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Lithia to buy back stock shares

Seattle Times analysis puts company atop growth list

Believing its stock undervalued, Lithia Motors plans to buy back — million shares, the auto dealership company said Thursday.

Our stock currently trades at a very compelling multiple of approximately 7.5 times 1999 earnings per share, said Sid DeBoer, the company's chairman and chief executive. That calculation is commonly referred to as a price-to-earnings ratio.

DeBoer noted that the company's per-share earnings have climbed an average of 46 percent in each of the last three years since its stock went public.

And that earnings growth includes dilution caused by the initial public offering, a secondary offering and the issuance of more than 7 million new shares as part of dealership purchases.

Lithia has consistently beat analyst estimates for the past fourteen quarters, DeBoer said. Our top management team remains in place to continue our industry leading performance.

The move marks the first time since the company went public in 1996 that it has bought back shares.

The buyback comes on the heels of a steady decline in the price of the stock. On May 17, it hit a new 52-week low of $11.63 a share after trading in the high teens and low 20s for much of the past year. Its 52-week high is $23.75, reached July 16 of last year. The stock closed unchanged at $12.06 on Thursday.

Analysts have tied the stock's decline to wider economic concerns — namely higher interest rates — — rather than factors directly related to the company. Lithia officials also said nothing had changed at the company to spark the decline.

In fact, the company was recently honored for its growth.

It ranked No. — for 1999 in a computerized analysis conducted by the Seattle Times of 130 publicly traded companies in Washington, Oregon and Idaho.

The so-called Northwest 100, published by the newspaper Tuesday, compares companies in four categories: annual return on shareholders? average equity over two years, two-year growth in market value, two-year growth in sales and two-year growth in employees.

Based on that formula, Lithia beat out all the region's other public companies — including Microsoft, which finished sixth.

Despite the depressed stock price and buy-back plan, Lithia officials said the company will keep growing.

Jeff DeBoer, Lithia chief financial officer, said the company has adequate capital to buy back the shares without cutting back on its aggressive acquisition plan.

Since going public in 1996, the company has purchased about a dozen dealerships per year and, in terms of revenue, is 11 times as big as it was when it went public.

The company has a $115 million line of credit specifically set aside for acquisitions and expects to complete more purchases before year's end.