Lithia Motors Inc. said late Monday, March 31, that it completed its internal investigation into sales reporting irregularities and found limited cases of misconduct at a small number of auto dealerships.
The findings did not have a significant negative impact on its estimated fourth-quarter and 2007 financial results originally reported in February, the dealership group said.
Lithia began an investigation last month to determine whether several of its dealerships improperly reported retail sales to automakers to get incentive money.
The investigation was conducted with legal counsel, accounting firm Ernst & Young LLP and the companys audit committee. It found that sales reporting misconduct was limited to a small number of stores, and the financial impact of the discovered misconduct was inconsequential.
The misconduct only occurred at the store level, without knowledge or encouragement from corporate management, according to a Lithia filing with the Securities and Exchange Commission.
Lithia said it received the investigation results March 29, and as a result, will delay the filing of its annual report.
We are pleased that the investigation is completed and our reporting problems were isolated and had minimal financial impact, CEO Sid DeBoer said in the SEC filing.
The company did revise its previously reported preliminary financial estimates for the fourth quarter of 2007.
In its revised earnings statement released Tuesday, April 1, Lithia said it posted a $4.7 million net loss in the fourth quarter. While it is the first quarterly loss since going public in 1996, the revision cut about $400,000 from its initial estimated loss.
Lithia posted revenue of $699.6 million in the fourth quarter of 2007, down from Februarys initial estimate of $705.8 million. Fourth-quarter revenue was down 1.3 percent from the same period in 2006.
For the year, Lithia said it posted net income of $21.5 million, down 42.2 percent from 2006. But total annual revenue gained 5.5 percent from 2006 to $3.22 billion.
Because of the companys disappointing results for the year, Lithia management and its board of directors agreed not to pay any of its senior executives cash bonuses they were to earn under a 2007 annual bonus plan, according to the SEC filing.
Lithia, of Medford, Ore., ranks No. 8 on the Automotive News list of the top 125 dealership groups in the United States with retail sales of 63,607 new vehicles in 2007.