Greetings and welcome to the Lithia Motors 4th Quarter 2014 Earnings Teleconference. [Operator Instructions] As a pointer, this conference is being taped. I would now such as to turn the conference over to Mr. John North, Vice President of Finance. Thank you. Mr. North, you may now start.

John North

Thanks and great morning. Welcome to Lithia Motors 4th Quarter 2014 Earnings Conference Call.

Before we start, the company wants you to know that this teleconference includes positive statements. Positive statements are not warranties of future efficiency and our real outcomes of operations, monetary condition and liquidity and development of the industries in which we run may differ materially from those made in or suggested by the forward-looking statements in this call. Examples of forward-looking statements include statements relating to anticipated operating profit, forecasts for our first quarter and 2015 performance, projected EBITDA, expected boosts in our yearly profits related to acquisitions, awaited accessibility from our unfinanced operating genuinerealty and awaited levels of future capital expenses. We urge you to carefully consider this information and not to place undue dependence on forward-looking statements. We undertake no task to upgrade our positive statements, including our earnings outlook, which are made as of the date of this release.

During this call, we might discuss specific non-GAAP items such as adjusted net income and diluted incomes per share from continuing operations, adjusted SGamp; A as a portion of incomes and gross revenue and adjusted pretax margin. Non-GAAP measures do not have meanings under GAAP and may be identified in a different way and not comparable to likewise titled measures used by other companies. We caution you not to place unnecessary dependence on such non-GAAP measures, however likewise to think about them with the most directly equivalent GAAP measures. We believe the non-GAAP financial measures we present enhance the openness of our disclosures, supply a meaningful discussion of our outcomes from core business operations due to the fact that they exclude products not related to core company, and enhance the period-to-period comparability of our outcomes from core company operations. These discussions should not be considered an alternative to GAAP measures and a complete reconciliation of the non-GAAP products is provided in the financial tables these days news release.

We also published an upgraded investor presentation on our Internet website lithiainvestorrelations.com, highlighting our fourth quarter results.

On the call today are Bryan DeBoer, President and CEO; Chris Holzshu, Senior citizen Vice President and CFO; and Sid DeBoer, Executive Chairman. At the end of our prepared statements, we will certainly open the call to questions and I am available in my office after the call for any follow-up you may have.

Now with that I will turn the call over to Bryan.

Bryan DeBoer

Excellent early morning and thank you for joining us. Earlier today we reported fourth quarter adjusted net earnings from continuing operations of $37.5 million compared with $25.7 million a year earlier. We earned $1.42 per share in the 4th quarter compared to $0.98 per share last year or a boost of 45 %. Our earnings was around $1.8 billion in the 4th quarter, a 75 % increase over the prior year. From this point forward, all contrasts will certainly be on an exact same shop basis.

For the 3rd quarter in a row, we saw double-digit increases in all 4 business lines as total sales increased 14 %. In the quarter, new car incomes enhanced 12 %. Our new vehicle typical selling pricesasking price increased 2 %. System sales enhanced 9 % which was higher than the nationwide average of 7 %. Domestic units increased 12 %, import enhanced 7 %, and luxury devices were up 9 %. Retail made use of car incomes increased 16 % in the quarter. Our retail made use of automobile average selling costasking price increased 5 % as late model made use of cars continued to comprise a higher percentage of the total automobile sales mix.

We retailed 10 % more secondhand systems over the prior year, leading to an utilized to brand-new ratio of 0.8 to 1. In the quarter, certified systems grew 17 %, core systems enhanced 12 % and finally value car systems, or automobiles over 80,000 miles enhanced 1 %.

Consistent with our third quarter outcomes, our utilized automobile gross margins fell approximately 130 basis points from the previous year. Regardless of this our shop workers have actually adjusted well, reducing selling costs and maintaining their volume concentrated to produce greater operating earnings. We sold a month-to-month average of 56 pre-owned cars per store, up from 53 devices in the 4th quarter of 2013 and 48 systems in the fourth quarter of 2012. We continue to concentrate on procuring core product and target 75 used devices monthly in each place. We thinkOur team believe that the increased availability of utilized automobiles provides an ongoing chance for our shops to enhance unit sales in the future. This stays a top concern for our workers in 2015 and beyond.

Gross revenue per new automobile retailed was $2260 compared to $2306 in the fourth quarter of 2013, a decline of $46 per system. Gross revenue per used vehicle retailed was $24.29 compared with $25.57 in the fourth quarter of 2013, a reduction of $128 per system. Our Famp; I per vehicle was $1214 compared to $1168 in 2013, or a boost of $46 per vehicle. Of the cars we offered in the quarter, we arranged financing on 72 %, sold a service agreement on 43 % and sold a life time oil item on 35 %. Our penetration rates were roughly flat when compared with in 2013.

In the 4th quarter, the combined total gross profit per unit was $35.65 as compared to $35.97 in 2013 or a decrease of just $32 or roughly 1 %. As we have actually formerly talked about, our store personnel keep track of gross revenue per retail car and in aggregate to examine and drive their efficiency. Growing general vehicle sales volumes almost 10 % while reducing overall gross per transaction 1 %, is a trade off we think deserves making.

Our total gross revenue produced through car sales enhanced $9.4 million over the prior year. This increased volume provides greater trade-in and service opportunity and develops new client relationships which offer us a possibility to complete the customer purchasing cycle by selling them another automobile in the future. Our service, body, and parts profits increased a record 12 % over the 4th quarter of 2013. This was on top of in 2013 8 % boost over the fourth quarter of 2012.

Consumer pay work increased 9 %, which is the 22nd successive quarter of improvement. Guarantee sales enhanced 32 %, which is the ninth consecutive quarter of improvement. Wholesale parts increased 7 % and body shop enhanced 9 %. Supplying affordable and hassle-free experiences with each consumer driven by service department personnel, who listen and react quickly continues to be the vital to our success moving forward.

Our overall gross margin was 15.1 % compared to 15.6 % in the same period last year. The decrease in gross margin was primarily due to used vehicles we went over previously. Including DCH, as of December 31, brand-new vehicle stocks were at a day supply of 62, a decline of 12 days from a year back. Used car stocks were at a day supply of 53 or a decrease of 10 days from a year back. Our store leaders remained to live our values of constant enhancement by discovering brand-new and innovative ways to grow their company and capture latent opportunities.

However, we still see substantial chance within our existing store base to improve outcomes. Increasing our brand-new vehicle market share, offering the 75 pre-owned cars per shop in each area, catching increasing devices in operations returning into our service department, controlling cost, enhancing efficiency and recognizing other business synergies, all continue to be as opportunities. In addition, acquisitions will certainly remain to be a cruciala fundamental part of our future growth story.

Over the past couple of years, we have actually purchased 45 stores which in total amount contribute around $3 billion in approximated incomes and nearly doubled our income base. The DCH combination is going well. The mix of Lithia and DCH has established our company as a nationwide seller and our incorporated results in the first quarter are a foundation for our ongoing growth in the future. Our comparable values allowing staff members to be entrepreneurial while surpassing our consumers expectations, have actually enabled us to cross pollinate best practices, swiftly and successfully.

We held business meetings in every DCH location to meet the general supervisors and their groups. During these meetings, we listen and challenge each other to catch identified opportunities in 2015. Through the first 3 months of the combination, DCH is performing ahead of expectations we established together. I prepare for a long and effective relationship with our 2 business as we remain to discover and grow together.

Lastly, less than 2 years ago, we introduced three strategic turning points for development. The secret to accomplishing these turning points are the combination of our internal focus on same-store sales growth, disciplined expense management and throughput, and the external focus on acquisitions to gain scale. Built off our 2012 base of $3 per share, each milestone targeted increased our incomes by $1 for $4, $5 and $6 targets.

This was expected to be achieved in a 3 to nine-year time duration. We reached the very first turning point of $4 revenues per share in 2013 and now likewise achieved the second turning point of $5 profits per share in 2014. The third turning point of $6 per share is directly in our sight in 2015 offeredconsidered that this is now the midpoint of our yearly outlook which Chris will certainly talk about in more information soon.

Furthermore, we are now comfy in developing a 4th turning point of $7 per share, which we anticipate accomplishing within one to 3 years after finishing turning point 3. With that, I will turn the call over to Chris, our CFO.

Chris Holzshu

Thank you, Bryan. As previously revealed on October 1, we acquired the DCH Car Group. After this transaction and other basic activity connected to our existing operation, we ended the year at $641 million in debt, omitting brand-new vehicle floor strategy funding. Of this debt, $334 million is mortgage funding, $134 million was outstanding on our used automobile funding facility, and $135 million was exceptional on our revolving credit lines.

At December 31, 2014, we had around $100 million in money and readily available credit as well as unfinanced real estate that might provide another $110 million in 60 to 90 days for a total liquidity of $210 million. Considering that year end we have actually completed another $25 million in home loan funding and are targeting an incremental $40 million to $50 million in home loan funding in the next 60 to 90 days to increase our working capital and take benefitbenefit from the existing rate environment to secure long term financing. We have actually been purposefully extending our home loan maturity and we presently have no home mortgages growing until 2016.

Regardless of the boost in our take advantage of as an outcome of the current acquisition, our net debt to forecasted EBITDA is approximately 2.0 times, well within our targeted range. At the end of the fourth quarter, we were in compliance with our debt covenants besides our current ratio, which was available in at 1.16:1, somewhat under 1.2:1. Our bank group has agreed to decrease the covenant to 1.1:1 for all future durations and gave us a waiver for the covenant since 12/31/2014. I would likewish to thank all of our bank and captive finance companies for their support.

Our free cash circulation as described in our investor presentation was $17 million for the fourth quarter of 2014. Capital expenses which decreased this free money flow figure, were $32 million for the quarter. For the full year 2014, free cash circulationcapital was $87 million. We approximate creating over $100 million in complimentary money flowcapital in 2015, offering considerable capital to minimize our take advantage of or to deploy for acquisitions, internal financial investment, dividends or share repurchases.

Our capital technique is the same. Our very first option for capital deployment continues to be to grow through acquisition and internal financial investment. But regardless of category, all financial investment decisions are determined versus rigorous ROE metrics and will be solid long-term financial investments for Lithias future. As Bryan previously went over, we grew total same-store sales 14 % in the quarter. Due mostly to made use of margin compression, our general gross revenue grew a little less at 10 %.

Our fourth quarter Lithia same-store adjusted SGamp; A as a portion of gross earnings improved 100 basis points to 67.2 %. Consisting of DCH and on a consolidated basis, our SGamp; A as a portion of gross earnings was 70.3 %. Our functional team will be working diligently in the brief to medium-term to go back to industry-leading performance.

Throughput, or the portion of each additional gross profit dollar over the previous year we retain after selling costs and adjusted to reflect same-store sales comparisons, was 42 %. We remain to target incremental throughput in the range of 45 % to 50 % in the future. As Bryan pointed out earlier, we achieved our second milestone of $5 incomes per share in 2014. We see a clear path to attaining the 3rd turning point of $6 profits per share. As such, we have upgraded our guidance as follows.

We anticipate very first quarter 2015 earnings-per-share of $1.18 to $1.21, and full-year 2015 earnings-per-share $5.95 to $6.05. For additional presumptions associated with our profits guidance, I would refer you to todays news release at lithiainvestorrelations.com.

This concludes our prepared remarks. We would now likewant to open the call to questions. Operator?