Cash in hand, Lithia shops for stores
Lithia CEO Bryan DeBoer: “We’re very motivated in finding a talented team to help us grow east of the Mississippi.”
Lithia Motors is looking to buy stores east of the Mississippi River, where it presently has none, CEO Bryan DeBoer said.
In an interview, DeBoer said Lithia wants to buy import- and domestic-brand dealerships in mid-sized markets and luxury dealerships in slightly larger markets.
"There's no perfect acquisition, and we're pretty open-minded and willing to work with sellers," DeBoer said. "I look forward to doing more of that in the future."
Lithia, of Medford, Ore., has the financial muscle to do it.
The company has $135 million in liquidity and expects its free cash flow to be north of $50 million next year.
Last week, Lithia said its third-quarter net income jumped 40 percent to $23.2 million from $16.6 million on rising car sales and lower costs. Quarterly revenue climbed 24 percent to $888.4 million.
Same-store new-vehicle sales rose 30 percent during the quarter, and used-vehicle sales rose 24 percent, the company said in a statement.
Also last week, Lithia closed on a deal to buy Bitterroot Toyota in Missoula, Mont.
That's the company's third acquisition this year with estimated annual revenues in the mid-$40 million range, DeBoer said. Lithia will begin rebuilding that store in 30 to 60 days and have it completed in eight months.
"It's a store we've had our eye on for years," he said. "We're still looking for opportunities in new marketplaces. We're competitive, good buyers, and we do what we say we'll do. We complete transactions, and we don't have deals fall apart."
Earlier this year, Lithia's stock price was a more attractive buy than pursuing acquisitions, DeBoer said.
"We were able to buy our own stock back rather than purchasing acquisitions, so we're always balancing," DeBoer said. "But we're very motivated in finding a talented team to help us grow east of the Mississippi."
Lithia also wants to increase per-store used-vehicle sales. In the third quarter Lithia sold an average of 52 used vehicles per store, up from 40 in the same period of 2011. Lithia's goal has been to average 60 used-vehicle sales per store. DeBoer raised that goal to 75.
DeBoer said Lithia can do better at acquiring more used vehicles from such channels as trade-ins, internal and external auctions, wholesalers, private party purchases and building relationships with other dealers to do trades.
"Every single one of those channels can yield a number of vehicles month in and month out," he said. "A majority of our stores now are doing that. There is opportunity in some of those channels with a few of our stores, but they know it and recognize it, and it's a matter of building relationships and opportunities."
Reuters contributed to this report
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