Lithia sells more dealerships to cut costs

After taking the pruning shears to operations earlier this year, Lithia Motors said Tuesday it will sell even more stores as it continues paring costs.

The Medford-based auto retailer said an additional 15 stores are up for sale, bringing the total to 29 as it reduces its count by 27 percent. Lithia began 2008 with 109 stores in 15 states and reached a high-water mark of 111 stores before announcing major cuts in June.

"We're redoubling our efforts to get to the right size for the current environment and we're getting there quickly," Chairman and Chief Executive Officer Sid DeBoer said of Lithia's push toward a 50/50 mix of domestic and import dealerships.

Of the 29 stores the company is shedding, 11 have been disposed of and deals are signed for another six. The company's support staff, spread throughout 13 Western states, has fallen to 382 from more than 500.

"We've been reducing costs since June," Chief Financial Officer Jeff DeBoer said during the firm's third-quarter earnings conference call with analysts. "The $33 million in annualized cost reductions has just begun in a major way. With the reductions in September and October kicking in, we have the potential for even more than that."

Lithia swung to a $2.36 million loss in the third quarter, compared to an $11.23 million profit a year ago. The consolidated net loss was 12 cents per share, including a 25 cents-per-share loss on discontinued operations, of which 18 cents was asset impairment charges and 7 cents was operating losses.

"We're not going to get what was on the books for those discontinued stores," Sid DeBoer said. "But it doesn't mean we're going to lose any cash."

Analysts estimated 10-cent-per-share earnings. Lithia improved its earnings from continuing operations for the third straight quarter, hitting 13 cents per share. Excluding the one-time asset impairment charges, consolidated net income was 9 cents per share.

Same store sales for new vehicles declined 25.1 percent and 14.3 percent for used autos, compared to third quarter 2007.

Lithia said it has raised more than $100 million through Oct. 3 from the sale of stores, financing of real estate and the sale of several development properties.

"There's a healthy demand from private dealers," Lithia President Bryan DeBoer said. "We believe we're 90 to 120 days from where the company wants to be."

Among the property Lithia is selling is development land in Seattle, Fresno, Calif., and Texas, Sid DeBoer said. "We want to get rid of all the debt we can."

Proceeds went to reduce Lithia's credit line from $184 million at the start of the year to about $84 million at the end of the third quarter. More recently, the credit line dropped to $76 million.

The company also repurchased and retired approximately $16 million of convertible debt in the third quarter and repurchased another $22 million in the fourth quarter at a significant discount.

"We finally have plenty of capacity to pay off the convertible debt just with our credit line alone," Sid DeBoer said.

Lithia stock closed at $1.60 Monday, up 5 cents, but it climbed to $1.78 in after-hours trading.

Reach reporter Greg Stiles at 776-4463 or e-mail

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