Lithia Motors reports $256.6 million loss for 2008

By any measure, 2008 was a miserable year for Lithia Motors.

The Medford auto retailer reported a net loss of $252.6 million in 2008 Monday, as new vehicle sales dove 23.4 percent and used vehicle sales dipped 11.8 percent. Lithia's first annual loss since going public more than a decade ago came on the heels of $21.549 million profit in 2007 and led the company to sell off or close faltering dealerships and slash its workforce over the past nine months.

The company's revenue decreased 18.5 percent to $2.138 billion in 2008, as a stumbling economy hammered same-store sales, while higher fuel prices, tight credit and declining home equity unraveled consumer confidence.

"We have accelerated cost-cutting measures to be proportional to the rapid and unexpected decline in the economy," Lithia Chairman and Chief Executive Officer Sid DeBoer said during a conference call. "December was almost a break-even month. Through our marketing effort, January customer traffic was up 11 percent from December and our unit sales were higher in January from December."

Based on fourth-quarter results and early 2009 trends — e-mail leads were up 40 percent during January — DeBoer vowed to fight on against recessionary trends and anticipates returning to profitability.

Lithia lost $4.278 million, or 21 cents per share, in the fourth quarter after inclusion of nine cents per share operating loss and 10 cents per share impairment on discontinued operations. The company said its net loss from continuing operations in the fourth quarter of 2008 was $419,000 or two cents per diluted share, compared to the prior year net loss from continuing operations of $409,000 or two cents per share, due to restatement of last year's results following discontinued operations designations.

During the fourth quarter, same store sales for new vehicles dropped 39.2 percent and 17.4 percent for used vehicles, compared to 2007. Parts and service same-store sales held relatively stable, with a slight decline of 1.7 percent.

Lithia raised close to $100 million dollars during 2008 from the sale of stores, financing of real estate, and the sale of development properties. In selling stores, it moved closer to balancing its mix of domestic and foreign car offerings.

"This illustrates the significant headway our company has made in our restructuring actions and cost reductions," DeBoer said.

"These restructuring actions are ongoing, and we have shown great progress on the plans outlined over the past five quarters," he said.

The company paid down its line of credit from $184 million at the start of the year to approximately $86 million at the end of the fourth quarter. Lithia has also repurchased and retired half of its convertible notes, producing a pre-tax gain of approximately $5.2 million.

Still, the company has struggled to reduce inventory. Chief Financial Officer Jeff DeBoer said the supply is nine days above its historic average.

A year ago, Lithia operated 110 stores in 46 markets in 15 states. As of Monday, Lithia had 93 stores in 39 markets located in 11 states, and Texas dealerships accounted for more than 25 percent of vehicle sales.

Sid DeBoer announced Lithia's top executives were forfeiting bonuses for the second-straight year.

"Our senior management team has experienced several recessions and cost-cutting reductions," he said. "We look for a less stressful year."

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