2011. Unadjusted, for the first six months of
2012, net income from continuing operations was $1.42 per diluted
share, compared to $0.86 per diluted share for 2011. 
Corporate Development
 On April 30, 2012, Lithia purchased a
Chevrolet Cadillac store in Bellingham, Washington with estimated
annual revenues of $40 million. On June 12, 2012, Lithia purchased
GMC and Buick franchises in Fairbanks, Alaska, to combine with our
Chevrolet store in the community. On June 25, 2012, Lithia was
awarded Dodge and Ram franchises and opened a store in Las Cruces,
New Mexico. Estimated annual revenues from the Fairbanks and Las
Cruces franchises are $35 million. 
Commenting on the acquisition activity, DeBoer said, "In the second
quarter, we were able to identify several opportunities that fit our
core strategy of seeking exclusive franchises in our markets. I am
excited to welcome our new employees to the family." 
Share Repurchases
 During the second quarter, Lithia repurchased
741,092 shares of its Class A common stock at a weighted average
price of $24.23 per share. For the first six months of 2012, Lithia
repurchased 823,092 shares of its Class A common stock at a weighted
average price of $24.17 per share.  
The Board of Directors has increased the existing authorization by 1
million shares, bringing the total remaining repurchase authorization
to 1,879,853 shares. 
Chris Holzshu, SVP and Chief Financial Officer, commented, "We remain
focused on the prudent allocation of capital. While our first choice
remains acquisitions and internal investment, we are pleased to
provide a dividend and opportunistically repurchase shares to return
value to our shareholders." 
Balance Sheet Update
 Lithia ended the second quarter with $16
million in cash and $76 million in available credit on our credit
facilities. In total, this represents approximately $92 million in
available liquidity. 
During the second quarter, Lithia strategically retired approximately
$23 million in mortgages, and refinanced approximately $70 million of
mortgages to extend the maturity dates. As a result, Lithia has no
mortgage maturities until 2015, when approximately $13 million
matures. 
Dividend Payment
 Lithia announced that the Board of Directors has
approved a dividend of $0.10 per share for the second quarter 2012.
Lithia will pay the dividend August 24, 2012 to shareholders of
record on August 10, 2012. 
Updated Outlook for 2012
 Lithia projects its 2012 third quarter
earnings within a range of $0.74 to $0.76 per diluted share.
Full-year 2012 earnings are projected within a range of $2.69 to
$2.75 per diluted share. Both projections are based on the following
annual assumptions: 


 
--  Total revenues in range of $3.2 to $3.3 billion
--  New vehicle same store sales increasing 22.0%
--  New vehicle gross margin ranging from 7.3% to 7.6%
--  Used vehicle same store sales increasing 16.0%
--  Used vehicle gross margin ranging from 14.7% to 14.9%
--  Service body and parts same store sales increasing 4.5%
--  Service body and parts gross margin ranging from 48.3% to 48.5%
--  Finance and insurance gross profit of $1,050 per unit
--  Tax rate of 40%
--  Average diluted shares outstanding of 26.1 million
--  Capital expenditures of $48 million
--  Guidance excludes the impact of future acquisitions, dispositions, and
    any potential non-core items

  
Second Quarter Earnings Conference Call and Updated Presentation
 The
second quarter conference call may be accessed at 10:00 a.m. ET today
by telephone at 877-407-8029. An updated presentation highlighting
the first quarter results has been added to Investor Relations on
www.lithia.com. 
To listen live on our website or for replay, visit Investor Relations
on www.lithia.com and click on webcasts. A playback of the conference
call will be available on July 25, 2012 through August 8, 2012 by
calling 877-660-6853 (Conference ID: 397183, Account: 305). 
About Lithia
 Lithia Motors, Inc. is the ninth largest automotive
retailer in the United States. Lithia sells 27 brands of new and all
brands of used vehicles at 85 stores, which are located in 11 states.
Lithia also arranges finance, warranty, and credit insurance
contracts; and provides vehicle parts, maintenance, and repair
services at all of its locations.  
Sites
 www.lithia.com 
www.lithiacareers.com 
www.assuredservice.com 
Lithia Motors on Facebook
 http://www.facebook.com/LithiaMotors 
Lithia Motors on Twitter
 http://twitter.com/lithiamotors 
Forward-Looking Statements
 This press release includes
"forward-looking statements" within the meaning of the "Safe-Harbor"
provisions of the Private Securities Litigation Reform Act of 1995,
which management believes are a benefit to shareholders.
Forward-looking statements in this press release include our guidance
regarding third quarter and full year 2012 results, the new vehicle
sales recovery in western markets and incremental opportunities to
improve our operational results. Forward lo
oking statements include
statements regarding our goals, plans, projections and guidance
regarding our financial position, results of operations, market
position, pending and potential future acquisitions and business
strategy, and often contain words such as "expects," "anticipates,"
"intends," "plans," "believes," "seeks" or "will." These statements
are necessarily subject to risk and uncertainty and actual results
could differ materially due to certain risk factors, including
without limitation, future economic conditions and others set forth
from time to time in the company's filings with the SEC. We urge you
to carefully consider this information. We undertake no duty to
update our forward-looking statements, including our earnings
outlook, which are made as of the date of this release.  
Non-GAAP Financial Measures 
 This press release and the attached
financial tables contain certain non-GAAP financial measures as
defined under SEC rules, such as adjusted net income and diluted
earnings per share from continuing operations, adjusted SG&A as a
percentage of revenues and gross profit, adjusted operating margin,
adjusted operating profit as a percentage of gross profit, and
adjusted pre-tax margin. These measures exclude certain items
disclosed in the attached financial tables. Cash flows from
operations were adjusted to include the change in non-trade floor
plan debt to improve the visibility of cash flows related to vehicle
financing. As required by SEC rules, the Company has provided
reconciliations of these measures to the most directly comparable
GAAP measures, which are set forth in the attachments to this
release. The Company believes that each of the foregoing non-GAAP
financial measures improves the transparency of the Company's
disclosure, provides a meaningful presentation of the Company's
results from its core business operations excluding adjustments for
items not related to the Company's ongoing core business operations
or other non-cash adjustments, and improves the period-to-period
comparability of the Company's results from its core business
operations. These presentations are not intended to provide net
income, cash flows from operations, operating income, or selling,
general and administrative costs in accordance with GAAP and should
not be considered an alternative to GAAP measures. 


 
                                                                            
Lithia Motors, Inc.                                                         
Consolidated Statements of Operations (Unaudited)                           
(In thousands except per share data)                                        
                                                                            
                                Three Months Ended                         
                                     June 30,                         %
                               --------------------   Increase    Increase
                                  2012       2011    (Decrease)  (Decrease) 
                               ---------  ---------  ----------  ---------- 
Revenues:                                                                   
New vehicle retail             $ 470,424  $ 347,727  $  122,697        35.3%
Used vehicle retail              212,767    176,591      36,176        20.5 
Used vehicle wholesale            36,083     29,153       6,930        23.8 
Finance and insurance             27,870     20,886       6,984        33.4 
Service, body and parts           88,585     80,937       7,648         9.4 
Fleet and other                   11,394     17,193      (5,799)      (33.7)
                               ---------  ---------  ----------  ---------- 
  Total revenues                 847,123    672,487     174,636        26.0 
Cost of sales:                                                              
New vehicle retail               435,785    319,726     116,059        36.3 
Used vehicle retail              181,023    149,590      31,433        21.0 
Used vehicle wholesale            35,779     28,885       6,894        23.9 
Service, body and parts           45,343     41,242       4,101         9.9 
Fleet and other                   11,004     15,907      (4,903)      (30.8)
                               ---------  ---------  ----------  ---------- 
  Total cost of sales            708,934    555,350     153,584        27.7 
                               ---------  ---------  ----------  ---------- 
Gross profit                     138,189    117,137      21,052        18.0 
Other asset impairments                -        490        (490)         NM 
SG&A expense                      96,167     82,768      13,399        16.2 
Depreciation and amortization      4,261      4,217          44         1.0 
                               ---------  ---------  ----------  ---------- 
Income from operations            37,761     29,662       8,099        27.3 
Floor plan interest expense       (3,119)    (3,359)       (240)       (7.1)
Other interest expense            (2,549)    (3,011)       (462)      (15.3)
Other income, net                    820        171         649       379.5 
                               ---------  ---------  ----------  ---------- 
Income from continuing                                                      
 operations before income                                                   
 taxes                            32,913     23,463       9,450        40.3 
Income tax expense               (12,422)    (8,777)      3,645        41.5 
Income tax rate                     37.7%      37.4%                        
                               ---------  ---------  ----------  ---------- 
Income from continuing                                                      
 operations                    $  20,491  $  14,686  $    5,805        39.5%
Income from discontinued                                                    
 operations                            -        140        (140)         NM 
                               ---------  ---------  ----------  ---------- 
Net income                     $  20,491  $  14,826  $    5,665        38.2%
                                                                            
Diluted net income per share:                                               
Continuing operations          $    0.78  $    0.55  $     0.23        41.8%
Discontinued operations                -          -           -           - 
                               ---------  ---------  ----------  ---------- 
Net income per share           $    0.78  $    0.55  $     0.23        41.8%
                               =========  =========  ==========  ========== 
                                                                            
Diluted shares outstanding        26,185     26,860        (675)      (2.5)%
                                                                            
NM - not meaningful                                                         
                                                                            
                                                                            
                                                                            
                                                                            
Lithia Motors, Inc.                                            
             
Key Performance Metrics (Unaudited)                                         
                                                                            
                                Three Months Ended                         
                                     June 30,                         %  
                               --------------------   Increase    Increase
                                  2012       2011    (Decrease)  (Decrease) 
                               ---------  ---------  ----------  ---------- 
Gross margin                                                                
New vehicle retail                   7.4%       8.1%   (70) bps             
Used vehicle retail                 14.9       15.3    (40) bps             
Used vehicle wholesale               0.8        0.9    (10) bps             
Finance and insurance              100.0      100.0       - bps             
Service, body and parts             48.8       49.0    (20) bps             
Fleet and Other                      3.4        7.5   (410) bps             
Gross profit margin                 16.3       17.4   (110) bps             
                                                                            
Unit sales                                                                  
New vehicle retail                14,406     10,725       3,681        34.3%
Used vehicle retail               11,923     10,085       1,838        18.2 
Used vehicle wholesale             4,621      3,767         854        22.7 
Total units sold                  30,950     24,577       6,373        25.9 
                                                                            
Average selling price                                                       
New vehicle retail             $  32,655  $  32,422  $      233         0.7%
Used vehicle retail               17,845     17,510         335         1.9 
Used vehicle wholesale             7,808      7,739          69         0.9 
                                                                            
Average gross profit per unit                                               
New vehicle retail             $   2,404  $   2,611  $     (207)      (7.9)%
Used vehicle retail                2,662      2,677         (15)       (0.6)
Used vehicle wholesale                66         71          (5)       (7.0)
Finance and insurance              1,059      1,004          55         5.5 
                                                                            
Revenue mix                                                                 
New vehicle retail                  55.5%      51.7%                        
Used vehicle retail                 25.1       26.3                         
Used vehicle wholesale               4.3        4.3                         
Finance and insurance, net           3.3        3.1                         
Service, body and parts             10.5       12.0                         
Fleet and other                      1.3        2.6                         
                                                                            
                                     Adjusted              As reported      
                               --------------------  ---------------------- 
                                Three Months Ended     Three Months Ended   
                                     June 30,               June 30,        
                               --------------------  ---------------------- 
Other metrics                     2012       2011       2012        2011    
                               ---------  ---------  ----------  ---------- 
SG&A as a % of revenue              11.4%      12.4%       11.4%       12.3%
SG&A as a % of gross profit         69.6       71.2        69.6        70.7 
Operating profit as a % of                                                  
 revenue                             4.5        4.4         4.5         4.4 
Operating profit as a % of                                                  
 gross profit                       27.3       25.2        27.3        25.3 
Pretax margin                        3.9        3.5         3.9         3.5 
Net profit margin                    2.4        2.1         2.4         2.2 
                                                                            
                                                                            
                                                                            
                                                                            
Lithia Motors, Inc.                                                         
Same Store Operating Highlights (Unaudited)                                 
                                                                            
                                Three Months Ended                         
                                     June 30,                         % 
                               --------------------   Increase    Increase
                                  2012       2011    (Decrease)  (Decrease) 
                               ---------  ---------  ----------  ---------- 
Revenues                                                                    
New vehicle retail             $ 454,445  $ 339,427  $  115,018        33.9%
Used vehicle retail              205,794    171,768      34,026        19.8 
Used vehicle wholesale            34,828     28,209       6,619        23.5 
Finance and insurance             27,086     20,163       6,923        34.3 
Service, body and parts           83,960     78,598       5,362         6.8 
Fleet and Other                    9,613     17,043      (7,430)      (43.6)
                               ---------  ---------  ----------             
Total revenues                 $ 815,726  $ 655,208  $  160,518        24.5 
                                                                            
Gross profit                                                                
New vehicle retail             $  33,375  $  27,328  $    6,047        22.1%
Used vehicle retail               30,779     26,319       4,460        16.9 
Used vehicle wholesale               291        257          34        13.2 
Finance and insurance             27,086     20,163       6,923        34.3 
Service, body and parts           40,089     37,779       2,310         6.1 
Fleet and Other                      195        813        (618)      (76.0)
                               ---------  ---------  ----------             
Total gross profit             $ 131,815  $ 112,659  $   19,156        17.0 
                                                                            
Unit sales                                                                  
New vehicle retail                13,939     10,486       3,453        32.9%
Used vehicle retail               11,546      9,847       1,699        17.3 
Used vehicle wholesale             4,497      3,683         814     
   22.1 
Total units sold                  29,982     24,016       5,966        24.8 
                                                                            
Average selling price                                                       
New vehicle retail             $  32,602  $  32,370  $      232         0.7%
Used vehicle retail               17,824     17,444         380         2.2 
Used vehicle wholesale             7,745      7,659          86         1.1 
                                                                            
Average gross profit per unit                                               
New vehicle retail             $   2,394  $   2,606  $     (212)      (8.1)%
Used vehicle retail                2,666      2,673          (7)       (0.3)
Used vehicle wholesale                65         70          (5)       (7.1)
Finance and insurance              1,063        992          71         7.2 
                                                                            
                                                                            
                                                                            
                                                                            
Lithia Motors, Inc.                                                         
Consolidated Statements of Operations (Unaudited)                           
(In thousands except per share data)                                        
                                                                            
                               Six Months Ended                            
                                   June 30,                          %   
                            ----------------------   Increase    Increase
                               2012        2011     (Decrease)  (Decrease)  
                            ----------  ----------  ----------  ----------  
Revenues:                                                                   
New vehicle retail          $  874,712  $  648,367  $  226,345        34.9% 
Used vehicle retail            408,188     333,069      75,119        22.6  
Used vehicle wholesale          70,419      58,690      11,729        20.0  
Finance and insurance           53,290      40,185      13,105        32.6  
Service, body and parts        175,033     154,698      20,335        13.1  
Fleet and other                 24,375      20,335       4,040        19.9  
                            ----------  ----------  ----------  ----------  
  Total revenues             1,606,017   1,255,344     350,673        27.9  
Cost of sales:                                                              
New vehicle retail             808,947     597,760     211,187        35.3  
Used vehicle retail            347,530     283,084      64,446        22.8  
Used vehicle wholesale          69,697      58,023      11,674        20.1  
Service, body and parts         90,198      79,242      10,956        13.8  
Fleet and other                 23,585      18,502       5,083        27.5  
                            ----------  ----------  ----------  ----------  
  Total cost of sales        1,339,957   1,036,611     303,346        29.3  
                            ----------  ----------  ----------  ----------  
Gross profit                   266,060     218,733      47,327        21.6  
Other asset impairments            115         872        (757)      (86.8) 
SG&A expense                   187,757     159,902      27,855        17.4  
Depreciation and                                                            
 amortization                    8,460       8,309         151         1.8  
                            ----------  ----------  ----------  ----------  
Income from operations          69,728      49,650      20,078        40.4  
Floor plan interest expense     (6,069)     (5,821)        248         4.3  
Other interest expense          (5,296)     (6,303)     (1,007)      (16.0) 
Other income, net                1,319         248       1,071       431.9  
                            ----------  ----------  ----------  ----------  
Income from continuing                                                      
 operations before income                                                   
 taxes                          59,682      37,774      21,908       (58.0) 
Income tax expense             (22,395)    (14,700)      7,695        52.3  
Income tax rate                   37.5%       38.9%                         
                            ----------  ----------  ----------  ----------  
Income from continuing                                                      
 operations                 $   37,287  $   23,074  $   14,213       (61.6)%
Income from discontinued                                                    
 operations                          -         457        (457)         NM  
                            ----------  ----------  ----------  ----------  
Net income                  $   37,287  $   23,531  $   13,756        58.5% 
                                                                            
Diluted net income per                                                      
 share:                                                                     
Continuing operations       $     1.42  $     0.86  $     0.56      (65.1)% 
Discontinued operations              -        0.02       (0.02)         NM  
                            ----------  ----------  ----------  ----------  
Net income per share        $     1.42  $     0.88  $     0.54      (61.4)% 
                            ==========  ==========  ==========  ==========  
                                                                            
Diluted shares outstanding      26,331      26,779        (448)      (1.7)% 
                                                                            
NM - not meaningful                                                         
                                                                            
                                                                            
                                                                            
                                                                            
Lithia Motors, Inc.                                                         
Key Performance Metrics (Unaudited)                                         
                                                                            
                                 Six Months Ended                          
                                     June 30,                         %  
                               --------------------   Increase    Increase
                                  2012       2011    (Decrease)  (Decrease) 
                               ---------  ---------  ----------  ---------- 
Gross margin                                                                
New vehicle retail                   7.5%       7.8%   (30) bps             
Used vehicle retail                 14.9       15.0    (10) bps             
Used vehicle wholesale               1.0        1.1    (10) bps             
Finance and insurance              100.0      100.0       - bps             
Service, body and parts             48.5       48.8    (30) bps             
Fleet and Other                      3.2        9.0   (580) bps             
Gross profit margin                 16.6       17.4    (80) bps             
                                                                            
Unit sales                                                                  
New vehicle retail                26,875     20,250       6,625        32.7%
Used vehicle retail               23,431     19,591       3,840        19.6 
Used vehicle wholesale             9,214      7,509       1,705        22.7 
Total units sold                  59,520     47,350      12,170        25.7 
                                                                            
Average selling price                                                       
New vehicle retail             $  32,547  $  32,018  $      529         1.7%
Used vehicle retail               17,421     17,001         420         2.5 
Used vehicle wholesale             7,643      7,816        (173)       (2.2)
                                                                            
Average gross profit per unit                                               
New vehicle retail             $   2,447  $   2,499  $      (52)      (2.1)%
Used vehicle retail                2,589      2,551          38         1.5 
Used vehicle wholesale                78         89         (11)      (12.4)
Finance and insurance              1,059      1,009          50         5.0 
                                                                            
Revenue mix                                                                 
New vehicle retail                  54.5%      51.6%                        
Used vehicle re
tail                 25.4       26.5                         
Used vehicle wholesale               4.4        4.8                         
Finance and insurance, net           3.3        3.2                         
Service, body and parts             10.9       12.3                         
Fleet and other                      1.5        1.6                         
                                                                            
                                     Adjusted              As reported      
                               --------------------  ---------------------- 
                                 Six Months Ended       Six Months Ended    
                                     June 30,               June 30,        
                               --------------------  ---------------------- 
Other metrics                     2012       2011       2012        2011    
                               ---------  ---------  ----------  ---------- 
SG&A as a % of revenue              11.7%      12.8%       11.7%       12.7%
SG&A as a % of gross profit         70.8       73.4        70.6        73.1 
Operating profit as a % of                                                  
 revenue                             4.3        4.0         4.3         4.0 
Operating profit as a % of                                                  
 gross profit                       26.0       22.8        26.2        22.7 
Pretax margin                        3.7        3.0         3.7         3.0 
Net profit margin                    2.2        1.9         2.3         1.8 
                                                                            
                                                                            
                                                                            
                                                                            
Lithia Motors, Inc.                                                         
Same Store Operating Highlights (Un
audited)                                 
                                                                            
                                Six Months Ended                           
                                    June 30,                          %  
                             ----------------------   Increase    Increase
                                2012        2011     (Decrease)  (Decrease) 
                             ----------  ----------  ----------  ---------- 
Revenues                                                                    
New vehicle retail           $  825,948  $  636,106  $  189,842        29.8%
Used vehicle retail             388,771     325,676      63,095        19.4 
Used vehicle wholesale           66,789      56,944       9,845        17.3 
Finance and insurance            50,825      38,627      12,198        31.6 
Service, body and parts         159,943     151,122       8,821         5.8 
Fleet and Other                  19,376      19,953        (577)       (2.9)
                             ----------  ----------  ----------             
Total revenues               $1,511,652  $1,228,428  $  283,224        23.1 
                                                                            
Gross profit                                                                
New vehicle retail           $   61,748  $   49,520  $   12,228        24.7%
Used ve
hicle retail              58,191      48,629       9,562        19.7 
Used vehicle wholesale              670         649          21         3.2 
Finance and insurance            50,825      38,627      12,198        31.6 
Service, body and parts          75,678      71,915       3,763         5.2 
Fleet and Other                     404         967        (563)      (58.2)
                             ----------  ----------  ----------             
Total gross profit           $  247,516  $  210,307  $   37,209        17.7 
                                                                            
Unit sales                                                                  
New vehicle retail               25,570      19,877       5,693        28.6%
Used vehicle retail              22,403      19,197       3,206        16.7 
Used vehicle wholesale            8,809       7,354       1,455        19.8 
Total units sold                 56,782      46,428      10,354        22.3 
                                                                            
Average selling price                                                       
New vehicle retail           $   32,301  $   32,002  $      299         0.9%
Used vehicle retail              17,354      16,965         389         2.3 
Used vehicle wholesale            7,582       7,743        (161)       (2.1)
                                                                            
Average gross profit per                                                    
 unit                                                                       
New vehicle retail           $    2,415  $    2,491  $      (76)      (3.1)%
Used vehicle retail               2,597       2,533          64         2.5 
Used vehicle wholesale               76          88         (12)      (13.6)
Finance and insurance             1,059         989          70         7.1 
                                                                            
                                                                            
                                                                            
                                                                            
Lithia Motors, Inc.                                                         
Other Highlights (Unaudited)                                                
                                                                            
                                                      As of                 
                                      June 30,    December 31,    June 30,  
                                    ----------------------------------------
                                        2012          2011          2011    
                                    ------------  ------------  ------------
Days Supply(1)   
                                                           
New vehicle inventory                    74            62            68     
Used vehicle inventory                   52            52            56     
                                                                            
(1) Days supply calculated based on current inventory levels, excluding in- 
 transit vehicles, and a 30-day historical cost of sales level.             
                                                                            
                                                                            
Financial covenants                                                         
                                     Requirement         As of June 30, 2012
                             --------------------------  -------------------
Current ratio                   Not less than 1.20 to 1            1.30 to 1
Fixed charge coverage ratio     Not less than 1.20 to 1            1.49 to 1
Leverage ratio                  Not more than 5.00 to 1            2.19 to 1
Funded debt restriction      Not more than $375 million       $180.5 million
                                                                            
                                                                            
                                                                            
                                                                            
Lithia Motors, Inc.                                                         
Revenue Mix (Unaudited)                                                     
                                                                            
                                     Three months ended   Six months ended  
                                          June 30,            June 30,      
                                     ------------------  ------------------ 
                                       2012      2011      2012      2011   
                                     --------  --------  --------  -------- 
New vehicle unit sales brand mix                                            
Chrysler                                 32.8%     30.5%     32.5%     29.7%
General Motors                           15.8      16.9      15.1      16.7 
Toyota                                   13.4      11.4      13.0      12.9 
Subaru                                    6.7       4.7       7.0       5.3 
Honda, Acura                              7.1       7.7       6.8       7.9 
BMW, Mini                                 6.3       7.3       6.5       6.1 
Ford                                      4.9       6.0       5.2       5.9 
Hyundai                                   4.6       5.5       4.7       5.8 
Nissan                                    2.5       3.3       2.8       3.8 
Mercedes                                  2.4       2.1       2.5       1.5 
Volkswagen, Audi                          1.8       2.4       1.9       2.3 
Kia                                       0.8       1.2       1.0       1.2 
Mazda                                     0.5       0.6       0.6       0.5 
Other                                     0.4       0.4       0.4       0.4 
                                                                            
                                     Three months ended   Six months ended  
                                          June 30,            June 30,      
                                     ------------------  ------------------ 
                                       2012      2011      2012      2011   
                                     --------  --------  --------  -------- 
Revenue geographic mix                                                      
Texas                                    25.1%     24.4%     24.8%     24.7%
Oregon                                   20.1      20.9      20.8      18.9 
California                               10.2       9.6      10.3      10.0 
Washington                                9.6       9.2       9.4       9.9 
Montana                                   8.8       8.1       8.6       8.2 
Alaska                                    8.5       9.6       8.5       9.3 
Idaho                                     5.1       5.5       5.2       6.0 
Nevada                                    4.4       4.3       4.6       4.6 
Iowa                                      4.7       5.3       4.6       5.3 
North Dakota                              2.4       2.1       2.2       2.1 
New Mexico                                1.1       1.0       1.0       1.0 
                                                                            
                                       As of July 27,                       
                                            2012                            
                                     ------------------                     
                                       # of      % of                       
Current store count mix               stores     total                      
                                     --------  --------                     
Chrysler                                   23      27.1%                    
General Motors                             13      15.3                     
Honda, Acura                                9      10.6                     
Toyota                                      8       9.4                     
BMW, MINI                                   7       8.2                     
Hyundai                                     6       7.1                     
Ford                                        5       5.9                     
Nissan                               
       3       3.5                     
Mercedes                                    3       3.5                     
Subaru                                      3       3.5                     
Kia                                         2       2.4                     
Other                                       2       2.4                     
Volkswagen, Audi                            1       1.1                     
                                                                            
                                                                            
                                                                            
                                                                            
Lithia Motors, Inc.                                                         
Consolidated Balance Sheets (Unaudited)                                     
(In thousands except per share data)                                        
                                                                            
                                         June 30, 2012    December 31, 2011 
                                       -----------------  ----------------- 
Cash and cash equivalents              $          16,247  $          20,851 
Trade receivables, net                           117,747             99,407 
Inventories, net                                 617,568            506,484 
Deferred income taxes                              3,976              4,730 
Other current assets                              10,588             16,719 
                                       -----------------  ----------------- 
Total current assets                   $         766,126  $         648,191 
                                                                            
Property and equipment, net                      387,652            373,779 
Goodwill                                          22,608             18,958 
Franchise value                                   59,319             59,095 
Deferred income taxes                             29,849             29,270 
Other non-current assets                          18,021             16,840 
                                       -----------------  ----------------- 
Total assets                           $       1,283,575          1,146,133 
                                       =================  ================= 
                                                                            
Floor plan notes payable               $          13,743  $         114,760 
Floor plan notes payable: non trade              482,390            229,180 
Current maturities of long-term debt               7,718              8,221 
Trade payables                                    40,196             31,712 
Accrued liabilities                               79,758             72,711 
                                       -----------------  ----------------- 
Total current liabilities              $         623,805            456,584 
                                                                            
Long-term debt                                   224,746            278,653 
Deferred revenue                                  30,110             25,146 
Other long-term liabilities                       19,921             18,629 
                                       -----------------  ----------------- 
Total liabilities                      $         898,582  $         779,012 
                                       -----------------  ----------------- 
                                                                            
Class A common stock                             263,559            279,366 
Class B common stock                                 437                468 
Additional paid-in capital                        10,949             10,918 
Accumulated other comprehensive loss              (3,718)            (4,508)
Retained earnings                                113,766             80,877 
                                       -----------------  ----------------- 
Total liabilities & stockholders'                                           
 equity                                $       1,283,575  $       1,146,133 
                                       =================  ================= 
                                                                            
                                                                            
                                                                            

 
                                                                            
Lithia Motors, Inc.                                                         
Summarized Cash Flow from Operations (Unaudited)                            
(In thousands)                                                              
                                                                            
                                                       Six Months Ended     
                                                           June 30,         
                                                   ------------------------ 
                                                       2012         2011    
                                                   -----------  ----------- 
Net income                                         $    37,287  $    23,531 
                                                                            
Adjustments to reconcile net income to net cash                             
 used in operating activities:                                              
Asset impairments                                          115          872 
Depreciation and amortization                            8,460        8,485 
Depreciation and amortization within discontinued                           
 operations                                                  -           21 
Stock-based compensation                                 1,512        1,034 
Gain on disposal of assets                                (983)        (190)
Loss from disposal activities within discontinued                           
 operations                                                  -           53 
Deferred income taxes                                      302        2,060 
Excess tax benefit from share-based payment                                 
 arrangements                                           (1,026)        (278)
(Increase) decrease:                                                        
  Trade receivables, net                               (18,305)      (6,579)
  Inventories                                         (109,592)     (60,498)
  Other current assets                                   4,680         (461)
  Other non-current assets                              (1,847)        (884)
Increase (decrease):                                                        
  Floor plan notes payable                             (94,305)       1,744 
  Trade payables                                         7,289        4,679 
  Accrued liabilities                      
              7,671        7,757 
  Other long-term liabilities and deferred revenue       6,700        1,418 
                                                   -----------  ----------- 
Net cash used in operating activities              $  (152,042) $   (17,236)
                                                   ===========  =========== 
                                                                            
                                                                            
                                                                            
                                                                            
Lithia Motors, Inc.                                                         
Reconciliation of Non-GAAP Cash Flow from Operations (Unaudited)            
(In thousands)                                                              
                                                                            
                                                       Six Months Ended     
                                                           June 30,         
                                                   ------------------------ 
Net cash provided by (used in) operating                                    
 activities                                            2012         2011    
                                                   -----------  ----------- 
As reported                                        $  (152,042) $   (17,236)
  Floor plan notes payable, non-trade                  251,844       65,789 
                                                   -----------  ----------- 
Adjusted                                           $    99,802  $    48,553 
                                                   ===========  =========== 
                                                                            
                                                                            
                                                                            
                                                                            
Lithia Motors, Inc.                                                         
Reconciliation of Certain Non-GAAP Financial Measures (Unaudited)           
(In thousands, except for per share data)                                   
                                                                            
                                      Three Months Ended June 30, 2012      
                                ------------------------------------------- 
                                 As reported   Tax attribute     Adjusted   
                                -------------  -------------  ------------- 
Income from continuing                                                      
 operations before income taxes $      32,913  $           -  $      32,913 
Income tax expense                    (12,422)          (578)       (13,000)
                                -------------  -------------  ------------- 
Net income from continuing                                                  
 operations                     $      20,491  $        (578) $      19,913 
                                =============  =============  ============= 
                                                                            
Diluted earnings per share from                                             
 continuing operations          $        0.78  $       (0.02) $        0.76 
Diluted share count                    26,185                               
                                                                            
                                                                            
                                  Three Months ended June 30, 2011          
                         -------------------------------------------------- 
                                         Asset                              
                                       Impairment  Reversal of              
                                          and      stock based              
                                        disposal     comp tax               
                         As reported      gain      shortfall     Adjusted  
                         -----------  -----------  -----------  ----------- 
Asset impairments        $       490  $      (490) $         -  $         - 
Selling, general and                                                        
 administrative               82,768          580            -       83,348 
                                                                            
Income from operations        29,662          (90)           -       29,572 
                                                                            
Income from continuing                                                      
 operations before                                                          
 income taxes            $    23,463  $       (90) $         -  $    23,373 
Income tax expense            (8,777)          37         (186)      (8,926)
                         -----------  -----------  -----------  ----------- 
Net income from                                                             
 continuing operations   $    14,686  $       (53) $      (186) $    14,447 
                         ===========  ===========  ===========  =========== 
                                                                            
Diluted earnings per                                                        
 share from continuing                                                      
 operations              $      0.55  $         -  $     (0.01) $      0.54 
Diluted share count           26,860                                        
                                                                            
                                                                            
                                                                            
                                                                            
Lithia Motors, Inc.                                                         
Reconciliation of Certain Non-GAAP Financial Measures (Unaudited)           
(In thousands, except for per share data)                                   
                                                                            
                                  Six Months Ended June 30, 2012            
                      ----------------------------------------------------- 
                                   Asset                                    
                                impairment                                  
                                    and                                     
                         As      disposal     Equity       Tax              
                      reported     gain     investment  attribute  Adjusted 
                      --------  ----------  ----------  ---------  -------- 
Asset impairments     $    115  $     (115) $        -  $       -  $      - 
Selling, general and                                                        
 administrative        187,757         739           -          -   188,496 
                                                                            
Income from                                                                 
 operations             69,728        (624)          -          -    69,104 
                                                                            
Other income, net        1,319           -        (244)         -     1,075 
                                                                            
Income from                                                                 
 continuing                                                                 
 operations before                                                          
 income taxes         $ 59,682  $     (624) $     (244) $       -  $ 58,814 
Income tax expense     (22,395)        244   
       95     (1,072)  (23,128)
                      --------  ----------  ----------  ---------  -------- 
Net income from                                                             
 continuing                                                                 
 operations           $ 37,287  $     (380) $     (149) $  (1,072) $ 35,686 
                      ========  ==========  ==========  =========  ======== 
                                                                            
Diluted earnings per                                                        
 share from                                                                 
 continuing                                                                 
 operations           $   1.42  $    (0.01) $    (0.01) $   (0.04) $   1.36 
Diluted share count     26,331                                              
                                                                            
                                                                            
                                          Six Months Ended June 30, 2011    
                                      ------------------------------------- 
                                                      Asset                 
                                                    impairment              
                                                       and                  
                                                     disposal               
                                      As reported      gain       Adjusted  
                                      -----------  -----------  ----------- 
Asset impairments                     $       872  $      (872) $         - 
Selling, general and administrative       159,902          580      160,482 
                                                                            
Income from operations                     49,650          292       49,942 
                                                                            
Income from continuing operations                                           
 before income taxes                  $    37,774  $       292  $    38,066 
Income tax expense                        (14,700)        (116)     (14,816)
                                      -----------  -----------  ----------- 
Net income from continuing operations $    23,074  $       176  $    23,250 
                                      ===========  ===========  =========== 
                                                                            
Diluted earnings per share from                                             
 continuing operations                $      0.86  $      0.01  $      0.87 
Diluted share count                        26,779                           

  
Contact:
John North
VP Finance and Controller
(541) 618-5748