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Lithia revenue hits $2.1 billion in second quarter

Lithia Motors reported second-quarter revenue and bottom-line gains Thursday while indicating it's on the hunt for new franchises and dealerships.

The Medford auto retailer's revenue increased $136.4 million, or 7 percent, to $2.1 billion from $2 billion for the second quarter in 2015. Net income grew to $51.4 million, or $2.01 per share, from $51.2 million, or $1.93 per share, a year ago.

Lithia's same-store sales increased 3.8 percent, new vehicle sales increased 2.3 percent and used-vehicle sales increased 10.2 percent.

"Our stores delivered strong results in the quarter, growing all business lines," CEO Bryan DeBoer said. "For the second year in a row, we were among the fastest-growing companies in both revenue and earnings in the Fortune 500."

Just as important was a deal sealed Wednesday boosting Lithia's borrowing capacity by $300 million to $2.05 billion over the next five years. CFO Chris Holzshu said Lithia now has up to $1.3 billion in new vehicle inventory floor plan financing, $350 million in used vehicle inventory floor plan financing and $400 million in revolving loan financing.

Lithia added a GMC Buick franchise in Helena, Mont., during the quarter, boosting the company's total to three this year. But DeBoer is confident the next six months will keep accountants and transition teams busy.

Although many auto dealers have indicated readiness to cash out and move on, rising valuations have prompted many to stay the course.

But DeBoer said Thursday the worm is about to turn.

"New vehicle market counts have flattened out," DeBoer said. "The sellers are trying to capture as much of the peak as they can before pricing stabilizes and goes down."

He senses the constraints that have impeded deals will fade.

"I think we're in for a big second half," he said.

Overall, the auto industry estimates new vehicle sales will slide to 17 million units in coming years, something that will play to Lithia's advantage.

"This provides Lithia several benefits, including a predictable and profitable cadence of new car sales and incrementally higher service revenues as the vehicles sold over the past six years age and require maintenance," DeBoer said.

Lithia's used vehicle sales grew 9 percent during the quarter while new vehicle sales were flat. During a conference call with investment analysts, DeBoer said he expected more used sales in Texas and other energy states where the economy has slowed.

"We try to diversify among manufacturers as well as local economic drivers. A little less than a quarter of our sales are energy-based markets. In agriculture and tourism areas such as Oregon and California, we're seeing pretty robust sales right now."

For the first six months of 2016, Lithia's revenue climbed 8.7 percent to $4.1 billion from $3.8 billion in the first six months of 2015. The company anticipates total 2016 revenue to be between $8.5 billion and $8.6 billion.

The company also announced a 25 cents-per-share dividend, payable Aug. 26 to shareholders of record on Aug. 12, 2016.

Lithia share rose $2.35 Thursday to $85.73.

Reach reporter Greg Stiles at 541-776-4463 or business@mailtribune.com. Follow him on Twitter at www.twitter.com/GregMTBusiness, on Facebook at www.facebook.com/greg.stiles.31.