Lithia Motors Inc (LAD) 2015 Q1 法說會逐字稿

Greetings and welcome to the Lithia Motors first-quarter 2015 earnings conference call. (Operator Instructions)

As a reminder, this conference is being recorded. I will now turn the conference over to our host, John North, Vice President of Finance. Please go ahead.

Thanks and good morning. Welcome to Lithia Motors first-quarter 2015 earnings conference call. Before we begin the Company wants you to know that this conference call includes forward-looking statements. Forward-looking statements are not guarantees of future performance, and actual results of operations, financial condition and liquidity and development of the industries in which we operate may differ materially from those made and as suggested by the forward-looking statements in this call.

Examples of forward-looking statements include statements regarding expected operating results, projections for our second quarter and 2015 full year performance, expected increases in our annual revenues related to acquisitions or open points, anticipated availability from our unfinanced operating real estate and anticipated levels of future capital expenditures.

We urge you to carefully consider this information and not place undue reliance on forward-looking statements. We undertake no duty to update our forward-looking statements, including our earnings outlook, which are made as of the date of this release.

During this call we may discuss certain non-GAAP items such as adjusted net income and diluted earnings per share from continuing operations, adjusted SG&A as a percentage of revenues and gross profit and adjusted pretax margin. Non-GAAP measures do not have definitions under GAAP and may be defined differently and not comparable to similarly titled measures used by other companies. We caution you not to place undue reliance on such non-GAAP measures, but also to consider them with the most directly comparable GAAP measures.

We believe the non-GAAP financial measures we present improve the transparency of our disclosures, provide a meaningful presentation of our results from core business operations because they exclude items not related to core business and improve the period-to-period comparability of our results from core business operations. These presentations should not be considered an alternative to GAAP measures. A full reconciliation of these non-GAAP items is provided in the financial tables in today's press release.

We have also posted an updated investor presentation on our website, lithiainvestorrelations.com, highlighting our first quarter results. On the call today are Bryan DeBoer, President and CEO; Chris Holzshu, Senior Vice President and CFO; and Sid DeBoer, Executive Chairman.

At the end of our prepared remarks we will open the call to questions. I'm also available in my office after the call for any follow-up you may have. With that, I'll turn the call over to Bryan.

Good morning, and thank you for joining us. Earlier today we reported first-quarter adjusted net income from continuing operations of $36.9 million compared to $27.1 million a year ago. We earned $1.39 per share in the first quarter compared to $1.03 per share last year, or an increase of 35%. Our revenue was approximately $1.8 billion in the first quarter, an increase of 66% over the prior year.

From this point forward all comparisons will be on a same-store basis. For the fourth quarter in a row we saw double-digit degrees in all four business lines. Total sales increased 11% and SAAR was $17.1 million for the first quarter, the best quarterly result since 2006.

In the quarter new vehicle revenues increased 11%. Our new vehicle average selling price increased 3%. Unit sales increased 9%, which was higher than the national average of 6%.

Domestic units increased 7% compared to 4% nationally. Import increased 10% compared to 6% nationally. And luxury units were up 12% compared to 11% nationally.

Retail used vehicle revenues increased 11% in the quarter. Our retail used vehicle average selling prices increased 4%, as late model vehicles continue to make up a greater percentage of the overall used vehicle sales mix. We retailed 6% more used units over the prior year, resulting in a used-to-new ratio of 0.9 to 1.

In the quarter, certified units grew 15%. Core units increased 5%. And finally, value auto units, or vehicles over 80,000 miles, increased 2%. Our used vehicle gross margins were unchanged from the prior year.

We sold a monthly average of 57 used vehicles per store, up from 55 units in the first quarter of 2014 and 50 units in the first quarter of 2013. We continue to focus on procuring core product and selling 75 used units per store per month.

We believe that the increased availability of used cars presents a continued opportunity for our stores to increase unit sales in the future. This remains a top priority for our teams in 2015 and beyond.

Gross profit per new vehicle retailed was $2,168 compared to $2,258 in the first quarter of 2014, a decrease of $90 per unit. Gross profit per used vehicle retailed was $2,602 compared to $2,505 in the first quarter of 2014, an increase of $97 per unit. Our F&I per vehicle was $1,233 compared to $1,181 last year, or an increase of $52 per vehicle.

On the vehicles we sold in the quarter, we arranged financing on 73%, sold a service contract on 44% and sold a lifetime oil product on 37%. Our penetration rates improved in all three areas when compared to last year.

In the first quarter the blended overall gross profit per unit was $3,656 compared to $3,599 last year, or an increase of $57 or approximately 2%. As we have previously discussed, our store personnel monitor overall gross profit per vehicle retail sold to evaluate and drive their performance. While we continue to see lower new vehicle gross profits per unit, this was more than offset by improvements in used vehicle gross profit per unit and F&I per vehicle.

Our service, body and parts revenue increased 11% over the first quarter of 2014. This was on top of last year's 9% increase over the first quarter of 2013.

Customer pay work increased 9%. Warranty sales increased 31%. Wholesale parts increased 5%, and our body shops had a slight decrease of 3%.

Our total gross margin was 15.8% compared to 16% in the same period last year. As of March 31, consolidated vehicle inventories were at a days supply of 62, a decrease of 7 days from a year ago. Used vehicle inventories were at a days supply of 49, a decrease of 3 days from a year ago.

The acquisition market remains robust and we believe the combination of moderating new car sales environment coupled with an aging dealer body will continue to provide opportunities for consolidation. We are actively evaluating acquisition candidates and note that with the DCH combination we now have identified over 2600 potential target stores.

We remain confident in our ability to find accretive purchases to increase our portfolio and grow earnings. We also still see considerable opportunities within our existing store base to improve results, increasing our new vehicle market share, selling 75 units per month per store, capturing increasing units in operation returning to our service departments, controlling costs, improving productivity and other corporate synergies all remain as opportunities.

The DCH combination is solidly on track and the speed of our integration continues to surprise us. We remain excited by our organizations' ability to share best practices to identify areas of opportunity. Increasingly, we are working together as one team, aligned with a common mission with similar values built upon our teams and around our customers.

In summary, we are humbled by the ability of our two organizations to come together as one cohesive team. With that I'll turn the call over to Chris, our CFO.

Thank you, Bryan. At March 31, 2015 we had approximately $71 million in cash and available credit, as well as unfinanced real estate that could provide another $116 million in 60 to 90 days for a total liquidity of $187 million. During the quarter we completed $41 million in net mortgage financing as we position our balance sheet after the DCH integration. We will continue to selectively mortgage properties to provide additional flexibility and to take advantage of the current rate environment.

At the end of the first quarter we were in compliance with all our debt covenants and increased our current ratio to 1.21 to 1 to ensure adequate working capital. Despite the increase in our outstanding debt levels as a result of the recent acquisitions, our net debt-to-EBITDA is approximately 2.2 times below our maximum target of under 3 times.

Our free cash flow, as outlined in our investor presentation, was $34 million for the first quarter of 2015. Capital expenditures, which reduce this free cash flow figure, were $25 million for the quarter.

We estimated generating over $110 million in free cash flow for 2015, providing significant capital to reduce our leverage or to deploy for acquisitions, share repurchases, dividends or internal investment. Our first choice for capital deployment remains to grow through acquisitions and internal investment. But regardless of category, all investment decisions are measured against strict ROE metrics and will be solid long-term investments for Lithia's future.

Our first-quarter adjusted SG&A as a percentage of gross profit on a same-store basis decreased 120 basis points to an estimated 67.1%. On a consolidated basis, including the effect of recent acquisitions, our adjusted SG&A as a percentage of gross profit was 71.3%. Our operational team will be working diligently in the short to medium term to return to industry-leading SG&A performance.

Throughput, or the percentage of each additional gross profit dollar over the prior year we retain after selling costs and adjusted to reflect same-store comparisons, was 45%. We continue to target incremental throughput in a range of 45% to 50% in the future.

Based on our results in the first quarter, we have increased our 2015 guidance as follows. We expect second-quarter 2015 earnings per share of $1.55 to $1.59 and full-year 2015 earnings per share of $6.20 to $6.30 per share.

For additional assumptions related to our earnings guidance, I would refer you to today's press release at lithiainvestorrelations.com. This concludes our prepared remarks. We would now like to open the call to questions. Operator?

Thank you. (Operator Instructions) Our first question comes from Steve Dyer with Craig-Hallum. Please state your question.

Nice quarter.

Morning, Steve. Thanks.

FCA recently announced they were going to bump up the invoice price but not sticker price by about 1% or so. Is that -- I know you don't have the exposure to them that you once did on a percentage basis, but is that something to be concerned about with other OEMs, or how would you anticipate managing something like that?

Steve, this is Sid DeBoer. Hey, Steve, I'm on a national dealer council and obviously we're not excited about them changing what appears to be our margin, but in reality it could work out in our favor. They brought themselves in line with where Ford and General Motors are in terms of a discount in terms of MSRP.

But in reality they've got such a stair-stacked incentive program. If nothing else it's put more money available to that, which could mean -- because they're not going to give up market share. They're on a roll.

They've gained market share I think for, what, 60 months in a row. And I just don't see them allowing that to impact sales at all. So could end up -- there's more of the gross profit hidden from the customer, then, if they put it back in the incentive drawer, which could help margins.

So I'm not negative on it. I don't like it. I think it's nice to have a high price and some room to trade. But that's just the old-fashioned car dealer in me.

Got it. All right. Thanks, Sid.

Geographically, what are you guys seeing? I know while you're -- it wouldn't seem that you're seeing much in the way of a falloff given your guidance. But some of the energy states, are you seeing anything on the margin there that is impacting anything?

No, it's -- Steve, this is Bryan. It's -- there's some variance, but overall the country seems pretty stable. If you look specifically at the energy markets, which we really have four that are centered on that, Texas, revenues were up 9%. Montana was up 15%. Alaska was up 26%. And North Dakota was up 15%. So all in all, if you balance that, it's about average for where the Company's performing.

Wow, okay. Thanks.

And then lastly, I know you guys are always on the hunt for acquisitions. Are there any common denominators other than valuation in terms of the size of the deal you guys are looking at? Mix, et cetera?

I mean would you do another big deal? Are you going to -- or are you kind of busy digesting this one, and you're looking for small ones? Any color as to what you guys are looking for would be great.

You bet, Steve. Bryan again. There's no question that we believe that -- in other sizable acquisition. Now, only there's only about nine other ones that are larger than DCH in the country. So those may be a little hard to come by.

But ones that are about half that size, or maybe a quarter that size are out there. We believe that the integration of DCH has went very smoothly. I think we proved to ourselves and the combination of the two teams that we're open-minded.

We challenge each other with best practices, that the idea of bringing in a management team that has slightly different cultures and blending them together is something that management teams can handle, and can challenge and be inspired by. So we really believe that those are definitely on the radar.

We're not solely looking at a $500 million or a $1 billion acquisition. We're still looking at our typical strategies where we buy a $50 million to $70 million store size. And there is a pretty active market in that arena, both in our exclusive markets and now in the metropolitan markets.

I think I mentioned we really increased our availability of candidates from about 1200 to about 2600 when we went into those metropolitan markets. Now, we still focus on a dominant manufacturer in what we would call a dominant area of influence, even in the metropolitan areas.

Great, helpful. Thanks a lot guys, congrats.

Thanks Steve.

Thank you. Our next question comes from Paresh Jain with Morgan Stanley. Please state your question.

Morning, everyone. Let me start with a question on guidance, and especially in context with the $7 EPS milestone. Now, guidance went up by $0.25 and the 1Q beat itself was about $0.20. And you're also expecting significant uptick in used margins and P&S margin and F&I for the rest of the year.

So, a couple of questions here. Wouldn't that suggest a pull-forward timing-wise of hitting the $7 target? And given that guidance only went up by $0.25, can you highlight some items that have an offsetting impact on the guidance?

Yes, you bet. This is Chris. As Bryan mentioned in our prepared remarks our revenues were up 66%, or almost $700 million in the quarter. So obviously we have lots of opportunities to work on. And based on the beat that we saw in the first quarter, we are optimistic about what the future holds.

However, consistent with the way that we've laid out our guidance historically, as we look at our current store performance and we look at current trends, and we make sure that we are executing before we actually promise the results for the year.

So we have three quarters left as far as the runway for 2015. And we feel that incrementally improving the guidance and as items come to fruition on the execution, is going to be our strategy. And we hope to continue to rise throughout the year.

Got it. And just a follow-up here on the drivers of the guidance change. When we look at the used, P&S and F&I, the three areas where you expect to draw synergies from DCH, parts and services margin and F&I seem to be back to pre-DCH levels.

In fact, parts and services margins have been above pre-DCH levels. Was this a case of very low initial expectations and you're just being more conservative, or are you already seeing some changes at the ground level in these areas?

Hi, this is Bryan again. When we decided to combine with DCH we really saw that there was opportunities. And I think as we outlined over the last few quarters, we expected that a lot of those synergies and the ability to tweak their operating model when they were already producing great revenues and fairly solid growth, but the ability of them to be able to bring it to the bottom line has taken effect a little quicker than expected.

Their West Coast stores have been very expedient on being able to make changes that quickly reflect on the bottom line. The East Coast stores over the last few months are starting to take hold as well. So we're pretty pleased with where that's at. It's probably a little ahead of where we planned.

And in addition I would say this, that George, TY and their teams, our divisional leaders of DCH, when it comes to those ideas of corporate synergies that we were really looking at, and I think I mentioned really briefly about it last call, we expected those synergies to happen over the first two years or so. We actually believe that we're about 75%, 80% of the way through those corporate synergies. And the idea of the Company really working together as one, while still sharing best practices that are maybe volume focused with DCH, where they're net focused with Lithia, are blending quite nicely.

So I think the overall result is being reflected a little sooner than expected in our bottom line profits.

Paresh, this is Sid. Hey, just -- it's a good point to remember that that projection that we make is built store by store by store by store manager with Company expectations and store expectations. It's not a number we just pick out of the air. And so it's built ground up and it's not a macro decision.

It's built on real forecasts for each store. So, I mean, that's how it ends up coming out as what we predict. And hopefully we can exceed. I mean, that's the goal obviously, but we build it on a real basis.

That's great color, guys. Thank you.

Thanks.

Our next question comes from Jamie Albertine with Stifel. Please state your question.

Great. Good morning, and congratulations on a solid quarter yet again, gentlemen. So if I could ask, I just really want to focus on used, if possible and wanted to get your opinions on at a high level, where Lithia thinks we are in the used retail cycle. And how important or critical is extracting, whether it's 57 units per store per month going to 75, or 93% used to new retail going to 100%, how important is the used business optimization to your overall trajectory to that $7 EPS target?

And so how should we sort of think about that for the next quarter, but maybe even for the next one to two years?

That's a good question, Jamie. This is Bryan. I think when we look at our opportunities in the coming few years, we break it down into three key factors that are going to be able to drive the performance upward.

Used cars, obviously you hit on, is probably the largest part of that. And at 57 units per store, we still strongly believe that the 75 is within our sights, excluding having DCH come in, in another three quarters which will raise it a little bit because their stores are a little bit bigger.

When we look at that one factor, the supply of vehicles is getting better. And in those three- to seven-year-old vehicles which we call core product, which if you recall is also the driver of value auto product, is starting to loosen. So there's becoming a greater supply because the SAAR rates that are starting to push through now are starting to become higher. And we really see that continuing for some number of years, three to five years. We really believe that that's a pretty easily accomplished task.

The other two key drivers are really that flow-through business in service and parts, which we still believe there's tons of opportunity to become that all-in-one type of shopping experience for our consumers. And then lastly, we would say that the opportunities within our existing stores in terms of productivity, cost management, as well as new vehicle market share in our underperforming stores, which is a sizable amount still, we believe that that is the third driver that can help take us to the $7 and beyond marks.

Very helpful, Bryan. Thank you for that color. And then just as a quick follow-up. Is there any detail that you can share with us as it relates to the first quarter, either across the different segments CPO, value, or core, or regionally as now you've grown with DCH, that might be helpful in sort of, I don't know, pinning down where we are in the year in terms of used vehicle supply and demand? Thanks.

You bet you, Jamie. You know I've got some extra color. I think it's fair to say if we look at the ability of the Lithia stores, they've become pretty balanced on how they stock and drive the three segments of value, core and certified. However, we still probably have a third of the stores that don't play very heavily in the value auto products.

Our Texas stores are starting to do that a little more, which is good. And I think with a slight moderation of vehicle sales -- they're at 9% up -- they're starting to look for more opportunities, so that's good.

If we look at the DCH side, value autos in many of their stores hasn't really been part of their formula. So as we look at the year going forward and we look at the supplies that are there, I think it really comes down to a belief that they can start to find these vehicles and buy those core products that take in those value vehicles.

And I know their general manager and service management teams are working closely to be able to recondition those cars and then market those cars to consumers that may not have looked towards the DCH stores in the past for that type of vehicle. So it is a slow process, and it was with Lithia.

But no matter what, they have lots of opportunity. And their top-of-funnel trade-ins is probably the easiest way to get to those value auto cars. So we're really excited to see the early stages of some of the stores to start to take hold in that value auto segment.

Thanks again. And good luck in the second quarter.

Thanks, Jamie.

Thanks, Jamie. Anybody home?

Diego?

Thank you. Our next question comes from Brett Hoselton with KeyBanc. Please state your question.

Good morning, gentlemen.

Hi Brett.

Kind of two questions. First on the DCH front, similar to the question that was asked by the previous caller. If I kind of reverse through the numbers, disaggregating DCH from your core operations, it seems to imply that if I assume a 2.5% net margins for Lithia's core operations, which is kind of what you've been running at for the past couple years, it seems to imply about a 1.2% net margin for DCH.

And my question is, where do you think that you could potentially take that margin? I mean, some of the larger peer metro dealers, so forth -- your public peers and so forth, are kind of in that mid to even high single digit range. But what's your expectations of where the margins for DCH might -- you might be able to take those?

Yes. Hey, Brett. This is Chris. I think when you get that far down the line it's hard for us to decouple the DCH margins with the Lithia margins, especially as we continue to integrate. I think the easier way for me to approach this is probably more from just an SG&A perspective. And if you look at our SG&A-to-gross on a same-store basis, I think we're still industry leading at 67%-some.

But if you look at what we were for the quarter overall at 71.3%, by default that means that the SG&A on the DCH segment and the additional acquisitions that we brought in was north of 80%; which is a sizable incremental opportunity for us. I mean, 10% on an $80 million gross profit number is north of $8 million a quarter.

So it's not lost on us, the opportunity, it's not lost on us the margin improvement that we have to expand with DCH and the other acquisitions that we brought in on the Lithia side in 2014. And we're going to continue to work on those and continue to work to get our margins overall back up to those pre-acquisitions, those pre-DCH acquisition levels.

Excellent. Good question, thank you -- or good answer. Thank you very much, Chris.

And then finally, in -- some of your peers have talked about a bit of a slowdown, or seeing a bit of a slowdown in M&A opportunities. They've talked about valuations maybe being a little bit higher. And some are taking a tact of focusing more on share repurchases and so forth.

I think your approach is definitely focused primarily on M&A. My question is, how are you seeing the pace of opportunities for yourself? I mean, I understand that DCH obviously gives you more opportunities. But just if you were to, kind of think about it on a same-store basis, or what you might expect if DCH was part of the business a year ago? Are you seeing more or less opportunities, and how are you seeing valuations and so forth?

Brett, this is Bryan. I would say that the current state continues to become more accelerated in terms of candidates that are out there. I think it's accurate that the pricing on those deals has also grown some.

There's some hot air there. I really believe that, because we're still not seeing a lot of those acquisitions break loose at those numbers.

However, I do believe that there's a lot of people out there with a lot of cash in their pockets that are looking for deals. And I think it really boils back down to the ability to operate those stores and have people that are on the benches ready to run those. And then your operating, what I would call your forecasting and your ROEs will fall into line a little easier. And I think with the talent that we have sitting on the bench we can be competitive and continue to grow at a pretty good clip on acquisitions at whatever pricing may or may not be out there.

As you think about valuations, Chris, are you thinking -- or Bryan, I'm sorry.

That's okay.

As you're thinking about valuations, obviously net income has grown for all the dealerships and so you would expect to pay more for a dealer. When you think about valuations, are we thinking more blue sky multiples maybe being a touch higher than they were?

Yes, I think that's a fair statement. I mean, we obviously have fairly high hurdle rates on what we expect out of acquisitions. We're typically looking at average performing stores, if you recall, because for us to hit our hurdle rate we need to be able to double or triple the profit potential of where they currently exist to be able to pay a goodwill multiple that's usually accepted by a seller. So it's a little bit different candidate than we're looking for than maybe even some of the -- some of our peer group.

And I think because of that ability to be able to bring value to those acquisitions and be able to operate them at a higher level of profitability, it makes it a little easier for us to still stay in the game on buying stores.

Excellent. Thank you very much, gentlemen.

Thanks Brett.

Thanks Brett.

Our next question comes from John Murphy with Bank of America Merrill Lynch. Please state your question.

This is Liz Suzuki on for John. It looks like the domestic brand growth lagged a little bit compared to import and luxury. Is that more a function of the mix of the acquired stores, or more a reflection of market share shifts between brands in the market?

Liz, this is Bryan. I think nationally -- it had nothing to do with our acquisition of DCH or the mix of our type of stores. I mean, on a same-store basis, if you recall, our unit sales were up 7% in domestic as compared to the nation at 4%, which is a delta of 3%. The imports were up 10% and the nation was up 6%, which is a delta of 4%. And luxury was up 12% with the nation at 11%, which is a 1% delta. So our stores kind of performed a little bit above national in all three categories.

Great. Thanks. And for acquisitions are there any particular brands that you'd prefer to be more or less exposed to than your current mix?

This is Bryan again. So we're about a quarter Honda, a little less than a quarter Toyota and about 17%, 18% Chrysler products, followed by a Ford and Chevrolet and Subaru, with some luxuries and BMW. But when we look at acquisitions, we like the balance of our current portfolio.

So I think when we look towards targets we're looking for that balanced approach as well, whereas I would say pre-DCH acquisition it may have been a little bit more import and luxury focused. But being that they were almost 95% import luxury, that helped balance us out pretty quickly where we aren't having to stretch on one type of brand or another. So we're pretty balanced in that arena now.

Great. And just one more quick one. It looks like you guys were around 2.2 times levered at the end of the quarter with a covenant requirement of no more than 5 times. How comfortable do you think you'd be to get to higher levels of leverage in the 3 times to 3.5 times range?

Yes, Liz this is Chris. We've said that our optimized leverage would be somewhere between 2.5 and 3 times, and at 2.2 times we're definitely below that.

I think that our primary use of capital is going to continue to be deploying it on acquisitions. And we feel pretty optimistic that midterm we're going to continue to bring leverage down until those acquisitions come to fruition.

As an example, pre-DCH our leverage ratio was somewhere near 1.3 times and post acquisition it popped up to, I think, 2.7 times. Optically I think that we're going to continue to see leverage fall for a few quarters. But with our acquisition team and the acquisitions that are out there in the market, there's plenty of headroom ahead of us and we're going to continue to deploy capital in that arena.

However, we did buy back some shares in the quarter. I think we bought back about 77,000 shares. We also raised our dividend in the quarter. And we invested $25 million in our existing stores. So we're going to continue to stay balanced, but focused on the acquisition front.

Great, thank you.

Our next question comes from Rick Nelson with Stephens. Please state your question.

Thanks. Good morning.

Hi Rick.

Question about incremental gross profit flow-through. As I calculate it on a consolidated basis, 23.9%. You had mentioned same-store flow-throughs are 45%.

I take it the difference being acquisitions, largely DCH. Is there anything structural within a DCH that would prevent you from getting to those sorts of same-store flow-throughs?

Yes. Hey, Rick. This is Chris. No. I think we're optimistic that midterm we're going to continue to target flow-through for both the DCH stores and the Lithia stores in that 45% to 50% range.

I just would call out on that on a first year of acquisitions, the flow-through is equivalent to the inverse of your SG&A-to-gross. So if a store on an SG&A-to-gross basis does 80%, the flow-through as you calculate it on that would be 20%.

So you have to wait for a full year comp in order to really do the flow-through analysis. And that's why it looks so low on a consolidated basis.

Rick, this is Sid. It's real important to remember that we have to keep and grow volume at those DCH stores at the same time. And that growth, we can bring in at a better SG&A.

Okay. Got you. And I guess same question about the used-to-new ratio. For similar same-store I'm calculating 0.92 on a consolidated 0.79. Again, anything structural that would not allow you to grow the used with DCH?

Rick, this is Bryan. I think the idea when you look at a used-to-new ratio on DCH it might be a little bit different. However, I do believe that there's huge growth opportunity within DCH.

But remember, many of their stores are high volume. In fact, it was neat to hear when I was driving in this morning on Sirius radio -- I listen to K100 New York so I can hear about traffic reports now that we're spending time out with a lot of the investment community. And I heard a DCH ad and they talked about the four New York Honda stores, which was pretty cool.

Anyway, so when you start to look at that, you go, you know what? We can spin that into used cars and we can continue to grow those things. But the idea of a 0.9 to 1, I think it's fair to say that we still strive for Lithia to get to a 1.5 to 1 on our used-to-new ratio.

And I think if DCH was pushing in the 0.8, 0.9 to 1 that'd be a pretty solid job considering that Brian Lam's store, Paramus Honda, sold 466, I believe, new Hondas last month. That's a pretty hard number to achieve, a 1 to 1 at 466, when I think the best Honda store in the country probably sells 250 to 300 used cars.

Okay, got you. Curiosity, where does DCH sit now with a used-to-new ratio? Recognizing, pushing a lot of new cars in those stores?

It's currently at 0.5 to 1.

Thanks a lot. And good luck.

You bet, Rick.

Our next question comes from Bret Jordan with BB&T Capital Markets. Please state your question.

Good morning. If we look at the regional performance, and I think you've got the slide in the deck still that talks about your, at least Western regions still underperforming 2006 peak levels. Do you have a feeling for what your regional SAAR was in the first quarter, just to compare your growth relative to growth in the market?

Bret, hold on one second. We're trying to get that.

And while you're digging I'll ask another one. Just to track what lease penetration is, it did seem like your Lithia core business had the potential to pick some best practices up from DCH. Do you have a lease number for the quarter?

Yes. Hey, Brett. This is Chris. I think first off, on your regional question as far as what SAAR is, we don't really back into an actually SAAR equivalent number. As you pointed out, on page 9 of our presentation we show you the incremental opportunity that's left in each one of our markets. And we could give you some more color on each state to get a feel for how those are improving.

Bryan mentioned about four of those earlier in the call are related to the oil states. And we could give you some more color on those, if that's helpful. And then as far as lease penetration is concerned, Bryan, you want to take that?

Yes, absolutely. I think we spoke to it a little bit last time. That the DCH's ability to lease cars, it continues to grow. They're in the mid-30 percentile range on their new vehicle leasing.

I think in terms of Lithia outlook, it's starting to take hold within Lithia. It could have had something to do with a little bit better new vehicle quarter.

I don't believe that we hit double digits yet. I think it's high single digits in the 8% to 9% range. So we still have lots of opportunity to be able to expand our market share by providing leasing opportunities to our consumer base.

Okay. And then one last question. On the collision, the minus 3% comp, is that just weather-related or is there anything going on in the collision space?

Yes, this is Bryan again. That's really a function again of some turnover in management in two stores in Texas, which are two large body shops. I think it's a short-term blip. We since have new leaders within those two stores, and hopefully see that trend there reverse itself.

Okay. Great. Thank you.

Yes, Bret, and to answer your first question. Then so Alaska was up 25%, California was up 22% in the quarter. Oregon was up 24% and Washington was up 16%. So overall with sales up 11%, those markets definitely performed a little better than our other markets.

Okay. Got you.

Showing that there were still opportunities.

Yes.

Great, Bret.

Thank you. There are no further questions at this time. I will turn the call back to management for closing remarks.

Thank you for joining us today. We look forward to talking to you again in July.

This concludes today's conference. All parties may disconnect. Have a wonderful day.