Lithia Motors Announces Earnings Per Share from Continuing Operations of 53 Cents; Up 4% from the Prior Year

Lithia Motors, Inc. (NYSE:LAD) today announced that third quarter 2007 sales increased 3% to $859.7 million as compared to $834.4 million in the same period last year. New vehicle sales increased 1.4%, used vehicle sales increased 2.4%, finance/insurance sales increased 0.2%, and parts/service sales increased 14.7%. Third quarter 2007 income from continuing operations was $11.3 million as compared to $10.7 million in the third quarter of 2006. Diluted earnings per share from continuing operations were $0.53 as compared to $0.51 in the third quarter of 2006. Sid DeBoer, Lithia’s Chairman and CEO, commented, "In spite of the current headwinds we face in today’s retail environment, Lithia has been successful in adapting to these conditions while still pursuing our new business initiatives. We continue to redesign operations to not only weather the current economic situation, but prevail in the sector as an innovator.” "Third quarter sales were steadied by strong parts and service sales and revenues from acquisitions made in the past 12 months. Third quarter total same-store sales declined 5.6%. We believe that we are still seeing a challenging retail environment for automotive sales in our markets that will continue for the rest of this year and well into 2008. This is related to the ripple effects from the struggling housing market, high gas prices and consumer debt pressures. In response to these challenges, we are successfully reducing employee headcount in the stores. Our advertising expenses are down by almost 12% on a same-store basis. Our vehicle inventory levels are being carefully managed, and we have held our new and used vehicle margins steady,” concluded Sid DeBoer. For the nine month period ending September 30, 2007, total sales increased 7.6% to $2.5 billion as compared to $2.3 billion in the same period last year. New vehicle sales increased 6.4%, used vehicle sales increased 6.6%, finance/insurance sales increased 5.5%, and parts/service sales increased 18%. For the first nine months, Lithia’s net income from continuing operations was $29.2 million as compared to $33.6 million in 2006. Diluted earnings per share from continuing operations were $1.38 as compared to $1.58 in the first nine months of 2006. Jeff DeBoer, Senior Vice President and CFO, added, "We have provided fourth quarter EPS guidance and have narrowed the range on our full year 2007 guidance as shown below. For the full year and first quarter of 2008, we have projected the guidance which is also shown below. These projections call for a continuation of difficult economic conditions through 2008, but we expect that our efficiency initiatives and our Assured Selling Program will successfully grow our EPS.” "Our guidance is based on income from continuing operations and assumes a steady pace of acquisitions, dispositions, and fifteen to twenty cents of development costs associated with L2,” concluded Jeff DeBoer. Earnings per Share From Continuing Operations:                                     Guidance Guidance Guidance Guidance Q4 2007             FY 2007             Q1 2008             FY 2008 $ 0.26 - $0.31 $ 1.65 - $1.70 $ 0.25 - $0.30 $ 1.75 - $1.95 Conference Call Information Lithia Motors will be providing more detailed information on the results for the third quarter 2007 in its conference call scheduled for today at 2 p.m. PDT and 5 p.m. EDT. The call can be accessed live by calling 973-582-2717; Conference ID #: 9348443. To listen LIVE on our website or for REPLAY: Log-on to www.Lithia.com – Go to Investor Relations – and click on the Conference Call Icon. About Lithia Lithia Motors, Inc. is a Fortune 700 and Russell 2000 Company. Lithia sells 30 brands of new and all brands of used vehicles at 109 stores which are located in 46 markets within 15 states. Internet sales are centralized at www.Lithia.com, or through the recently launched www.L2.com. Lithia also sells used vehicles; arranges finance, warranty, and credit insurance contracts; and provides vehicle parts, maintenance, and repair services at all of its locations. Lithia retailed 109,648 new and used vehicles and had $3.17 billion in total revenue in 2006. 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. These statements are necessarily subject to risk and uncertainty and actual results could differ materially due to certain risk factors including, without limitation, economic conditions, acquisition risk factors and others set forth from time to time in the company’s filings with the SEC. Specific risks in this press release include the accuracy of the company’s comments and predictions related to the retail sales environment and its ability to successfully adjust to those conditions and achieve the earnings per share projected. Additional Information For additional information on Lithia Motors, contact the Investor Relations Department: 541-618-5770 or log on to: www.lithia.com – go to Investor Relations. LITHIA MOTORS, INC.       (In Thousands except per share data)   Three Months Ended % September 30, Increase Increase   2007       2006   (Decrease) (Decrease) New vehicle sales $ 494,882 $ 488,113 $ 6,769 1.4 % Used vehicle sales 231,868 226,468 5,400 2.4 Finance and insurance 32,701 32,644 57 0.2 Service, body and parts 97,913 85,360 12,553 14.7 Fleet and other revenues   2,343     1,832     511   27.9   Total revenues 859,707 834,417 25,290 3.0         Cost of sales   715,016     695,657     19,359   2.8   Gross Profit 144,691 138,760 5,931 4.3 SG&A expense 107,387 102,225 5,162 5.0 Depreciation and amortization   5,289     4,204     1,085   25.8   Income from operations 32,015 32,331 (316 ) (1.0 )   Floorplan interest expense (8,236 ) (12,358 ) (4,122 ) (33.4 ) Other interest expense (4,900 ) (3,482 ) 1,418 40.7 Other income, net   144     128     16   12.5   Income from continuing operations before income taxes 19,023 16,619 2,404 14.5   Income tax expense 7,713 5,933 1,780 30.0 Income Tax Rate   40.5 %   35.7 %     Income from continuing operations 11,310 10,686 624 5.8 %   Discontinued Operations: Loss from operations (336 ) (170 ) 166 97.6 Gain (Loss) from sale   263     -     263     Net income $ 11,237   $ 10,516     721   6.9   %   Diluted net income per share: Continuing Operations $ 0.53 $ 0.51 $ 0.02 3.9 Discontinued Operations: Loss from operations, net of income tax (0.01 ) (0.01 ) Gain from sale, net of income tax   0.01     -       Net income per share $ 0.53   $ 0.50   $ 0.03   6.0   Diluted shares outstanding   22,058     22,128     (70 ) (0.3 ) % LITHIA MOTORS, INC.     (Continuing Operations)   Three Months Ended % September 30, Increase Increase   2007   2006 (Decrease) (Decrease) Unit Sales: New Vehicle 16,884 17,860 (976 ) (5.5 ) % Used - Retail Vehicle 10,928 11,395 (467 ) (4.1 ) Used - Wholesale 7,364 7,218 146 2.0 Total Units Sold 35,176 36,473 (1,297 ) (3.6 )   Average Selling Price: New Vehicle $ 29,311 $ 27,330 $ 1,981 7.2 % Used - Retail Vehicle 16,867 16,110 $ 757 4.7 Used - Wholesale 6,457 5,943 $ 514 8.6   Key Financial Data: Gross Profit Margin 16.8 % 16.6 % 20 bps SG&A as a % of Gross Profit 74.2 % 73.7 % 50 bps Operating Margin 3.7 % 3.9 % -20 bps Pre-Tax Margin 2.2 % 2.0 % 20 bps   Gross Margin/Profit Data New Vehicle Retail 7.6 % 7.6 % 0 bps Used Vehicle Retail 14.9 % 14.4 % 50 bps Used Vehicle Wholesale 0.5 % 1.1 % -60 bps Service, Body & Parts 47.3 % 48.6 % -130 bps Finance & Insurance 100.0 % 100.0 % 0 bps New Retail Gross Profit/Unit $ 2,237 $ 2,088 $ 149 Used Retail Gross Profit/Unit $ 2,505 $ 2,325 $ 180 Used Wholesale Gross Profit/Unit $ 33 $ 66 -$33 Finance & Insurance/Retail Unit $ 1,176 $ 1,116 $ 60   Revenue Mix: New Vehicles 57.6 % 58.5 % Used Retail Vehicles 21.4 % 22.0 % Used Wholesale Vehicles 5.5 % 5.2 % Finance and Insurance, Net 3.8 % 3.9 % Service and Parts 11.4 % 10.2 % Fleet and other 0.3 % 0.2 %   New Vehicle Unit Sales Brand Mix: Chrysler Brands 40.0 % 40.3 % General Motors & Saturn 16.9 % 17.6 % Toyota 13.1 % 12.9 % Honda 6.8 % 5.3 % Ford 5.5 % 7.8 % Hyundai 4.1 % 4.3 % Nissan 3.5 % 3.2 % BMW 3.4 % 1.6 % Subaru 2.1 % 3.2 % Volkswagen, Audi 2.0 % 1.8 % Mercedes 1.0 % 0.5 % Other 1.6 % 1.5 % LITHIA MOTORS, INC.     (Selected Same Store Data) Three Months Ended % September 30, Increase Increase   2007     2006   (Decrease) (Decrease) Same Store Unit Sales: New Vehicle 15,801 17,882 (2,081 ) (11.6 ) % Used - Retail Vehicle 10,093 11,410 (1,317 ) (11.5 ) Used - Wholesale 6,822 7,226 (404 ) (5.6 ) Total Units Sold 32,716 36,518 (3,802 ) (10.4 )   Same Store Average Selling Price: New Vehicle $ 28,899 $ 27,330 $ 1,569 5.7 % Used - Retail Vehicle 16,637 16,110 527 3.3 Used - Wholesale 6,396 5,943 453 7.6   Same Store Revenue: New Vehicle Retail Sales (6.6 ) % (4.8 ) % Used Vehicle Retail Sales (8.6 ) % (2.4 ) % Used Wholesale Sales 1.6 % 12.3 % Total Vehicle Sales (excluding Fleet) (6.6 ) % (3.3 ) % Finance & Insurance Sales (5.9 ) % (2.0 ) % Service, Body and Parts Sales 3.3 % 4.3 % Total Sales (excluding Fleet) (5.6 ) % (2.6 ) % Total Gross Profit (excluding Fleet) (4.4 ) % (3.0 ) %   Same Store Average Gross Profit Data: New Retail Gross Profit/Unit $ 2,198 $ 2,087 $ 111 Used Retail Gross Profit/Unit $ 2,475 $ 2,286 $ 189 Used Wholesale Gross Profit/Unit $ 37 $ 66 $ (29 )   Same Store Total Sales Geographic Mix: Texas 23.2 % 18.9 % Oregon 15.2 % 17.1 % California 11.9 % 13.8 % Washington 11.1 % 11.2 % Montana 7.2 % 6.0 % Alaska 7.1 % 7.6 % Colorado 6.7 % 6.9 % Idaho 6.4 % 7.1 % Nevada 3.9 % 5.0 % Nebraska 2.7 % 2.5 % South Dakota 2.4 % 1.9 % New Mexico 1.3 % 1.2 % Wisconsin 0.6 % 0.5 % LITHIA MOTORS, INC.       (In Thousands except per share data)   Nine Months Ended % September 30, Increase Increase   2007       2006   (Decrease) (Decrease) New vehicle sales $ 1,447,623 $ 1,360,912 $ 86,711 6.4 % Used vehicle sales 683,838 641,737 42,101 6.6 Finance and insurance 95,488 90,549 4,939 5.5 Service, body and parts 288,020 244,045 43,975 18.0 Fleet and other revenues   4,339     3,781     558   14.8   Total revenues 2,519,308 2,341,024 178,284 7.6         Cost of sales   2,090,893     1,943,164     147,729   7.6   Gross Profit 428,415 397,860 30,555 7.7 SG&A expense 326,500 296,241 30,259 10.2 Depreciation and amortization   15,149     12,052     3,097   25.7   Income from operations 86,766 89,567 (2,801 ) (3.1 )   Floorplan interest expense (24,070 ) (25,219 ) (1,149 ) (4.6 ) Other interest expense (14,567 ) (9,817 ) 4,750 48.4 Other income, net   469     765     (296 ) (38.7 ) Income from continuing operations before income taxes 48,598 55,296 (6,698 ) (12.1 )   Income tax expense 19,411 21,670 (2,259 ) (10.4 ) Income Tax Rate   39.9 %   39.2 %     Income from continuing operations 29,187 33,626 (4,439 ) (13.2 ) %   Discontinued Operations: Loss from operations, net of income tax (714 ) (1,851 ) (1,137 ) (61.4 ) Loss from sale, net of income tax   (2,218 )   -     2,218     Net income $ 26,255   $ 31,775     (5,520 ) (17.4 ) %   Diluted net income per share: Continuing Operations $ 1.38 $ 1.58 $ (0.20 ) (12.7 ) % Discontinued Operations: Loss from operations (0.03 ) (0.08 ) Gain (Loss) from sale   (0.10 )   -       Net income per share $ 1.25   $ 1.50   $ (0.25 ) (16.7 ) Diluted shares outstanding   22,102     22,120     (18 ) (0.1 ) % LITHIA MOTORS, INC.       (Continuing Operations)   Nine Months Ended % September 30, Increase Increase   2007     2006 (Decrease) (Decrease) Unit Sales: New Vehicle 50,049 49,658 391 0.8 % Used - Retail Vehicle 33,375 32,939 436 1.3 Used - Wholesale 20,051 18,392 1,659 9.0 Total Units Sold 103,475 100,989 2,486 2.5   Average Selling Price: New Vehicle $ 28,924 $ 27,406 $ 1,518 5.5 % Used - Retail Vehicle 16,591 16,102 $ 489 3.0 Used - Wholesale 6,490 6,054 $ 436 7.2   Key Financial Data: Gross Profit Margin 17.0 % 17.0 % 0 bps SG&A as a % of Gross Profit 76.2 % 74.5 % 170 bps Operating Margin 3.4 % 3.8 % -40 bps Pre-Tax Margin 1.9 % 2.4 % -50 bps   Gross Margin/Profit Data New Vehicle Retail 7.5 % 7.6 % -10 bps Used Vehicle Retail 15.0 % 15.2 % -20 bps Used Vehicle Wholesale 2.3 % 2.9 % -60 bps Service, Body & Parts 47.6 % 48.6 % -100 bps Finance & Insurance 100.0 % 100.0 % 0 bps New Retail Gross Profit/Unit $ 2,174 $ 2,087 $ 87 Used Retail Gross Profit/Unit $ 2,481 $ 2,451 $ 30 Used Wholesale Gross Profit/Unit $ 151 $ 174 -$23 Finance & Insurance/Retail Unit $ 1,145 $ 1,096 $ 49   Revenue Mix: New Vehicles 57.5 % 58.1 % Used Retail Vehicles 22.0 % 22.7 % Used Wholesale Vehicles 5.1 % 4.7 % Finance and Insurance, Net 3.8 % 3.9 % Service and Parts 11.4 % 10.4 % Fleet and other 0.2 % 0.2 %   New Vehicle Unit Sales Brand Mix: Chrysler Brands 40.0 % 40.8 % General Motors & Saturn 16.4 % 16.8 % Toyota 13.4 % 12.6 % Honda 6.5 % 5.4 % Ford 5.9 % 7.6 % Hyundai 3.8 % 4.4 % BMW 3.7 % 2.1 % Nissan 3.5 % 3.5 % Subaru 2.1 % 3.0 % Volkswagen, Audi 2.0 % 1.7 % Mercedes 1.1 % 0.6 % Other 1.5 % 1.5 % LITHIA MOTORS, INC.               (Selected Same Store Data)   Nine Months Ended % September 30,   Increase Increase   2007     2006   (Decrease)   (Decrease)     Same Store Unit Sales: New Vehicle 45,631 49,558 (3,927 ) (7.9 ) % Used - Retail Vehicle 30,476 32,923 (2,447 ) (7.4 ) Used - Wholesale 18,310 18,399 (89 ) (0.5 ) Total Units Sold 94,417 100,880 (6,463 ) (6.4 )   Same Store Average Selling Price: New Vehicle $ 28,477 $ 27,403 $ 1,074 3.9 % Used - Retail Vehicle 16,377 16,102 275 1.7 Used - Wholesale 6,479 6,052 427 7.0   Same Store Revenue: New Vehicle Retail Sales (4.3 ) % 4.4 % Used Vehicle Retail Sales (5.8 ) % 3.3 % Used Wholesale Sales 6.5 % 8.3 % Total Vehicle Sales (excluding Fleet) (4.1 ) % 4.3 % Finance & Insurance Sales (1.7 ) % 5.9 % Service, Body and Parts Sales 4.5 % 5.8 % Total Sales (excluding Fleet) (3.1 ) % 4.5 % Total Gross Profit (excluding Fleet) (2.9 ) % 3.1 %   Same Store Average Gross Profit Data: New Retail Gross Profit/Unit $ 2,140 $ 2,087 $ 53 Used Retail Gross Profit/Unit $ 2,439 $ 2,417 $ 22 Used Wholesale Gross Profit/Unit $ 147 $ 181 $ (34 )   Same Store Total Sales Geographic Mix: Texas 21.8 % 18.4   % Oregon 16.1 % 17.7   % California 12.0 % 13.6   % Washington 11.6 % 11.4   % Montana 6.9 % 6.1   % Alaska 7.2 % 7.4   % Colorado 7.0 % 7.3   % Idaho 6.2 % 6.6   % Nevada 4.4 % 5.1   % Nebraska 2.9 % 3.0   % South Dakota 2.4 % 2.1   % New Mexico 1.3 % 1.1   % Wisconsin 0.2 % 0.2   % Balance Sheet Highlights (Dollars in Thousands)     September 31, 2007 December 31, 2006 Cash & Cash Equivalents $ 15,749 $ 26,600 Trade Receivables(a) 112,508 118,528 Inventory 559,267 603,306 Assets held for sale 23,825 15,485 Other Current Assets   16,644     15,721   Total Current Assets 727,993 779,640   Real Estate, net 348,413 327,890 Equipment & Leases, net 96,709 89,213 Goodwill, net 311,467 307,424 Other Assets   76,946     75,190   Total Assets $ 1,561,528   $ 1,579,357     Flooring Notes Payable $ 437,607 $ 499,679 Liabilities held for sale 18,373 11,610 Other Current Liabilities   115,391     118,650   Total Current Liabilities 571,371 629,939   Used Vehicle Flooring 109,160 95,614 Real Estate Debt 171,789 155,890 Other Long-Term Debt 120,022 140,879 Other Liabilities   74,177     63,642   Total Liabilities $ 1,046,519   $ 1,085,964     Shareholders' Equity 515,009 493,393     Total Liabilities & Shareholders' Equity $ 1,561,528   $ 1,579,357         (a) Note: Includes contracts-in-transit of $48,593 and $56,211 for 2007 and 2006   Other Balance Sheet Data (Dollars in Thousands)   Current Ratio 1.3x 1.2x LT Debt/Total Cap.(Excludes Real Estate) 31 % 32 % Working Capital $ 156,622 $ 149,701 Book Value per Basic Share 26.40 25.32