<HTML> <HEAD> <TITLE> Prepared by MERRILL CORPORATION www.edgaradvantage.com </TITLE> </HEAD> <BODY BGCOLOR="#FFFFFF"> <HR noshade> <HR noshade> <BR> <P ALIGN="CENTER"><FONT SIZE=4><B>UNITED STATES<BR> SECURITIES AND EXCHANGE COMMISSION<BR></B></FONT><FONT SIZE=4><B>WASHINGTON, D.C. 20549</B></FONT></P> <HR noshade WIDTH=40%> <P ALIGN="CENTER"><FONT SIZE=5><B>FORM 10-Q</B></FONT></P> <HR noshade WIDTH=40%> <br> <table width="100%" border="0" cellpadding="0" cellspacing="0"> <tr> <td width="23%" align="right"><font size=2> (Mark One)</font></td> <td width="77%"> </td> </tr> </TABLE> <br> <TABLE WIDTH="76%" CELLSPACING=0 CELLPADDING=0 align="center"> <TR VALIGN=top> <TD WIDTH="11%" ALIGN=CENTER><FONT SIZE=2> </FONT> <FONT SIZE=3>/X/</FONT></TD> <TD WIDTH="89%"><FONT SIZE=3> </FONT> <FONT SIZE=3>QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="100%" ALIGN=CENTER colspan="2"><font size=2><b>For the quarterly period ended June 30, 1999</b></font></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="100%" ALIGN=CENTER colspan="2"><font size=2>OR</font></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="11%" ALIGN=CENTER><FONT SIZE=3>/ /</FONT></TD> <TD WIDTH="89%"><FONT SIZE=3>TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</FONT></TD> </TR> </TABLE> <div ALIGN="CENTER"><FONT SIZE=2>For the transition period from <U> </U> to<u> </u> </FONT></div> <P ALIGN="CENTER"><FONT SIZE=2>Commission file number: 000-21789</FONT></P> <HR noshade WIDTH=40%> <P ALIGN="CENTER"><B><font size="5">LITHIA MOTORS, INC.</font><BR> </B><FONT SIZE=2>(Exact name of registrant as specified in its charter)</FONT></P> <TABLE WIDTH="90%%" CELLSPACING=0 CELLPADDING=0 align="center"> <TR VALIGN=TOP> <TD WIDTH="45%" ALIGN=CENTER><FONT SIZE=2><B>Oregon</B></FONT><FONT SIZE=2><BR> (State or other jurisdiction of<BR> incorporation or organization)</FONT></TD> <TD WIDTH="5%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="40%" ALIGN=CENTER><FONT SIZE=2><B>93-0572810</B></FONT><FONT SIZE=2><BR> (I.R.S. Employer Identification No.)</FONT></TD> </TR> </TABLE> <br> <TABLE WIDTH="90%%" CELLSPACING=0 CELLPADDING=0 align="center"> <TR VALIGN=TOP> <TD WIDTH="45%" ALIGN=CENTER><FONT SIZE=2> <BR> </FONT> <FONT SIZE=2><B>360 E. Jackson Street, Medford, Oregon</B></FONT><FONT SIZE=2><BR> (Address of principal executive offices)</FONT></TD> <TD WIDTH="5%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="40%" ALIGN=CENTER><FONT SIZE=2> <BR> </FONT> <FONT SIZE=2><B>97501</B></FONT><FONT SIZE=2><BR> (Zip Code)</FONT></TD> </TR> </TABLE> <P ALIGN="CENTER"><FONT SIZE=2> Registrant's telephone number, including area code: </FONT><FONT SIZE=2><B>541-776-6899</B></FONT></P> <HR noshade WIDTH=40%> <P><FONT SIZE=2>Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /x/ No / /</FONT></P> <P><FONT SIZE=2>Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.</FONT></P> <TABLE WIDTH="76%" CELLSPACING=0 CELLPADDING=0> <TR VALIGN=BOTTOM> <TH WIDTH="49%" ALIGN=CENTER><FONT SIZE=1> </FONT><BR> </TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="49%" ALIGN=LEFT><FONT SIZE=1> </FONT><BR> </TH> </TR> <TR VALIGN=TOP> <TD WIDTH="49%" ALIGN=CENTER><FONT SIZE=2><B>Class A Common stock without par value</B></FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="49%" ALIGN=CENTER><FONT SIZE=2><B>7,446,054</B></FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="49%" ALIGN=CENTER><FONT SIZE=2><B>Class B Common stock without par value</B></FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="49%" ALIGN=CENTER><FONT SIZE=2><B>4,110,000</B></FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="49%" ALIGN=CENTER><FONT SIZE=2>(Class)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="49%" ALIGN=CENTER><FONT SIZE=2>(Outstanding at August 10, 1999)</FONT></TD> </TR> </TABLE> <br> <hr noshade> <hr noshade> <!-- SEQ=1,EFW="9919732",CP="LITHIA MOTORS, INC.",DN="1", FOLIO=,FILE="DISK004:[99SFO5.99SFO1995.EDGAR]10Q_A_1995.CHC",USER="BHUGHES", CD="11-AUG-1999 9:17:37"--> <P ALIGN="CENTER"><FONT SIZE=2><B>LITHIA MOTORS, INC.<BR> FORM 10-Q<BR> INDEX</B></FONT></P> <TABLE WIDTH="100%" CELLSPACING=0 CELLPADDING=0> <TR VALIGN=BOTTOM> <TD WIDTH="92%" COLSPAN=3 valign="bottom"><FONT SIZE=2><U>PART I - FINANCIAL INFORMATION<BR> </U></FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="6%" ALIGN=CENTER valign="bottom"><FONT SIZE=2>Page</FONT> <HR noshade></TD> </TR> <TR VALIGN=TOP> <TD valign="bottom"><FONT SIZE=2> <BR> Item 1.</FONT></TD> <TD><FONT SIZE=2> <BR> </FONT></TD> <TD valign="bottom"><FONT SIZE=2> <BR> Financial Statements</FONT></TD> <TD><FONT SIZE=2> <BR> </FONT></TD> <TD valign="bottom"><FONT SIZE=2> <BR> </FONT></TD> </TR> <TR VALIGN=TOP BGCOLOR="#CCEEFF"> <TD WIDTH="9%" valign="bottom"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="80%" valign="bottom"><FONT SIZE=2> <BR> Consolidated Balance Sheets — June 30, 1999 (unaudited) and December 31, 1998</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="6%" ALIGN=CENTER valign="bottom"><FONT SIZE=2> <BR> <BR> 2</FONT></TD> </TR> <TR VALIGN=TOP BGCOLOR="#FFFFFF"> <TD WIDTH="9%" valign="bottom"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="80%" valign="bottom"><FONT SIZE=2> <BR> Consolidated Statements of Operations — Three and Six Months Ended June 30, 1999 and 1998 (unaudited)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="6%" ALIGN=CENTER valign="bottom"><FONT SIZE=2> <BR> <BR> 3</FONT></TD> </TR> <TR VALIGN=TOP BGCOLOR="#CCEEFF"> <TD WIDTH="9%" valign="bottom"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="80%" valign="bottom"><FONT SIZE=2> <BR> Consolidated Statements of Cash Flows — Six Months Ended June 30, 1999 and 1998 (unaudited)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="6%" ALIGN=CENTER valign="bottom"><FONT SIZE=2> <BR> <BR> 4</FONT></TD> </TR> <TR VALIGN=TOP BGCOLOR="#FFFFFF"> <TD WIDTH="9%" valign="bottom"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="80%" valign="bottom"><FONT SIZE=2> <BR> Notes to Consolidated Financial Statements (unaudited)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="6%" ALIGN=CENTER valign="bottom"><FONT SIZE=2> <BR> 5</FONT></TD> </TR> <TR VALIGN=TOP BGCOLOR="#CCEEFF"> <TD WIDTH="9%" valign="bottom"><FONT SIZE=2> <BR> Item 2.</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="80%" valign="bottom"><FONT SIZE=2> <BR> Management's Discussion and Analysis of Financial Condition and Results of Operations</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="6%" ALIGN=CENTER valign="bottom"><FONT SIZE=2> <BR> <BR> 7</FONT></TD> </TR> <TR VALIGN=TOP BGCOLOR="#FFFFFF"> <TD WIDTH="9%" valign="bottom"><FONT SIZE=2> <BR> Item 3.</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="80%" valign="bottom"><FONT SIZE=2> <BR> Quantitative and Qualitative Disclosures About Market Risk</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="6%" ALIGN=CENTER valign="bottom"><FONT SIZE=2> <BR> 14</FONT></TD> </TR> <TR VALIGN=BOTTOM BGCOLOR="#CCEEFF"> <TD WIDTH="92%" COLSPAN=3 valign="bottom"><FONT SIZE=2> <BR> <U>PART II - OTHER INFORMATION </U></FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="6%" valign="bottom"><FONT SIZE=2> <BR> </FONT></TD> </TR> <TR VALIGN=TOP BGCOLOR="#FFFFFF"> <TD WIDTH="9%" valign="bottom"><FONT SIZE=2> <BR> Item 4.</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="80%" valign="bottom"><FONT SIZE=2> <BR> Submission of Matters to a Vote of Security Holders</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="6%" ALIGN=CENTER valign="bottom"><FONT SIZE=2> <BR> 15</FONT></TD> </TR> <TR VALIGN=TOP BGCOLOR="#CCEEFF"> <TD WIDTH="9%" valign="bottom"><FONT SIZE=2> <BR> Item 6.</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="80%" valign="bottom"><FONT SIZE=2> <BR> Exhibits and Reports on Form 8-K</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="6%" ALIGN=CENTER valign="bottom"><FONT SIZE=2> <BR> 16</FONT></TD> </TR> <TR VALIGN=TOP BGCOLOR="#FFFFFF"> <TD WIDTH="92%" COLSPAN=3 valign="bottom"><FONT SIZE=2> <BR> Signatures</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="6%" ALIGN=CENTER valign="bottom"><FONT SIZE=2> <BR> 17</FONT></TD> </TR> </TABLE> <p align=center><font size=2>1</font></p> <P><FONT SIZE=2> <!-- SEQ.=1,EFW="9919732",CP="LITHIA MOTORS, INC.",DN="1",FOLIO=1,FILE="DISK004:[99SFO5.99SFO1995.EDGAR]10Q_B_1995.CHC",USER="BHUGHES",CD='11-AUG-1999;06:52' --> </FONT></P> <!-- Generated by Merrill Corporation (www.merrillcorp.com) --> <P ALIGN="CENTER"><FONT SIZE=2><B>PART I - FINANCIAL INFORMATION</B></FONT></P> <P><FONT SIZE=2><B><U>Item 1. Financial Statements </U></B></FONT></P> <P ALIGN="CENTER"><FONT SIZE=2> LITHIA MOTORS, INC. AND SUBSIDIARIES<BR> CONSOLIDATED BALANCE SHEETS<BR> (In thousands)<BR> (Unaudited)</FONT></P> <TABLE WIDTH="100%" CELLSPACING=0 CELLPADDING=0> <TR VALIGN=BOTTOM> <TH WIDTH="69%" ALIGN=CENTER><FONT SIZE=1> </FONT><BR> </TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <td WIDTH="12%" COLSPAN=2 ALIGN=CENTER><font size="2">June 30,<BR> 1999</font> <hr noshade width=94%> </td> <TH WIDTH="2%"><font size="2"> </font></TH> <td WIDTH="15%" COLSPAN=2 ALIGN=CENTER><font size="2">December 31,<BR> 1998</font> <hr noshade width=94%> </td> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=BOTTOM> <TD WIDTH="69%"><FONT SIZE=2><B>Assets</B></FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=BOTTOM> <TD WIDTH="69%"><FONT SIZE=2>Current Assets:</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=BOTTOM> <TD WIDTH="69%"><FONT SIZE=2>Cash and cash equivalents</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>42,001</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="13%" ALIGN=RIGHT><FONT SIZE=2>20,879</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=BOTTOM> <TD WIDTH="69%"><FONT SIZE=2>Trade receivables</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>25,603</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN=RIGHT><FONT SIZE=2>17,287</FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=BOTTOM> <TD WIDTH="69%"><FONT SIZE=2>Notes receivable, current portion, net of allowance for doubtful accounts of $533 and $714</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>4,897</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN=RIGHT><FONT SIZE=2>3,074</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=BOTTOM> <TD WIDTH="69%"><FONT SIZE=2>Inventories, net</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>233,624</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN=RIGHT><FONT SIZE=2>157,455</FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=BOTTOM> <TD WIDTH="69%"><FONT SIZE=2>Vehicles leased to others, current portion</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>1,677</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN=RIGHT><FONT SIZE=2>861</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=BOTTOM> <TD WIDTH="69%"><FONT SIZE=2>Prepaid expenses and other</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>1,353</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN=RIGHT><FONT SIZE=2>1,933</FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=BOTTOM> <TD WIDTH="69%"><FONT SIZE=2>Deferred income taxes</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>3,290</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN=RIGHT><FONT SIZE=2>2,707</FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="69%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="15%" COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=BOTTOM> <TD WIDTH="69%"><FONT SIZE=2>Total Current Assets</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>312,445</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN=RIGHT><FONT SIZE=2>204,196</FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=BOTTOM> <TD WIDTH="69%"><FONT SIZE=2>Property and Equipment, net of accumulated depreciation of $4,783 and $3,907</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>42,726</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN=RIGHT><FONT SIZE=2>32,933</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=BOTTOM> <TD WIDTH="69%"><FONT SIZE=2>Vehicles Leased to Others, net</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>5,718</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN=RIGHT><FONT SIZE=2>5,647</FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=BOTTOM> <TD WIDTH="69%"><FONT SIZE=2>Notes Receivable, less current portion</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>5,722</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN=RIGHT><FONT SIZE=2>7,173</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=BOTTOM> <TD WIDTH="69%"><FONT SIZE=2>Goodwill, net of accumulated amortization of $1,892 and $1,180</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>78,633</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN=RIGHT><FONT SIZE=2>42,951</FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=BOTTOM> <TD WIDTH="69%"><FONT SIZE=2>Other Non-Current Assets, net of accumulated amortization of $123 and $103</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>1,671</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN=RIGHT><FONT SIZE=2>1,498</FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="69%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="15%" COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=BOTTOM> <TD WIDTH="69%"><FONT SIZE=2>Total Assets</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>446,915</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="13%" ALIGN=RIGHT><FONT SIZE=2>294,398</FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="69%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN=RIGHT> <HR noshade SIZE=4> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="15%" COLSPAN=2 ALIGN=RIGHT> <HR noshade SIZE=4> </TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=BOTTOM> <TD WIDTH="69%"><FONT SIZE=2><B>Liabilities and Shareholders' Equity</B></FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=BOTTOM> <TD WIDTH="69%"><FONT SIZE=2>Current Liabilities:</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=BOTTOM> <TD WIDTH="69%"><FONT SIZE=2>Floorplan notes payable</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>185,426</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="13%" ALIGN=RIGHT><FONT SIZE=2>124,167</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=BOTTOM> <TD WIDTH="69%"><FONT SIZE=2>Current maturities of long-term debt</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>8,893</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN=RIGHT><FONT SIZE=2>8,116</FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=BOTTOM> <TD WIDTH="69%"><FONT SIZE=2>Current portion of capital leases</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>153</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN=RIGHT><FONT SIZE=2>27</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=BOTTOM> <TD WIDTH="69%"><FONT SIZE=2>Trade payables</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>11,246</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN=RIGHT><FONT SIZE=2>6,313</FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=BOTTOM> <TD WIDTH="69%"><FONT SIZE=2>Accrued liabilities</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>21,788</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN=RIGHT><FONT SIZE=2>12,020</FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="69%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="15%" COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=BOTTOM> <TD WIDTH="69%"><FONT SIZE=2>Total Current Liabilities</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>227,506</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN=RIGHT><FONT SIZE=2>150,643</FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=BOTTOM> <TD WIDTH="69%"><FONT SIZE=2>Long-Term Debt, less current maturities</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>72,106</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN=RIGHT><FONT SIZE=2>38,994</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=BOTTOM> <TD WIDTH="69%"><FONT SIZE=2>Long-Term Capital Lease Obligation, less current portion</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>2,651</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN=RIGHT><FONT SIZE=2>2,426</FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=BOTTOM> <TD WIDTH="69%"><FONT SIZE=2>Deferred Revenue</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>2,607</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN=RIGHT><FONT SIZE=2>2,076</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=BOTTOM> <TD WIDTH="69%"><FONT SIZE=2>Other Long-Term Liabilities</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>3,002</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN=RIGHT><FONT SIZE=2>1,606</FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=BOTTOM> <TD WIDTH="69%"><FONT SIZE=2>Deferred Income Taxes</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>9,217</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN=RIGHT><FONT SIZE=2>7,142</FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="69%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="15%" COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=BOTTOM> <TD WIDTH="69%" height="14"><FONT SIZE=2>Total Liabilities</FONT></TD> <TD WIDTH="2%" height="14"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%" height="14"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT height="14"><FONT SIZE=2>317,089</FONT></TD> <TD WIDTH="2%" height="14"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%" height="14"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN=RIGHT height="14"><FONT SIZE=2>202,887</FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="69%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="15%" COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=BOTTOM> <TD WIDTH="69%"><FONT SIZE=2>Shareholders' Equity</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=BOTTOM> <TD WIDTH="69%"><FONT SIZE=2>Preferred stock — no par value; authorized 15,000 shares; issued and outstanding; none</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>—</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN=RIGHT><FONT SIZE=2>—</FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=BOTTOM> <TD WIDTH="69%"><FONT SIZE=2>Convertible, redeemable Series M preferred stock; authorized 15 shares; issued and outstanding 10.4</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>6,216</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN=RIGHT><FONT SIZE=2>—</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=BOTTOM> <TD WIDTH="69%"><FONT SIZE=2>Class A common stock — no par value; authorized 100,000 shares; issued and outstanding 7,432 and 6,105</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>95,325</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN=RIGHT><FONT SIZE=2>70,871</FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=BOTTOM> <TD WIDTH="69%"><FONT SIZE=2>Class B common stock — no par value; authorized 25,000 shares; issued and outstanding 4,110 and 4,110</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>511</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN=RIGHT><FONT SIZE=2>511</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=BOTTOM> <TD WIDTH="69%"><FONT SIZE=2>Additional paid-in capital</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>189</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN=RIGHT><FONT SIZE=2>150</FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=BOTTOM> <TD WIDTH="69%"><FONT SIZE=2>Retained earnings</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>27,585</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN=RIGHT><FONT SIZE=2>19,979</FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="69%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="15%" COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=BOTTOM> <TD WIDTH="69%"><FONT SIZE=2>Total Shareholders' Equity</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>129,826</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN=RIGHT><FONT SIZE=2>91,511</FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="69%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="15%" COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=BOTTOM> <TD WIDTH="69%"><FONT SIZE=2>Total Liabilities and Shareholders' Equity</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>446,915</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="13%" ALIGN=RIGHT><FONT SIZE=2>294,398</FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="69%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN=RIGHT> <HR noshade SIZE=4> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="15%" COLSPAN=2 ALIGN=RIGHT> <HR noshade SIZE=4> </TD> </TR> </TABLE> <P ALIGN="CENTER"><FONT SIZE=2>The accompanying notes are an integral part of these consolidated statements.</FONT></P> <p align=center><font size=2>2</font></p> <!-- SEQ.=1,EFW="9919732",CP="LITHIA MOTORS, INC.",DN="1",FOLIO=2,FILE="DISK004:[99SFO5.99SFO1995.EDGAR]10Q_C_1995.CHC",USER="BHUGHES",CD='11-AUG-1999;06:26' --> <P ALIGN="CENTER"><FONT SIZE=2> LITHIA MOTORS, INC. AND SUBSIDIARIES<BR> CONSOLIDATED STATEMENTS OF OPERATIONS<BR> (Dollars in thousands, except per share amounts)<BR> (Unaudited)</FONT></P> <TABLE WIDTH="100%" CELLSPACING=0 CELLPADDING=0> <TR VALIGN=BOTTOM> <TH WIDTH="40%" ALIGN=LEFT valign="top"><FONT SIZE=2> </FONT><BR> </TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <td COLSPAN=5 ALIGN=CENTER><font size="2">Three months ended June 30,</font> <HR noshade> </td> <td><font size="2"> </font></td> <td COLSPAN=5 ALIGN=CENTER><font size="2">Six months ended June 30,</font> <HR noshade> </td> </TR> <TR VALIGN=BOTTOM> <TH WIDTH="40%" ALIGN=CENTER valign="top"><FONT SIZE=1> </FONT><BR> </TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <td COLSPAN=2 ALIGN=CENTER><font size="2">1999</font> <hr noshade> </td> <td><font size="2"> </font></td> <td COLSPAN=2 ALIGN=CENTER><font size="2">1998</font> <HR noshade> </td> <td><font size="2"> </font></td> <td COLSPAN=2 ALIGN=CENTER><font size="2">1999</font> <HR noshade> </td> <td><font size="2"> </font></td> <td COLSPAN=2 ALIGN=CENTER><font size="2">1998</font> <HR noshade> </td> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=TOP> <TD WIDTH="40%" valign="top"><FONT SIZE=2>Revenues:</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD align="right"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="5%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=TOP> <TD WIDTH="40%" valign="top"><FONT SIZE=2>New vehicle sales</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD align="right"><FONT SIZE=2>167,222</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="12%" ALIGN=RIGHT><FONT SIZE=2>94,704</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="12%" ALIGN=RIGHT><FONT SIZE=2>284,075</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="5%" ALIGN=RIGHT><FONT SIZE=2>169,612</FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=TOP> <TD WIDTH="40%" valign="top"><FONT SIZE=2>Used vehicle sales</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD align="right"><FONT SIZE=2>93,049</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN=RIGHT><FONT SIZE=2>55,894</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN=RIGHT><FONT SIZE=2>164,858</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="5%" ALIGN=RIGHT><FONT SIZE=2>105,695</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=TOP> <TD WIDTH="40%" valign="top"><FONT SIZE=2>Service, body and parts</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD align="right"><FONT SIZE=2>28,477</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN=RIGHT><FONT SIZE=2>16,156</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN=RIGHT><FONT SIZE=2>51,907</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="5%" ALIGN=RIGHT><FONT SIZE=2>30,748</FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=TOP> <TD WIDTH="40%" valign="top"><FONT SIZE=2>Other revenues</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD align="right"><FONT SIZE=2>19,005</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN=RIGHT><FONT SIZE=2>6,788</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN=RIGHT><FONT SIZE=2>31,058</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="5%" ALIGN=RIGHT><FONT SIZE=2>13,685</FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="40%" valign="top"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2> <hr noshade> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=TOP> <TD WIDTH="40%" valign="top"><FONT SIZE=2>Total revenues</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD align="right"><FONT SIZE=2>307,753</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN=RIGHT><FONT SIZE=2>173,542</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN=RIGHT><FONT SIZE=2>531,898</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="5%" ALIGN=RIGHT><FONT SIZE=2>319,740</FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=TOP> <TD WIDTH="40%" valign="top"><FONT SIZE=2>Cost of sales</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD align="right"><FONT SIZE=2>258,967</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN=RIGHT><FONT SIZE=2>146,443</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN=RIGHT><FONT SIZE=2>447,912</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="5%" ALIGN=RIGHT><FONT SIZE=2>269,695</FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="40%" valign="top"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2> <HR noshade> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=TOP> <TD WIDTH="40%" valign="top"><FONT SIZE=2>Gross profit</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD align="right"><FONT SIZE=2>48,786</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN=RIGHT><FONT SIZE=2>27,099</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN=RIGHT><FONT SIZE=2>83,986</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="5%" ALIGN=RIGHT><FONT SIZE=2>50,045</FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=TOP> <TD WIDTH="40%" valign="top"><FONT SIZE=2>Selling, general and administrative</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD align="right"><FONT SIZE=2>36,061</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN=RIGHT><FONT SIZE=2>20,195</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN=RIGHT><FONT SIZE=2>62,709</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="5%" ALIGN=RIGHT><FONT SIZE=2>38,111</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=TOP> <TD WIDTH="40%" valign="top"><FONT SIZE=2>Depreciation and amortization</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD align="right"><FONT SIZE=2>1,364</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN=RIGHT><FONT SIZE=2>804</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN=RIGHT><FONT SIZE=2>2,439</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="5%" ALIGN=RIGHT><FONT SIZE=2>1,524</FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="40%" valign="top"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2> <hr noshade> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=TOP> <TD WIDTH="40%" valign="top"><FONT SIZE=2>Income from operations</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD align="right"><FONT SIZE=2>11,361</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN=RIGHT><FONT SIZE=2>6,100</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN=RIGHT><FONT SIZE=2>18,838</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="5%" ALIGN=RIGHT><FONT SIZE=2>10,410</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=TOP> <TD WIDTH="40%" valign="top"><FONT SIZE=2>Other income (expense)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD align="right"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="5%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=TOP> <TD WIDTH="40%" valign="top"><FONT SIZE=2>Floorplan interest expense</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD align="right"><FONT SIZE=2>(2,179</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN=RIGHT><FONT SIZE=2>(1,880</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN=RIGHT><FONT SIZE=2>(4,288</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="5%" ALIGN=RIGHT><FONT SIZE=2>(3,516</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=TOP> <TD WIDTH="40%" valign="top"><FONT SIZE=2>Other interest expense</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD align="right"><FONT SIZE=2>(1,065</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN=RIGHT><FONT SIZE=2>(777</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN=RIGHT><FONT SIZE=2>(1,694</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="5%" ALIGN=RIGHT><FONT SIZE=2>(1,351</FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=TOP> <TD WIDTH="40%" valign="top"><FONT SIZE=2>Other income (expense), net</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD align="right"><FONT SIZE=2>(338</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN=RIGHT><FONT SIZE=2>187</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN=RIGHT><FONT SIZE=2>(72</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="5%" ALIGN=RIGHT><FONT SIZE=2>553</FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="40%" valign="top"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2> <HR noshade> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=TOP> <TD WIDTH="40%" valign="top"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD align="right"><FONT SIZE=2>(3,582</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN=RIGHT><FONT SIZE=2>(2,470</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN=RIGHT><FONT SIZE=2>(6,054</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="5%" ALIGN=RIGHT><FONT SIZE=2>(4,314</FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="40%" valign="top"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2> <HR noshade> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=TOP> <TD WIDTH="40%" valign="top"><FONT SIZE=2>Income before income taxes</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD align="right"><FONT SIZE=2>7,779</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN=RIGHT><FONT SIZE=2>3,630</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN=RIGHT><FONT SIZE=2>12,784</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="5%" ALIGN=RIGHT><FONT SIZE=2>6,096</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=TOP> <TD WIDTH="40%" valign="top"><FONT SIZE=2>Income tax expense</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD align="right"><FONT SIZE=2>3,202</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN=RIGHT><FONT SIZE=2>1,407</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN=RIGHT><FONT SIZE=2>5,178</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="5%" ALIGN=RIGHT><FONT SIZE=2>2,354</FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="40%" valign="top"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2> <HR noshade> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=TOP> <TD WIDTH="40%" valign="top"><FONT SIZE=2>Net income</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD align="right"><FONT SIZE=2>4,577</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="12%" ALIGN=RIGHT><FONT SIZE=2>2,223</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="12%" ALIGN=RIGHT><FONT SIZE=2>7,606</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="5%" ALIGN=RIGHT><FONT SIZE=2>3,742</FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="40%" valign="top"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2> <HR noshade SIZE=4> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN=RIGHT> <HR noshade SIZE=4> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN=RIGHT> <HR noshade SIZE=4> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN=RIGHT> <HR noshade SIZE=4> </TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=TOP> <TD WIDTH="40%" valign="top"><FONT SIZE=2>Basic net income per share</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD align="right"><FONT SIZE=2>0.42</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="12%" ALIGN=RIGHT><FONT SIZE=2>0.24</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="12%" ALIGN=RIGHT><FONT SIZE=2>0.72</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="5%" ALIGN=RIGHT><FONT SIZE=2>0.46</FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="40%" valign="top"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2> <hr noshade size=4> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN=RIGHT> <HR noshade SIZE=4> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN=RIGHT> <HR noshade SIZE=4> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN=RIGHT> <HR noshade SIZE=4> </TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=TOP> <TD WIDTH="40%" valign="top"><FONT SIZE=2>Diluted net income per share</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD align="right"><FONT SIZE=2>0.40</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="12%" ALIGN=RIGHT><FONT SIZE=2>0.24</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="12%" ALIGN=RIGHT><FONT SIZE=2>0.69</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="5%" ALIGN=RIGHT><FONT SIZE=2>0.45</FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="40%" valign="top"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN=right> <hr noshade size=4> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN=RIGHT> <HR noshade SIZE=4> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN=RIGHT> <HR noshade SIZE=4> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN=RIGHT> <HR noshade SIZE=4> </TD> </TR> </TABLE> <P ALIGN="CENTER"><FONT SIZE=2>The accompanying notes are an integral part of these consolidated statements.</FONT></P> <p align=center><font size=2>3<!-- SEQ=2,EFW="9919732",CP="LITHIA MOTORS, INC.",DN="1", FOLIO=3,FILE="DISK004:[99SFO5.99SFO1995.EDGAR]10Q_C_1995.CHC",USER="BHUGHES", CD="11-AUG-1999 10:0:2"--></font></p> <P ALIGN="CENTER"><FONT SIZE=2> LITHIA MOTORS, INC.<BR> CONSOLIDATED STATEMENTS OF CASH FLOWS<BR> (In thousands)<BR> (Unaudited)</FONT></P> <TABLE WIDTH="100%" CELLSPACING=0 CELLPADDING=0> <TR VALIGN=BOTTOM> <TH WIDTH="72%" ALIGN=LEFT><FONT SIZE=2> </FONT><BR> </TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <td WIDTH="24%" COLSPAN=5 ALIGN=CENTER><font size="2">Six months ended June 30,</font> <HR noshade> </td> </TR> <TR VALIGN=BOTTOM> <TH WIDTH="72%" ALIGN=CENTER><FONT SIZE=1> </FONT><BR> </TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <td WIDTH="11%" COLSPAN=2 ALIGN=CENTER><font size="2">1999</font> <HR noshade> </td> <td WIDTH="2%"><font size="2"> </font></td> <td WIDTH="11%" COLSPAN=2 ALIGN=CENTER><font size="2">1998</font> <HR noshade> </td> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=BOTTOM> <TD WIDTH="72%"><FONT SIZE=2>Cash flows from operating activities:</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=BOTTOM> <TD WIDTH="72%"><FONT SIZE=2>Net income</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>7,606</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>3,742</FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=BOTTOM> <TD WIDTH="72%"><FONT SIZE=2>Adjustments to reconcile net income to net cash flows provided by (used in) operating activities:</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=BOTTOM> <TD WIDTH="72%"><FONT SIZE=2>Depreciation and amortization</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>2,439</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>1,524</FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=BOTTOM> <TD WIDTH="72%"><FONT SIZE=2>Compensation expense related to stock option issuances</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>39</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>69</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=BOTTOM> <TD WIDTH="72%"><FONT SIZE=2>Loss on sale of assets</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>21</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>9</FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=BOTTOM> <TD WIDTH="72%"><FONT SIZE=2>Loss (gain) on sale of vehicles leased to others</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>111</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>(54</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=BOTTOM> <TD WIDTH="72%"><FONT SIZE=2>Deferred income taxes</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>(1,446</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>(136</FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=BOTTOM> <TD WIDTH="72%"><FONT SIZE=2>Equity in income of affiliate</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>(151</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>(19</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=BOTTOM> <TD WIDTH="72%"><FONT SIZE=2>Changes in operating assets and liabilities, net of effect of acquisitions:</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=BOTTOM> <TD WIDTH="72%"><FONT SIZE=2>Trade and installment contract receivables, net</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>526</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>(4,328</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=BOTTOM> <TD WIDTH="72%"><FONT SIZE=2>Inventories</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>(13,686</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>(28,355</FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=BOTTOM> <TD WIDTH="72%"><FONT SIZE=2>Prepaid expenses and other</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>884</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>(1,454</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=BOTTOM> <TD WIDTH="72%"><FONT SIZE=2>Other noncurrent assets</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>(42</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>228</FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=BOTTOM> <TD WIDTH="72%"><FONT SIZE=2>Floorplan notes payable</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>12,776</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>23,726</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=BOTTOM> <TD WIDTH="72%"><FONT SIZE=2>Trade payables</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>(3,544</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>2,085</FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=BOTTOM> <TD WIDTH="72%"><FONT SIZE=2>Accrued liabilities</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>5,940</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>2,261</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=BOTTOM> <TD WIDTH="72%"><FONT SIZE=2>Other long-term liabilities and deferred revenue</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>1,737</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>13</FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="72%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=BOTTOM> <TD WIDTH="72%"><FONT SIZE=2>Net cash provided by (used in) operating activities</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>13,210</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>(689</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=BOTTOM> <TD WIDTH="72%"><FONT SIZE=2> <BR> Cash flows from investing activities:</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="9%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="9%"><FONT SIZE=2> <BR> </FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=BOTTOM> <TD WIDTH="72%"><FONT SIZE=2>Notes receivable issued</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>(418</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>(171</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=BOTTOM> <TD WIDTH="72%"><FONT SIZE=2>Principal payments received on notes receivable</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>2,496</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>161</FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=BOTTOM> <TD WIDTH="72%"><FONT SIZE=2>Capital expenditures</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>(4,497</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>(2,420</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=BOTTOM> <TD WIDTH="72%"><FONT SIZE=2>Proceeds from sale of assets</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>389</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>—</FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=BOTTOM> <TD WIDTH="72%"><FONT SIZE=2>Expenditures for vehicles leased to others</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>(4,932</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>(4,579</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=BOTTOM> <TD WIDTH="72%"><FONT SIZE=2>Proceeds from sale of vehicles leased to others</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>3,312</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>3,664</FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=BOTTOM> <TD WIDTH="72%"><FONT SIZE=2>Cash paid for acquisitions, net of cash acquired</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>(21,490</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>(25,935</FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="72%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=BOTTOM> <TD WIDTH="72%"><FONT SIZE=2>Net cash used in investing activities</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>(25,140</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>(29,280</FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=BOTTOM> <TD WIDTH="72%"><FONT SIZE=2> <BR> Cash flows from financing activities:</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="9%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="9%"><FONT SIZE=2> <BR> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=BOTTOM> <TD WIDTH="72%"><FONT SIZE=2>Net borrowings on lines of credit</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>36,400</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>—</FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=BOTTOM> <TD WIDTH="72%"><FONT SIZE=2>Principal payments on long-term debt and capital leases</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>(5,047</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>(31,168</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=BOTTOM> <TD WIDTH="72%"><FONT SIZE=2>Proceeds from issuance of long-term debt</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>1,351</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>27,137</FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=BOTTOM> <TD WIDTH="72%"><FONT SIZE=2>Proceeds from issuance of common stock</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>348</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>42,682</FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="72%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=BOTTOM> <TD WIDTH="72%"><FONT SIZE=2>Net cash provided by financing activities</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>33,052</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>38,651</FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="72%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=BOTTOM> <TD WIDTH="72%"><FONT SIZE=2>Increase in cash and cash equivalents</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>21,122</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>8,682</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=BOTTOM> <TD WIDTH="72%"><FONT SIZE=2>Cash and cash equivalents:</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=BOTTOM> <TD WIDTH="72%"><FONT SIZE=2>Beginning of period</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>20,879</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>18,454</FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="72%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=BOTTOM> <TD WIDTH="72%"><FONT SIZE=2>End of period</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>42,001</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>27,136</FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="72%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN=RIGHT> <HR noshade SIZE=4> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN=RIGHT> <HR noshade SIZE=4> </TD> </TR> </TABLE> <P ALIGN="CENTER"><FONT SIZE=2>The accompanying notes are an integral part of these consolidated statements.</FONT></P> <p align=center><font size=2>4</font></p> <P><FONT SIZE=2> <!-- SEQ.=3,EFW="9919732",CP="LITHIA MOTORS, INC.",DN="1",FOLIO=4,FILE="DISK004:[99SFO5.99SFO1995.EDGAR]10Q_C_1995.CHC",USER="BHUGHES",CD='11-AUG-1999;06:26' --> </FONT></P> <!-- Generated by Merrill Corporation (www.merrillcorp.com) --> <P ALIGN="CENTER"><FONT SIZE=2><B>LITHIA MOTORS, INC.<BR> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR> (In thousands, except per share amounts or as otherwise indicated)<BR> (Unaudited)</B></FONT></P> <P><FONT SIZE=2><B><U>Note 1. Basis of Presentation </U></B></FONT><br> <FONT SIZE=2>The financial information included herein as of June 30, 1999 and December 31, 1998 and for the three and six-month periods ended June 30, 1999 and 1998 is unaudited; however, such information reflects all adjustments consisting only of normal recurring adjustments which are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods. The financial information as of December 31, 1998 is derived from Lithia Motors, Inc.'s (the Company's) 1998 Annual Report on Form 10-K. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's 1998 Annual Report on Form 10-K. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full year.</FONT></P> <P><FONT SIZE=2><B><U>Note 2. Inventories </U></B></FONT> <br><FONT SIZE=2>Inventories are valued at cost, using the specific identification method for vehicles and the first-in first-out (FIFO) method of accounting for parts (collectively, the FIFO method).</FONT></P> <TABLE WIDTH="86%" CELLSPACING=0 CELLPADDING=0> <TR VALIGN=BOTTOM> <TH WIDTH="58%" ALIGN=CENTER><FONT SIZE=1> </FONT><BR> </TH> <TH WIDTH="1%"><FONT SIZE=1> </FONT></TH> <TH COLSPAN=2 ALIGN=CENTER><font size="2"><B>June 30, 1999</B></font> <HR noshade> </TH> <TH WIDTH="3%"><font size="2"> </font></TH> <TH COLSPAN=2 ALIGN=CENTER><font size="2"><B>December 31, 1998</B></font> <HR noshade> </TH> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=TOP> <TD WIDTH="58%"><FONT SIZE=2>New and demonstrator vehicles</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="5%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="11%" ALIGN=RIGHT><FONT SIZE=2>171,837</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="20%" ALIGN=RIGHT><FONT SIZE=2>112,990</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=TOP> <TD WIDTH="58%"><FONT SIZE=2>Used vehicles</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="5%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" ALIGN=RIGHT><FONT SIZE=2>49,589</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="20%" ALIGN=RIGHT><FONT SIZE=2>34,599</FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=TOP> <TD WIDTH="58%"><FONT SIZE=2>Parts and accessories</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="5%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" ALIGN=RIGHT><FONT SIZE=2>12,198</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="20%" ALIGN=RIGHT><FONT SIZE=2>9,866</FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="58%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=TOP> <TD WIDTH="58%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="5%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="11%" ALIGN=RIGHT><FONT SIZE=2>233,624</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="20%" ALIGN=RIGHT><FONT SIZE=2>157,455</FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="58%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD COLSPAN=2 ALIGN=RIGHT> <HR noshade SIZE=4> </TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD COLSPAN=2 ALIGN=RIGHT> <HR noshade SIZE=4> </TD> </TR> </TABLE> <P><FONT SIZE=2><B><U>Note 3. Supplemental Cash Flow Information </U></B></FONT> <br><FONT SIZE=2>Supplemental disclosure of cash flow information is as follows:</FONT></P> <TABLE WIDTH="86%" CELLSPACING=0 CELLPADDING=0> <TR VALIGN=BOTTOM> <TH WIDTH="61%" ALIGN=LEFT><FONT SIZE=2> </FONT><BR> </TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH COLSPAN=5 ALIGN=CENTER><font size="2"><B>Six Months Ended June 30,</B></font> <HR noshade> </TH> </TR> <TR VALIGN=BOTTOM> <TH WIDTH="61%" ALIGN=CENTER><FONT SIZE=1> </FONT><BR> </TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH COLSPAN=2 ALIGN=CENTER><font size="2"><B>1999</B></font> <HR noshade> </TH> <TH WIDTH="4%"><font size="2"> </font></TH> <TH COLSPAN=2 ALIGN=CENTER><font size="2"><B>1998</B></font> <HR noshade> </TH> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=TOP> <TD WIDTH="61%"><FONT SIZE=2>Cash paid during the period for income taxes</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="4%" ALIGN=RIGHT><FONT SIZE=2>4,630</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="15%" ALIGN=RIGHT><FONT SIZE=2>2,155</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=TOP> <TD WIDTH="61%"><FONT SIZE=2>Cash paid during the period for interest</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="4%" ALIGN=RIGHT><FONT SIZE=2>5,569</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="15%" ALIGN=RIGHT><FONT SIZE=2>4,352</FONT></TD> </TR> </TABLE> <p align=center><font size=2>5</font></p> <!-- SEQ.=1,EFW="9919732",CP="LITHIA MOTORS, INC.",DN="1",FOLIO=5,FILE="DISK004:[99SFO5.99SFO1995.EDGAR]10Q_D_1995.CHC",USER="BHUGHES",CD='10-AUG-1999;17:26' --> <P><FONT SIZE=2><B><U>Note 4. Earnings Per Share </U></B></FONT> <br><FONT SIZE=2>Following is a reconciliation of basic earnings per share ("EPS") and diluted EPS: </FONT></P> <table width="100%" cellspacing=0 cellpadding=0> <tr valign=BOTTOM> <th width="35%" align=LEFT><font size="2"><b>Three Months Ended June 30, </b> </font> <hr noshade> </th> <th width="2%"><font size=1> </font></th> <th colspan=7 align=LEFT width="2%"><font size="2"><b>1999<br> </b></font> <hr noshade> </th> <th width="4%"><font size="2"> </font></th> <th width="29%" colspan=7 align=LEFT><font size="2"><b>1998<br> </b></font> <hr noshade> </th> </tr> <tr valign=BOTTOM> <th width="35%" align=LEFT valign="bottom"><font size="2"><b> <u>Basic EPS </u></b> </font></th> <th width="2%" valign="bottom"><font size=1> </font></th> <td colspan=2 align=CENTER valign="bottom" width="2%"><font size="2">Income<br> </font></td> <td valign="bottom" width="2%"><font size="2"> </font></td> <td align=CENTER valign="bottom" width="12%"><font size="2">Shares<br> </font></td> <td valign="bottom" width="2%"><font size="2"> </font></td> <td colspan=2 align=CENTER valign="bottom" width="3%"><font size="2">Per Share<br> Amount </font></td> <td valign="bottom"><font size="2"> </font></td> <td colspan=2 align=CENTER valign="bottom"><font size="2">Income<br> </font></td> <td valign="bottom" width="2%"><font size="2"> </font></td> <td align=CENTER valign="bottom" width="12%"><font size="2">Shares<br> </font></td> <td valign="bottom" width="2%"><font size="2"> </font></td> <td colspan=2 align=CENTER valign="bottom" width="2%"><font size="2">Per Share <br> Amount </font></td> </tr> <tr valign=TOP> <td width="35%"><font size=1> </font></td> <td width="2%"><font size=1> </font></td> <td colspan=7 align=RIGHT width="2%"> <hr noshade> </td> <td width="4%"><font size=1> </font></td> <td width="29%" colspan=7 align=RIGHT> <hr noshade> </td> </tr> <tr bgcolor="#FFFFFF" valign=BOTTOM> <td width="35%"><font size=2>Net income available to Common Shareholders</font></td> <td width="2%"><font size=2> </font></td> <td width="2%"><font size=2>$</font></td> <td width="12%" align=RIGHT><font size=2>4,577</font></td> <td width="2%"><font size=2> </font></td> <td width="12%" align=RIGHT><font size=2>10,926</font></td> <td width="2%"><font size=2> </font></td> <td width="3%"><font size=2>$</font></td> <td width="12%" align=RIGHT><font size=2>0.42</font></td> <td width="4%"><font size=2> </font></td> <td width="2%"><font size=2>$</font></td> <td width="12%" align=RIGHT><font size=2>2,223</font></td> <td width="2%"><font size=2> </font></td> <td width="12%" align=RIGHT><font size=2>9,102</font></td> <td width="2%"><font size=2> </font></td> <td width="2%"><font size=2>$</font></td> <td width="7%" align=RIGHT><font size=2>0.24</font></td> </tr> <tr valign=TOP> <td width="35%"><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="12%" align=RIGHT><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="12%" align=RIGHT><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="3%" colspan=2 align=RIGHT> <hr noshade> </td> <td width="4%"><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="12%" align=RIGHT><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="12%" align=RIGHT><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="2%" colspan=2 align=RIGHT> <hr noshade> </td> </tr> <tr bgcolor="#CCEEFF" valign=BOTTOM> <td width="35%"><b> <u><font size="2">Diluted EPS </font></u></b></td> <td width="2%"><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="12%"><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="12%"><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="3%"><font size=2> </font></td> <td width="12%"><font size=2> </font></td> <td width="4%"><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="12%"><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="12%"><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="7%"><font size=2> </font></td> </tr> <tr bgcolor="#FFFFFF" valign=BOTTOM> <td width="35%"><font size="2">Effect of dilutive stock options</font></td> <td width="2%"><font size="2"> </font></td> <td width="2%"><font size="2"> </font></td> <td width="12%" align=RIGHT><font size="2">—</font></td> <td width="2%"><font size="2"> </font></td> <td width="12%" align=RIGHT><font size="2">349</font></td> <td width="2%"><font size="2"> </font></td> <td width="3%"><font size="2"> </font></td> <td width="12%" align=RIGHT> </td> <td width="4%"><font size="2"> </font></td> <td width="2%"><font size="2"> </font></td> <td width="12%" align=RIGHT><font size="2">— </font></td> <td width="2%"><font size="2"> </font></td> <td width="12%" align=RIGHT><font size="2">324</font></td> <td width="2%"><font size="2"> </font></td> <td width="2%"><font size="2"> </font></td> <td width="7%" align=RIGHT> </td> </tr> <tr bgcolor="#CCEEFF" valign=BOTTOM> <td width="35%"><font size=2>Conversion of preferred stock</font></td> <td width="2%"><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="12%" align=RIGHT><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="12%" align=RIGHT><font size=2>295</font></td> <td width="2%"><font size=2> </font></td> <td width="3%"><font size=2> </font></td> <td width="12%"><font size=2> </font></td> <td width="4%"><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="12%"><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="12%"><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="7%"><font size=2> </font></td> </tr> <tr valign=TOP> <td width="35%"><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td colspan=4 align=RIGHT width="2%"> <hr noshade> </td> <td width="2%"><font size=2> </font></td> <td width="3%"><font size=2> </font></td> <td width="12%" align=RIGHT><font size=2> </font></td> <td width="4%"><font size=2> </font></td> <td width="17%" colspan=4 align=RIGHT> <hr noshade> </td> <td width="2%"><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="7%" align=RIGHT><font size=2> </font></td> </tr> <tr bgcolor="#FFFFFF" valign=BOTTOM> <td width="35%"><font size=2>Net income available to Common Shareholders</font></td> <td width="2%"><font size=2> </font></td> <td width="2%"><font size=2>$</font></td> <td width="12%" align=RIGHT><font size=2>4,577</font></td> <td width="2%"><font size=2> </font></td> <td width="12%" align=RIGHT><font size=2>11,570</font></td> <td width="2%"><font size=2> </font></td> <td width="3%"><font size=2>$</font></td> <td width="12%" align=RIGHT><font size=2>0.40</font></td> <td width="4%"><font size=2> </font></td> <td width="2%"><font size=2>$</font></td> <td width="12%" align=RIGHT><font size=2>2,223</font></td> <td width="2%"><font size=2> </font></td> <td width="12%" align=RIGHT><font size=2>9,426</font></td> <td width="2%"><font size=2> </font></td> <td width="2%"><font size=2>$</font></td> <td width="7%" align=RIGHT><font size=2>0.24</font></td> </tr> <tr valign=TOP> <td width="35%"><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="12%" align=RIGHT><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="12%" align=RIGHT><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="3%" colspan=2 align=RIGHT> <hr noshade> </td> <td width="4%"><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="12%" align=RIGHT><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="12%" align=RIGHT><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="2%" colspan=2 align=RIGHT> <hr noshade> </td> </tr> <tr bgcolor="#FFFFFF" valign=BOTTOM> <td width="35%"><font size=2> <br> </font></td> <td width="2%"><font size=2> <br> </font></td> <td width="2%"><font size=2> <br> </font></td> <td width="12%"><font size=2> <br> </font></td> <td width="2%"><font size=2> <br> </font></td> <td width="12%"><font size=2> <br> </font></td> <td width="2%"><font size=2> <br> </font></td> <td width="3%"><font size=2> <br> </font></td> <td width="12%"><font size=2> <br> </font></td> <td width="4%"><font size=2> <br> </font></td> <td width="2%"><font size=2> <br> </font></td> <td width="12%"><font size=2> <br> </font></td> <td width="2%"><font size=2> <br> </font></td> <td width="12%"><font size=2> <br> </font></td> <td width="2%"><font size=2> <br> </font></td> <td width="2%"><font size=2> <br> </font></td> <td width="7%"><font size=2> <br> </font></td> </tr> <tr valign=BOTTOM> <th width="35%" align=LEFT><font size="2"><b>Six Months Ended June 30, </b></font> <font size="2"><b> </b> </font> <hr noshade> </th> <th width="2%"><font size=1> </font></th> <th colspan=7 align=LEFT width="2%"><font size="2"><b>1999<br> </b></font> <hr noshade> </th> <th width="4%"><font size="2"> </font></th> <th width="29%" colspan=7 align=LEFT><font size="2"><b>1998<br> </b></font> <hr noshade> </th> </tr> <tr valign=BOTTOM> <th width="35%" align=LEFT><font size="2"><b> <u>Basic EPS </u></b> </font></th> <th width="2%"><font size="2"> </font></th> <td colspan=2 align=CENTER width="2%"><font size="2">Income<br> </font></td> <td width="2%"><font size="2"> </font></td> <td width="12%" align=CENTER><font size="2">Shares<br> </font></td> <td width="2%"><font size="2"> </font></td> <td width="3%" colspan=2 align=CENTER><font size="2">Per Share <br> Amount </font></td> <td width="4%"><font size="2"> </font></td> <td width="9%" colspan=2 align=CENTER><font size="2">Income<br> </font></td> <td width="2%"><font size="2"> </font></td> <td width="12%" align=CENTER><font size="2">Shares<br> </font></td> <td width="2%"><font size="2"> </font></td> <td width="2%" colspan=2 align=CENTER><font size="2">Per Share<br> Amount </font></td> </tr> <tr valign=TOP> <td width="35%"><font size=1> </font></td> <td width="2%"><font size=1> </font></td> <td colspan=7 align=RIGHT width="2%"> <hr noshade> </td> <td width="4%"><font size=1> </font></td> <td width="29%" colspan=7 align=RIGHT> <hr noshade> </td> </tr> <tr bgcolor="#FFFFFF" valign=BOTTOM> <td width="35%"><font size=2>Net income available to Common Shareholders</font></td> <td width="2%"><font size=2> </font></td> <td width="2%"><font size=2>$</font></td> <td width="12%" align=RIGHT><font size=2>7,606</font></td> <td width="2%"><font size=2> </font></td> <td width="12%" align=RIGHT><font size=2>10,585</font></td> <td width="2%"><font size=2> </font></td> <td width="3%"><font size=2>$</font></td> <td width="12%" align=RIGHT><font size=2>0.72</font></td> <td width="4%"><font size=2> </font></td> <td width="2%"><font size=2>$</font></td> <td width="12%" align=RIGHT><font size=2>3,742</font></td> <td width="2%"><font size=2> </font></td> <td width="12%" align=RIGHT><font size=2>8,075</font></td> <td width="2%"><font size=2> </font></td> <td width="2%"><font size=2>$</font></td> <td width="7%" align=RIGHT><font size=2>0.46</font></td> </tr> <tr valign=TOP> <td width="35%"><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="12%" align=RIGHT><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="12%" align=RIGHT><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="3%" colspan=2 align=RIGHT> <hr noshade> </td> <td width="4%"><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="12%" align=RIGHT><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="12%" align=RIGHT><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="2%" colspan=2 align=RIGHT> <hr noshade> </td> </tr> <tr bgcolor="#CCEEFF" valign=BOTTOM> <td width="35%"><font size="2"><b> <u>Diluted EPS </u></b></font></td> <td width="2%"><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="12%"><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="12%"><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="3%"><font size=2> </font></td> <td width="12%"><font size=2> </font></td> <td width="4%"><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="12%"><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="12%"><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="7%"><font size=2> </font></td> </tr> <tr bgcolor="#FFFFFF" valign=BOTTOM> <td width="35%"><font size=2>Effect of dilutive stock options</font></td> <td width="2%"><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="12%" align=RIGHT><font size=2>— </font></td> <td width="2%"><font size=2> </font></td> <td width="12%" align=RIGHT><font size=2>353</font></td> <td width="2%"><font size=2> </font></td> <td width="3%"><font size=2> </font></td> <td width="12%" align=RIGHT> </td> <td width="4%"><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="12%" align=RIGHT><font size=2>— </font></td> <td width="2%"><font size=2> </font></td> <td width="12%" align=RIGHT><font size=2>330</font></td> <td width="2%"><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="7%" align=RIGHT> </td> </tr> <tr bgcolor="#CCEEFF" valign=BOTTOM> <td width="35%"><font size=2>Conversion of preferred stock</font></td> <td width="2%"><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="12%" align=RIGHT><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="12%" align=RIGHT><font size=2>147</font></td> <td width="2%"><font size=2> </font></td> <td width="3%"><font size=2> </font></td> <td width="12%"><font size=2> </font></td> <td width="4%"><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="12%"><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="12%"><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="7%"><font size=2> </font></td> </tr> <tr valign=TOP> <td width="35%"><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td colspan=4 align=RIGHT width="2%"> <hr noshade> </td> <td width="2%"><font size=2> </font></td> <td width="3%"><font size=2> </font></td> <td width="12%" align=RIGHT><font size=2> </font></td> <td width="4%"><font size=2> </font></td> <td width="17%" colspan=4 align=RIGHT> <hr noshade> </td> <td width="2%"><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="7%" align=RIGHT><font size=2> </font></td> </tr> <tr bgcolor="#FFFFFF" valign=BOTTOM> <td width="35%"><font size=2>Net income available to Common Shareholders</font></td> <td width="2%"><font size=2> </font></td> <td width="2%"><font size=2>$</font></td> <td width="12%" align=RIGHT><font size=2>7,606</font></td> <td width="2%"><font size=2> </font></td> <td width="12%" align=RIGHT><font size=2>11,085</font></td> <td width="2%"><font size=2> </font></td> <td width="3%"><font size=2>$</font></td> <td width="12%" align=RIGHT><font size=2>0.69</font></td> <td width="4%"><font size=2> </font></td> <td width="2%"><font size=2>$</font></td> <td width="12%" align=RIGHT><font size=2>3,742</font></td> <td width="2%"><font size=2> </font></td> <td width="12%" align=RIGHT><font size=2>8,405</font></td> <td width="2%"><font size=2> </font></td> <td width="2%"><font size=2>$</font></td> <td width="7%" align=RIGHT><font size=2>0.45</font></td> </tr> <tr valign=TOP> <td width="35%"><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="12%" align=RIGHT><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="12%" align=RIGHT><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="3%" colspan=2 align=RIGHT> <hr noshade> </td> <td width="4%"><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="12%" align=RIGHT><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="12%" align=RIGHT><font size=2> </font></td> <td width="2%"><font size=2> </font></td> <td width="2%" colspan=2 align=RIGHT> <hr noshade> </td> </tr> </TABLE> <P><FONT SIZE=2> Potentially dilutive securities that are not included in the diluted EPS calculations because they would be antidilutive include 109 and 44 shares, respectively, issuable pursuant to stock options, for the three month periods ended June 30, 1999 and 1998, respectively, and 133 and 44 shares, respectively, for the six month periods ended June 30, 1999 and 1998, respectively.</FONT></P> <P><FONT SIZE=2><B><U>Note 5. Acquisitions </U></B></FONT><br> <FONT SIZE=2>In May 1999, Lithia acquired all of the stock of seven commonly controlled automotive dealerships constituting the Moreland Automotive Group ("Moreland") for approximately $35.7 million in cash drawn from the Company's existing used vehicle line of credit, 1,272,919 shares of the Company's Class A Common Stock with a value of approximately $24.1 million at the time of issuance, and 10,360 shares of Lithia's newly created Series M Preferred Stock with a value of approximately $6.2 million at the time of issuance. Additional amounts will be payable by Lithia to the Moreland shareholders if the performance of the Moreland stores exceeds certain profit targets set for 1999. At closing, Moreland had approximately $18.2 million of used vehicles available for flooring under the Lithia's used vehicle line of credit, reducing Lithia's net investment in the acquired dealerships by that amount to a total of $47.8 million.</FONT></P> <P><FONT SIZE=2> Lithia also acquired one store in Klamath Falls, Oregon in May 1999 for a net investment of $2.4 million.</FONT></P> <p align=center><font size=2>6</font></p> <!-- SEQ.=2,EFW="9919732",CP="LITHIA MOTORS, INC.",DN="1",FOLIO=6,FILE="DISK004:[99SFO5.99SFO1995.EDGAR]10Q_D_1995.CHC",USER="BHUGHES",CD='10-AUG-1999;17:26' --> <P><FONT SIZE=2>The following table sets forth the total purchase price, cash paid from existing cash reserves, debt incurred and the net investment for the two acquisitions made by Lithia in the first half of 1999:</FONT></P> <TABLE WIDTH="100%" CELLSPACING=0 CELLPADDING=0> <TR VALIGN=BOTTOM> <TH ALIGN=LEFT WIDTH="20%"><font size="2"><B>Name<BR> </B></font> <HR noshade> </TH> <TH WIDTH="2%"><font size="2"> </font></TH> <TH ALIGN=CENTER WIDTH="10%"><font size="2"><B>Month</B></font> <HR noshade> </TH> <TH WIDTH="2%"><font size="2"> </font></TH> <TH COLSPAN=2 ALIGN=CENTER><font size="2"><B>Total Paid</B></font> <HR noshade> </TH> <TH WIDTH="2%"><font size="2"> </font></TH> <TH COLSPAN=2 ALIGN=CENTER><font size="2"><B>Cash Paid</B></font> <HR noshade> </TH> <TH WIDTH="2%"><font size="2"> </font></TH> <TH COLSPAN=2 ALIGN=CENTER><font size="2"><B>Debt Incurred</B></font> <HR noshade> </TH> <TH WIDTH="2%"><font size="2"> </font></TH> <TH COLSPAN=2 ALIGN=CENTER><font size="2"><B>Stock Issued</B></font> <HR noshade> </TH> <TH WIDTH="2%"><font size="2"> </font></TH> <TH COLSPAN=2 ALIGN=CENTER><font size="2"><B>Net Investment<SUP>(1)</SUP></B></font> <HR noshade> </TH> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=TOP> <TD WIDTH="20%"><FONT SIZE=2>Moreland Automotive</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>May</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>66,018</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>—</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN=RIGHT><FONT SIZE=2>35,696</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>30,322</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>47,818</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=TOP> <TD WIDTH="20%"><FONT SIZE=2>Klamath Falls</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>May</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>4,107</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>1,721</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN=RIGHT><FONT SIZE=2>2,386</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>—</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>2,400</FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="20%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="8%" COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" COLSPAN=2 ALIGN=RIGHT> <HR noshade> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT> <hr noshade> <FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=TOP> <TD WIDTH="20%"><FONT SIZE=2>Total</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>70,125</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>1,721</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN=RIGHT><FONT SIZE=2>38,082</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>30,322</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>50,218</FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="20%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" COLSPAN=2 ALIGN=RIGHT> <HR noshade SIZE=4> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="8%" COLSPAN=2 ALIGN=RIGHT> <HR noshade SIZE=4> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" COLSPAN=2 ALIGN=RIGHT> <HR noshade SIZE=4> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" COLSPAN=2 ALIGN=RIGHT> <HR noshade SIZE=4> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT> <hr noshade size=4> <FONT SIZE=2> </FONT></TD> </TR> </TABLE> <DL compact> <DT><FONT SIZE=2><SUP>(1)</SUP></FONT></DT><DD><FONT SIZE=2> Net investment consists of the amount of goodwill, working capital, any notes issued to the seller and other initial investments.</FONT></DD></DL> <BR> <P><FONT SIZE=2> The above acquisitions were accounted for under the purchase method of accounting. Pro forma results of operations including Klamath Falls are not materially different from actual results of operations. Pro forma results of operations including Moreland Automotive for the six months ended June 30, 1999 and 1998 are as follows:</FONT></P> <TABLE WIDTH="82%" CELLSPACING=0 CELLPADDING=0> <TR VALIGN=BOTTOM> <TH ALIGN=LEFT><font size="2"><B>Six Months Ended June 30,<BR> </B></font> <HR noshade> </TH> <TH><font size="2"> </font></TH> <TH COLSPAN=2 ALIGN=CENTER><font size="2"><B>1999</B></font> <HR noshade> </TH> <TH><font size="2"> </font></TH> <TH COLSPAN=2 ALIGN=CENTER><font size="2"><B>1998</B></font> <HR noshade> </TH> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=TOP> <TD WIDTH="71%"><FONT SIZE=2>Revenue</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>698,643</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>499,665</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=TOP> <TD WIDTH="71%"><FONT SIZE=2>Net income</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>9,441</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>3,746</FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=TOP> <TD WIDTH="71%"><FONT SIZE=2>EPS: Basic</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>0.82</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>0.40</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=TOP> <TD WIDTH="71%"><FONT SIZE=2>Diluted</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>0.76</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>0.36</FONT></TD> </TR> </TABLE> <P><FONT SIZE=2><B><U>Note 6. Sale of Properties </U></B></FONT> <br><FONT SIZE=2>In June 1999, Lithia Properties, LLC, of which 20% is owned by Lithia, completed its previously announced sale of certain real estate holdings in the Southern Oregon region to Capital Automotive Real Estate Investment Trust ("Capital") for $18.3 million. Lithia now leases such properties from Capital for amounts that are not materially different from the lease amounts under the previous lease agreements.</FONT></P> <P><FONT SIZE=2><B><U>Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations </U></B></FONT></P> <P><FONT SIZE=2><B>Forward Looking Statements and Risk Factors</B></FONT><br> <FONT SIZE=2>This Form 10-Q contains forward-looking statements. These statements are necessarily subject to risk and uncertainty. Actual results could differ materially from those projected in these forward-looking statements. These risk factors include, but are not limited to, the following:</FONT> <DL compact> <DT><FONT SIZE=2>•</FONT></DT><DD><FONT SIZE=2> The cyclical nature of automobile sales;</FONT></DD><DT><FONT SIZE=2>•</FONT></DT><DD><FONT SIZE=2> Lithia's ability to negotiate profitable, accretive acquisitions;</FONT></DD><DT><FONT SIZE=2>• </FONT></DT><DD><FONT SIZE=2> Lithia's ability to secure manufacturer approvals for acquisitions; and</FONT></DD><DT><FONT SIZE=2> •</FONT></DT><DD><FONT SIZE=2> Lithia's ability to retain existing management.</FONT></DD></DL> <P><FONT SIZE=2> See Exhibit 99 to Lithia's 1998 Form 10-K for a more complete discussion of risk factors.</FONT></P> <p align=center><font size=2>7</font></p> <!-- SEQ.=3,EFW="9919732",CP="LITHIA MOTORS, INC.",DN="1",FOLIO=7,FILE="DISK004:[99SFO5.99SFO1995.EDGAR]10Q_D_1995.CHC",USER="BHUGHES",CD='10-AUG-1999;17:26' --> <P><FONT SIZE=2><B>General</B></FONT> <br><FONT SIZE=2>Lithia is a leading operator and retailer in the highly fragmented automotive industry. We offer 24 brands of new vehicles, through 83 franchises in 36 locations in the western United States. We currently operate 14 dealerships in California, 10 in Oregon, 2 in Washington, 6 in Colorado and 4 in Nevada. Lithia sells new and used cars and light trucks, sells replacement parts, provides vehicle maintenance, warranty, paint and repair services, and arranges related financing and insurance for its automotive customers.</FONT></P> <P><FONT SIZE=2> The following table shows selected condensed financial data expressed as a percentage of total revenues for the periods indicated for the average automotive dealer in the United States.</FONT></P> <TABLE WIDTH="100%" CELLSPACING=0 CELLPADDING=0> <TR VALIGN=top> <td WIDTH="75%" ALIGN=LEFT valign="middle" rowspan="2"><FONT SIZE=2><b>Average U.S. Dealership <BR> Statement of Operations Data:</b></FONT></td> <TH WIDTH="2%" valign="top"><FONT SIZE=2> </FONT></TH> <TH WIDTH="21%" COLSPAN=3 ALIGN=CENTER valign="top"><FONT SIZE=2><B>Year Ended December 31,</B></FONT> <HR noshade> </TH> <TH WIDTH="2%"><FONT SIZE=2> </FONT></TH> </TR> <TR VALIGN=top> <TH WIDTH="2%"><FONT SIZE=2> </FONT></TH> <TH WIDTH="7%" ALIGN=CENTER valign="top"><FONT SIZE=2>1998</FONT> <HR noshade> </TH> <TH WIDTH="7%" valign="top"><FONT SIZE=2> </FONT></TH> <TH WIDTH="7%" ALIGN=CENTER valign="top"><FONT SIZE=2>1997</FONT> <HR noshade> </TH> <TH WIDTH="2%" valign="top"><FONT SIZE=2> </FONT></TH> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=TOP> <TD WIDTH="75%"><FONT SIZE=2>Revenues:</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=TOP> <TD WIDTH="75%"><FONT SIZE=2>New vehicles</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN=RIGHT><FONT SIZE=2>59.0</FONT></TD> <TD WIDTH="7%"><FONT SIZE=2>%</FONT></TD> <TD WIDTH="7%" ALIGN=RIGHT><FONT SIZE=2>58.3</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=TOP> <TD WIDTH="75%"><FONT SIZE=2>Used vehicles</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN=RIGHT><FONT SIZE=2>29.4</FONT></TD> <TD WIDTH="7%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN=RIGHT><FONT SIZE=2>29.8</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=TOP> <TD WIDTH="75%"><FONT SIZE=2>Parts and service, other</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN=RIGHT><FONT SIZE=2>11.6</FONT></TD> <TD WIDTH="7%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN=RIGHT><FONT SIZE=2>11.9</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="75%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN=RIGHT> <HR noshade> </TD> <TD WIDTH="7%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN=RIGHT> <HR noshade> </TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=TOP> <TD WIDTH="75%"><FONT SIZE=2>Total sales</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN=RIGHT><FONT SIZE=2>100.0</FONT></TD> <TD WIDTH="7%"><FONT SIZE=2>%</FONT></TD> <TD WIDTH="7%" ALIGN=RIGHT><FONT SIZE=2>100.0</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=TOP> <TD WIDTH="75%"><FONT SIZE=2>Gross profit</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN=RIGHT><FONT SIZE=2>12.9</FONT></TD> <TD WIDTH="7%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN=RIGHT><FONT SIZE=2>12.7</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=TOP> <TD WIDTH="75%"><FONT SIZE=2>Total dealership expense</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN=RIGHT><FONT SIZE=2>11.2</FONT></TD> <TD WIDTH="7%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN=RIGHT><FONT SIZE=2>11.3</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=TOP> <TD WIDTH="75%"><FONT SIZE=2>Income before taxes</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN=RIGHT><FONT SIZE=2>1.7</FONT></TD> <TD WIDTH="7%"><FONT SIZE=2>%</FONT></TD> <TD WIDTH="7%" ALIGN=RIGHT><FONT SIZE=2>1.4</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD> </TR> </TABLE> <P><FONT SIZE=2> Source: </FONT><FONT SIZE=2><B>NADA Industry Analysis Division</B></FONT></P> <P><FONT SIZE=2> The following table sets forth selected condensed financial data for the Company, expressed as a percentage of total sales for the periods indicated below.</FONT></P> <TABLE WIDTH="100%" CELLSPACING=0 CELLPADDING=0> <TR VALIGN=BOTTOM> <TH WIDTH="47%" ALIGN=LEFT><FONT SIZE=2> </FONT><BR> </TH> <TH WIDTH="3%"><FONT SIZE=1> </FONT></TH> <TH COLSPAN=3 ALIGN=CENTER><font size="2"><B>Three Months Ended<BR> June 30,</B></font> <HR noshade> </TH> <TH WIDTH="3%"><font size="2"> </font></TH> <TH COLSPAN=3 ALIGN=CENTER><font size="2"><B>Six Months Ended<BR> June 30,</B></font> <HR noshade> </TH> <TH WIDTH="4%"><FONT SIZE=1> </FONT></TH> </TR> <TR VALIGN=BOTTOM> <TH WIDTH="47%" ALIGN=CENTER><FONT SIZE=1> </FONT><BR> </TH> <TH WIDTH="3%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="10%" ALIGN=CENTER><font size="2"><B>1999</B></font> <HR noshade> </TH> <TH WIDTH="3%"><font size="2"> </font></TH> <TH WIDTH="9%" ALIGN=CENTER><font size="2"><B>1998</B></font> <HR noshade> </TH> <TH WIDTH="3%"><font size="2"> </font></TH> <TH WIDTH="9%" ALIGN=CENTER><font size="2"><B>1999</B></font> <HR noshade> </TH> <TH WIDTH="3%"><font size="2"> </font></TH> <TH WIDTH="9%" ALIGN=CENTER><font size="2"><B>1998</B></font> <HR noshade> </TH> <TH WIDTH="4%"><FONT SIZE=1> </FONT></TH> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=TOP> <TD WIDTH="47%"><FONT SIZE=2><B>Statement of Operations Data:</B></FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=TOP> <TD WIDTH="47%"><FONT SIZE=2>Revenues:</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=TOP> <TD WIDTH="47%"><FONT SIZE=2>New vehicles</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>54.3</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>54.6</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>53.4</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>53.0</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2>%</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=TOP> <TD WIDTH="47%"><FONT SIZE=2>Used vehicles</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>30.2</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>32.2</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>31.0</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>33.1</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=TOP> <TD WIDTH="47%"><FONT SIZE=2>Service, body and parts</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>9.3</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>9.3</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>9.8</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>9.6</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=TOP> <TD WIDTH="47%"><FONT SIZE=2>Other</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>6.2</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>3.9</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>5.8</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>4.3</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="47%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT> <HR noshade> </TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT> <HR noshade> </TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT> <HR noshade> </TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT> <HR noshade> </TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=TOP> <TD WIDTH="47%"><FONT SIZE=2>Total sales</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>100.0</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>100.0</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>100.0</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>100.0</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=TOP> <TD WIDTH="47%"><FONT SIZE=2>Gross profit</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>15.8</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>15.6</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>15.8</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>15.7</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=TOP> <TD WIDTH="47%"><FONT SIZE=2>Selling, general and administrative</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>11.7</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>11.6</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>11.8</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>11.9</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=TOP> <TD WIDTH="47%"><FONT SIZE=2>Depreciation and amortization</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>0.4</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>0.5</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>0.5</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>0.5</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="47%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT> <HR noshade> </TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT> <HR noshade> </TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT> <HR noshade> </TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT> <HR noshade> </TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=TOP> <TD WIDTH="47%"><FONT SIZE=2>Operating income</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>3.7</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>3.5</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>3.5</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>3.3</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN=TOP> <TD WIDTH="47%"><FONT SIZE=2>Other expense, net</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>(1.2</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>(1.4</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>(1.1</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>(1.4</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2>)</FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="47%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT> <HR noshade> </TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT> <HR noshade> </TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT> <HR noshade> </TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT> <HR noshade> </TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#FFFFFF" VALIGN=TOP> <TD WIDTH="47%"><FONT SIZE=2>Income before taxes</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT><FONT SIZE=2>2.5</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>2.1</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>2.4</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT><FONT SIZE=2>1.9</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2>%</FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="47%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN=RIGHT> <HR noshade SIZE=4> </TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT> <HR noshade SIZE=4> </TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT> <HR noshade SIZE=4> </TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN=RIGHT> <HR noshade SIZE=4> </TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> </TR> </TABLE> <p align=center><font size=2>8</font></P> <br> <!-- SEQ.=4,EFW="9919732",CP="LITHIA MOTORS, INC.",DN="1",FOLIO=8,FILE="DISK004:[99SFO5.99SFO1995.EDGAR]10Q_D_1995.CHC",USER="BHUGHES",CD='10-AUG-1999;17:26' --> <P><FONT SIZE=2><B>Results of Operations</B></FONT></P> <P><FONT SIZE=2><B><I>Revenues.</I></B></FONT><FONT SIZE=2> Revenues increased $134.2 million, or 77.3%, to $307.8 million for the quarter ended June 30, 1999 from $173.5 million for the comparable period of 1998. Revenues increased $212.2 million, or 66.4%, to $531.9 million for the six months ended June 30, 1999 compared to $319.7 million for the comparable period of 1998. Same store sales increased 7.0% in the second quarter of 1999 compared to the second quarter of 1998 and 9.7% in the first six months of 1999 compared to the first six months of 1998.</FONT></P> <P><FONT SIZE=2><B> </B></FONT><FONT SIZE=2><B><I>New Vehicles.</I></B></FONT> <FONT SIZE=2> Total revenue from new vehicle sales increased 76.6% and 67.5%, respectively, to $167.2 million and $284.1 million, respectively (54.3% and 53.4%, respectively, of total revenues) in the three and six month periods ended June 30, 1999 compared to $94.7 million and $169.6 million, respectively (54.6% and 53.0%, respectively, of total revenues) for the three and six-month periods ended June 30, 1998. Lithia sold 7,229 and 12,460 new vehicles, respectively, in the three and six month periods ended June 30, 1999, a 65.7% and 60.1% increase, respectively, over the 4,362 and 7,784 sold, respectively, in the three and six month periods ended June 30, 1998. Average selling prices for new vehicles increased 6.5% and 4.6%, respectively, to $23,132 and $22,799, respectively, in the three and six month periods ended June 30, 1999 compared to $21,711 and $21,790, respectively, in the three and six month periods ended June 30, 1998. The increases in units sold are primarily a result of acquisitions and strong internal growth.</FONT></P> <P><FONT SIZE=2> Lithia purchases substantially all of its new car inventory directly from manufacturers who allocate new vehicles to dealerships based on orders and the amount of vehicles sold by the dealership and by the dealership's market area. Lithia also exchanges vehicles with other dealers to accommodate customer demand and to balance inventory.</FONT></P> <P><FONT SIZE=2><B> </B></FONT><FONT SIZE=2><B><I>Retail Used Vehicles.</I></B></FONT> <FONT SIZE=2> Total revenue from retail used vehicle sales increased 74.9% and 60.5%, respectively, to $78.1 million and $133.1 million, respectively (25.4% and 25.0%, respectively, of total revenues) in the three and six month periods ended June 30, 1999 compared to $44.6 million and $82.9 million, respectively (25.7% and 25.9%, respectively, of total revenues) for the three and six-month periods ended June 30, 1998. Lithia sold 5,875 and 10,128 retail used vehicles, respectively, in the three and six month periods ended June 30, 1999, a 70.8% and 56.6% increase, respectively, over the 3,439 and 6,466 sold, respectively, in the three and six month periods ended June 30, 1998. Average selling prices for used retail vehicles increased 2.4% and 2.5%, respectively, to $13,285 and $13,144, respectively, in the three and six month periods ended June 30, 1999 compared to $12,977 and $12,823, respectively, in the three and six month periods ended June 30, 1998. The increases in units sold are primarily a result of acquisitions and strong internal growth.</FONT></P> <P><FONT SIZE=2><B> </B></FONT><FONT SIZE=2><B><I>Service, Body and Parts.</I></B></FONT> <FONT SIZE=2> Lithia derives additional revenue from the sale of parts and accessories, maintenance and repair services and collision repair work. Revenues from these services increased 76.3% and 68.8%, respectively, to $28.5 million and $51.9 million, respectively (9.3% and 9.8% of total revenues, respectively), in the three and six month periods ended June 30, 1999 compared to $16.2 million and $30.7 million, respectively (9.3% and 9.6% of total revenues, respectively), in the three and six month periods ended June 30, 1998. The increases are primarily a result of internal growth and dealership acquisitions.</FONT></P> <p align=center><font size=2>9</font></p> <!-- SEQ.=1,EFW="9919732",CP="LITHIA MOTORS, INC.",DN="1",FOLIO=9,FILE="DISK004:[99SFO5.99SFO1995.EDGAR]10Q_E_1995.CHC",USER="BHUGHES",CD='11-AUG-1999;06:31' --> <P><FONT SIZE=2><B> </B></FONT><FONT SIZE=2><B><I>Other Revenues.</I></B></FONT> <FONT SIZE=2> Other revenues consist primarily of fleet, financing and insurance ("F& I") transactions. Other revenues increased 180.0% and 126.9%, respectively, to $19.0 million and $31.1 million, respectively (6.2% and 5.8% of total revenues, respectively), in the three and six month periods ended June 30, 1999 compared to $6.8 million and $13.7 million, respectively (3.9% and 4.3% of total revenues, respectively), in the three and six month periods ended June 30, 1998. The increases are a result of internal growth and dealership acquisitions.</FONT></P> <P><FONT SIZE=2><B><I>Gross Profit.</I></B></FONT><FONT SIZE=2> Gross profit increased 80.0% and 67.8%, respectively, to $48.8 million and $84.0 million, respectively, for the three and six month periods ended June 30, 1999, compared with $27.1 million and $50.0 million, respectively, for the three and six month periods ended June 30, 1998, primarily due to increased revenues as indicated above. The gross profit margin achieved by the Company on new vehicle sales during the three and six month periods ended June 30, 1999 was 9.3% and 9.5%, respectively, compared to 9.7% and 9.9%, respectively, for the three and six month periods ended June 30, 1998. These figures compare favorably with the average gross profit margin of 6.5% realized by franchised automobile dealers in the United States on sales of new vehicles in 1998. Lithia's gross profit margin on retail used vehicle sales during the three and six month periods ended June 30, 1999 was 11.5% and 11.4%, respectively, compared to 10.9% and 10.7%, respectively, for the three and six month periods ended June 30, 1998, and compared to the industry average for 1998 of 10.9%. Sales of used vehicles to other dealers and to wholesalers are frequently at, or close to, cost. Total gross profit margin increased to 15.9% and 15.8% for the three and six month periods ended June 30, 1999, respectively, compared to 15.6% and 15.7% for the comparable periods of 1998. The decreases in gross profit margin on new vehicle sales and service, body and parts were more than offset by increases in gross profit margin on retail used vehicle sales and finance and lease transactions.</FONT></P> <P><FONT SIZE=2><B><I>Selling, General and Administrative Expense.</I></B></FONT><FONT SIZE=2> Selling, general and administrative ("SG&A") expense increased 78.6% and 64.6%, respectively, to $36.1 million and $62.7 million, respectively (11.7% and 11.8% of total revenues, respectively), for the three and six month periods ended June 30, 1999, compared with $20.2 million and $38.1 million, respectively (11.6% and 11.9% of total revenues, respectively), for the three and six month periods ended June 30, 1998. The increase in SG& A was due primarily to increased selling, or variable, expense related to the increase in revenues and the number of total locations.</FONT></P> <P><FONT SIZE=2><B><I>Depreciation and Amortization.</I></B></FONT><FONT SIZE=2> Depreciation and amortization expense increased 67.8% and 59.1%, respectively, to $1.4 million and $2.4 million, respectively (0.4% and 0.5% of total revenues, respectively), for the three and six month periods ended June 30, 1999, compared with $0.8 million and $1.5 million, respectively (0.5% and 0.5% of total revenues, respectively), for the three and six month periods ended June 30, 1998. The increases are primarily a result of increased property and equipment and goodwill related to acquisitions in 1998 and 1999.</FONT></P> <p align=center><font size=2>10</font></p> <!-- SEQ.=2,EFW="9919732",CP="LITHIA MOTORS, INC.",DN="1",FOLIO=10,FILE="DISK004:[99SFO5.99SFO1995.EDGAR]10Q_E_1995.CHC",USER="BHUGHES",CD='11-AUG-1999;06:31' --> <P><FONT SIZE=2><B><I>Floorplan Interest Expense.</I></B></FONT><FONT SIZE=2> Floorplan interest expense increased 15.9% and 22.0%, respectively, to $2.2 million and $4.3 million, respectively (0.7% and 0.8% of total revenues, respectively), for the three and six month periods ended June 30, 1999, compared with $1.9 million and $3.5 million, respectively (1.1% and 1.1% of total revenues, respectively), for the three and six month periods ended June 30, 1998. The increases are primarily a result of increased flooring notes payable related to increased inventories as a result of the increase in stores owned and vehicles sold. Lithia has been able to reduce its floorplan interest expense as a percentage of total revenues by successfully managing inventory levels.</FONT></P> <P><FONT SIZE=2><B><I>Income Tax Expense.</I></B></FONT><FONT SIZE=2> Lithia's effective tax rate for the first six months of 1999 was 40.5% compared to 38.6% in the first six months of 1998 and 39.3% for the full year of 1998. The Company's effective tax rate may be effected by the purchase of new dealerships in jurisdictions with tax rates either higher or lower than the current effective rate and by the deductibility or non-deductibility of goodwill related to acquisitions.</FONT></P> <P><FONT SIZE=2><B><I>Net Income.</I></B></FONT><FONT SIZE=2> Net income increased 105.9% and 103.3%, respectively, to $4.6 million and $7.6 million, respectively (1.5% and 1.4% of total revenues, respectively), for the three and six month periods ended June 30, 1999, compared with $2.2 million and $3.7 million, respectively (1.3% and 1.2% of total revenues, respectively), for the three and six month periods ended June 30, 1998, primarily as a result of increased revenues and decreased floorplan and other interest expense as a percent of total revenues.</FONT></P> <P><FONT SIZE=2><B>Liquidity and Capital Resources</B></FONT> <br><FONT SIZE=2>The Company's principal needs for capital resources are for acquisitions, capital expenditures and increased working capital requirements. Historically, the Company has relied primarily upon internally generated cash flows from operations, borrowings under its credit facility and the proceeds from its public offerings to finance its operations and expansion.</FONT></P> <P><FONT SIZE=2> At June 30, 1999 the Company had working capital of $84.9 million, which included $42.0 million of cash and cash equivalents. The $21.1 million increase in cash since December 31, 1998 is primarily a result of $13.2 million provided by operations, $36.4 million net borrowings on the Company's lines of credit, offset by $21.5 million used for acquisitions, $4.5 million used for the purchase of property and equipment and $5.0 million net payments on long-term debt. The current ratio was 1.4:1 at both June 30, 1999 and December 31, 1998.</FONT></P> <P><FONT SIZE=2> The increases in inventory and goodwill are primarily a result of the acquisition of the Moreland Automotive Group in May 1999 (see Note 5. Acquisitions).</FONT></P> <P><FONT SIZE=2> Ford Credit, Toyota Motor Credit Corporation, Chrysler Financial Corporation and General Motors Acceptance Corporation have agreed to floor all of Lithia's new vehicles for their respective brands with Ford serving as the primary lender for all other brands. There are no formal limits to these commitments for new vehicle wholesale financing.</FONT></P> <P> <font size="2">Ford Credit has also extended a $60 million revolving line of credit for used vehicles and a $75 million acquisition line of credit to purchase dealerships of any brand. These commitments have an expiration date of November 23, 2000 with interest due monthly. Lithia has the right to elect to extend the term on these lines of credit for an additional two years at November 23, </font> <p align=center><font size=2>11</font></P> <!-- SEQ=1,EFW="9919732",CP="LITHIA MOTORS, INC.",DN="1", FOLIO=15,FILE="DISK004:[99SFO5.99SFO1995.EDGAR]10Q_E_1995.CHC",USER="BHUGHES", CD="11-AUG-1999 11:1:22"--> <p><font size="2">1999. Lithia also has the option to convert the acquisition line into a five-year term loan on November 23, </font><font size=2>1999 or November 23, 2000. In addition, U.S. Bank N.A. has extended a $10 million revolving line of credit for leased vehicles.</FONT></p> <P><FONT SIZE=2> The lines with Ford Credit are cross-collateralized and are secured by inventory, accounts receivable, intangible assets and equipment. The other new vehicle lines are secured by new vehicle inventory of the relevant dealerships.</FONT></P> <P> <font size="2">The Ford Credit lines of credit contain financial covenants requiring Lithia to maintain compliance with, among other things, specified ratios of (i) total debt to tangible base capital; (ii) total adjusted debt to tangible base capital; (iii) current ratio; (iv) fixed charge coverage; and (v) net cash. The Ford Credit lines of credit agreements also preclude the payment of cash dividends without the prior consent of Ford Credit. Lithia was in compliance with all such covenants at June 30, 1999.</font></P> <P> <font size="2">Interest rates on all of the above facilities ranged from 6.65% to 8.12% at June 30, 1999. Amounts outstanding on the lines at June 30, 1999 were as follows (in thousands):</font></P> <TABLE WIDTH="73%" CELLSPACING=0 CELLPADDING=0> <TR VALIGN=TOP> <TD WIDTH="84%"><FONT SIZE=2> <BR> New and Program Vehicle Lines</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> <BR>$</FONT></TD> <TD WIDTH="11%" ALIGN=RIGHT><FONT SIZE=2> <BR> 185,426</FONT></TD> </TR> <TR VALIGN=TOP bgcolor="#CCFFFF"> <TD WIDTH="84%"><FONT SIZE=2>Used Vehicle Line</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" ALIGN=RIGHT><FONT SIZE=2>40,400</FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="84%"><FONT SIZE=2>Acquisition Line</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" ALIGN=RIGHT><FONT SIZE=2>—</FONT></TD> </TR> <TR VALIGN=TOP bgcolor="#CCFFFF"> <TD WIDTH="84%"><FONT SIZE=2>Leased Vehicle Line</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" ALIGN=RIGHT><FONT SIZE=2>5,000</FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="84%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="14%" COLSPAN=2 ALIGN=RIGHT><HR noshade></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="84%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="11%" ALIGN=RIGHT><FONT SIZE=2>230,826</FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="84%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="14%" COLSPAN=2 ALIGN=RIGHT><HR noshade SIZE=4></TD> </TR> </TABLE> <P><FONT SIZE=2> Since December 1996 when Lithia completed its initial public offering, it has acquired 31 dealerships. The aggregate net investment was approximately $124.4 million (excluding borrowings on its credit lines to finance acquired vehicle inventories and equipment and the purchase of any real estate).</FONT></P> <P><FONT SIZE=2><B>Seasonality and Quarterly Fluctuations</B></FONT><br> <FONT SIZE=2>Historically, Lithia's sales have been lower in the first and fourth quarters of each year largely due to consumer purchasing patterns during the holiday season, inclement weather and the reduced number of business days during the holiday season. As a result, financial performance may be lower during the first and fourth quarters than during the other quarters of each fiscal year. Management believes that interest rates, levels of consumer debt, consumer buying patterns and confidence, as well as general economic conditions, also contribute to fluctuations in sales and operating results. The timing of acquisitions may cause substantial fluctuations in operating results from quarter to quarter.</FONT></P> <p align=center><font size=2>12</font></p> <!-- SEQ.=4,EFW="9919732",CP="LITHIA MOTORS, INC.",DN="1",FOLIO=12,FILE="DISK004:[99SFO5.99SFO1995.EDGAR]10Q_E_1995.CHC",USER="BHUGHES",CD='11-AUG-1999;06:31' --> <P><FONT SIZE=2><B>Year 2000</B></FONT></P> <div><FONT SIZE=2><B><I>General.</I></B></FONT><FONT SIZE=2> Lithia has identified three major areas of concern:</FONT></div> <table width="100%" border="0" cellpadding="0" cellspacing="0"> <tr> <td width="12%" align="center"><font size=2>1.</font></td> <td width="88%" align="left"> <font size=2>The functionality of its internal systems and Lithia's ability to run its daily business after January 1, 2000;</font> </td> </tr> <tr> <td width="12%" align="center"><font size=2>2.</font></td> <td width="88%" align="left"><font size=2>The visual representation of "2000;" and</font></td> </tr> <tr> <td width="12%" align="center"><font size="2">3.</font></td> <td width="88%" align="left"><font size="2">Third party systems.</font></td> </tr> </TABLE> <P><FONT SIZE=2> Lithia expects to be Year 2000 compliant by September 30, 1999, as a result of recent acquisitions. Lithia is utilizing the National Auto Dealers Association dealer guide to assist in resolving its Year 2000 issues and problems.</FONT></P> <P><FONT SIZE=2><B><I>Internal Systems.</I></B></FONT><FONT SIZE=2> Lithia is in the process of analyzing and updating its internal systems, including its dealer management systems, dealer communication systems, personal computer systems, shared port systems and phone systems. Lithia estimates that it is 95 percent complete with implementing various internal systems upgrades in order to make them Year 2000 compliant. We estimate that our internal systems we will be fully Year 2000 compliant by September 30, 1999.</FONT></P> <P><FONT SIZE=2> Like all businesses, Lithia is at risk from external infrastructure failures that could arise from Year 2000 failures. It is not clear that electrical power, telephone and computer networks, for example, will be fully functional across the nation in the year 2000. Investigation and assessment of infrastructures, like the nation's power grid, is beyond the scope and resources of Lithia. Investors should use their own awareness of the issues in the nation's infrastructure to make ongoing infrastructure risk assessments and their potential impact to a company's performance.</FONT></P> <P><FONT SIZE=2><B><I>Visual Representation.</I></B></FONT><FONT SIZE=2> Lithia is currently working on ensuring that all report date stamps, timekeeping devices, etc. are Year 2000 compliant. We estimate that we are approximately 99 percent complete with this process.</FONT></P> <P><FONT SIZE=2><B><I>Third Parties.</I></B></FONT><FONT SIZE=2> Lithia has begun a Year 2000 supplier audit program. It has contacted all of its critical suppliers to inform them of its Year 2000 expectations, and requests have been made for each vendor's compliance program and/or Year 2000 compliance assurance. In regard to the automobile manufacturers, Lithia has received written or other confirmation that they are Year 2000 compliant, except for Subaru. Subaru has assured Lithia that they expect to be Year 2000 compliant prior to January 1, 2000.</FONT></P> <P><FONT SIZE=2> It should be noted that there have been predictions of failures of key components in the transportation infrastructure due to the Year 2000 problem. It is possible that there could be delays in rail, over-the-road and air shipments due to failure in transportation control systems. Investigation and validation of the world's transportation infrastructure is beyond the scope and the resources of Lithia. Investors should use their own awareness of the issues in the transportation infrastructure to make ongoing infrastructure risk assessments and their potential impact to a company's performance.</FONT></P> <p align=center><font size=2>13</font></p> <!-- SEQ.=5,EFW="9919732",CP="LITHIA MOTORS, INC.",DN="1",FOLIO=13,FILE="DISK004:[99SFO5.99SFO1995.EDGAR]10Q_E_1995.CHC",USER="BHUGHES",CD='11-AUG-1999;06:31' --> <P><FONT SIZE=2><B><I>Acquisitions.</I></B></FONT><FONT SIZE=2> Acquisitions in 1999 will be subject to strict due diligence for Year 2000 compliance.</FONT></P> <P><FONT SIZE=2><B><I>Cost.</I></B></FONT><FONT SIZE=2> Lithia expects to incur costs totaling approximately $1,345,000, including recent acquisitions, to ensure Year 2000 compliance, approximately $972,000 of which has already been incurred since the end of 1997. A majority of the $1,345,000 represents replacement of non-compliant systems, and therefore will be capitalized and amortized over a three to five year period. This estimate could change depending on variances not anticipated in the initial bids.</FONT></P> <P><FONT SIZE=2><B><I>Risk.</I></B></FONT><FONT SIZE=2> The failure to correct a material Year 2000 problem could result in an interruption in, or a failure of, certain normal business activities or operations. Such failures could materially and adversely affect Lithia's results of operations, liquidity and financial condition. Due to the general uncertainty inherent in the Year 2000 problem, resulting in part from the uncertainty of the Year 2000 readiness of third-party suppliers, Lithia is unable to determine, at this time, whether the consequences of Year 2000 failures will have a material impact on its results of operations, liquidity or financial condition. Lithia's efforts to help ensure Year 2000 preparedness have, and will continue to, significantly reduce its level of uncertainty about the Year 2000 problem. We believe that, with completion of the above mentioned plans, the possibility of significant interruptions of normal operations should be reduced.</FONT></P> <P><FONT SIZE=2> Lithia has developed contingency plans in regard to its internal systems and supplier issues and will distribute these plans to all relevant departments of Lithia by October 1999. The contingency plans consist primarily of manual processes and procedures to be followed in the event of system failures.</FONT></P> <P><FONT SIZE=2><B>Recent Accounting Pronouncement</B></FONT> <br><FONT SIZE=2>In June 1999, the FASB issued Statement of Financial Accounting Standards No. 137, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 137"). SFAS 137 is an amendment to Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS 137 establishes accounting and reporting standards for all derivative instruments. SFAS 137 is effective for fiscal years beginning after June 15, 2000. Lithia does not currently have any derivative instruments and, accordingly, does not expect the adoption of SFAS 137 to have an impact on its financial position or results of operations.</FONT></P> <P><FONT SIZE=2><B><U>Item 3. Quantitative and Qualitative Disclosures About Market Risk </U></B></FONT></P> <P><FONT SIZE=2> Lithia's only financial instruments with market risk exposure are variable rate floor plan notes payable and other credit line borrowings. At June 30, 1999 Lithia had $230.8 million outstanding under such facilities at interest rates ranging from 6.65% to 8.12%. An increase or decrease in the interest rates would affect interest expense for the period accordingly.</FONT></P> <p align=center><font size=2>14</font></p> <P><FONT SIZE=2> <!-- SEQ.=6,EFW="9919732",CP="LITHIA MOTORS, INC.",DN="1",FOLIO=14,FILE="DISK004:[99SFO5.99SFO1995.EDGAR]10Q_E_1995.CHC",USER="BHUGHES",CD='11-AUG-1999;06:31' --> </FONT></P> <!-- Generated by Merrill Corporation (www.merrillcorp.com) --> <P ALIGN="CENTER"><FONT SIZE=2><B>PART II - OTHER INFORMATION</B></FONT></P> <P><FONT SIZE=2><B><U>Item 4. Submission of Matters to a Vote of Security Holders </U></B></FONT></P> <P><FONT SIZE=2> The annual meeting of the shareholders of the Company was held on May 20, 1999, at which the following actions were taken:</FONT></P> <DL compact> <DT><FONT SIZE=2>1.</FONT></DT><DD><FONT SIZE=2> The shareholders elected the five nominees for director to the Board of Directors of the Company. The five directors elected, along with the voting results are as follows:</FONT></DD></DL> <TABLE WIDTH="90%%" CELLSPACING=0 CELLPADDING=0> <TR VALIGN=BOTTOM> <TH WIDTH="32%" ALIGN=LEFT><font size="2"> <BR> </font> <font size="2"><B> Name<BR> </B></font> <HR noshade> </TH> <TH WIDTH="3%"><font size="2"><B> <BR> </B></font></TH> <TH WIDTH="13%" ALIGN=CENTER><font size="2"><B> <BR> </B><BR> </font></TH> <TH WIDTH="3%"><font size="2"><B> <BR> </B></font></TH> <TH WIDTH="21%" ALIGN=CENTER><font size="2"><B> <BR> No. of Shares<BR> Voting For<SUP>(1)</SUP></B></font> <HR noshade> </TH> <TH WIDTH="3%"><font size="2"><B> <BR> </B></font></TH> <TH WIDTH="25%" ALIGN=CENTER><font size="2"><B> <BR> No. of Shares<BR> Withheld Voting</B></font> <HR noshade> </TH> </TR> <TR VALIGN=TOP> <TD WIDTH="32%"><FONT SIZE=2>Sidney B. DeBoer</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%"><FONT SIZE=2>Class A</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="21%" ALIGN=RIGHT><FONT SIZE=2>3,692,963</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="25%" ALIGN=RIGHT><FONT SIZE=2>502</FONT></TD> </TR> <TR VALIGN=TOP bgcolor="#CCFFFF"> <TD WIDTH="32%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%"><FONT SIZE=2>Class B</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="21%" ALIGN=RIGHT><FONT SIZE=2>4,110,000</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="25%" ALIGN=RIGHT><FONT SIZE=2>0</FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="32%"><FONT SIZE=2>M. L. Dick Heimann</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%"><FONT SIZE=2>Class A</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="21%" ALIGN=RIGHT><FONT SIZE=2>3,692,963</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="25%" ALIGN=RIGHT><FONT SIZE=2>502</FONT></TD> </TR> <TR VALIGN=TOP bgcolor="#CCFFFF"> <TD WIDTH="32%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%"><FONT SIZE=2>Class B</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="21%" ALIGN=RIGHT><FONT SIZE=2>4,110,000</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="25%" ALIGN=RIGHT><FONT SIZE=2>0</FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="32%"><FONT SIZE=2>Thomas Becker</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%"><FONT SIZE=2>Class A</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="21%" ALIGN=RIGHT><FONT SIZE=2>3,692,963</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="25%" ALIGN=RIGHT><FONT SIZE=2>502</FONT></TD> </TR> <TR VALIGN=TOP bgcolor="#CCFFFF"> <TD WIDTH="32%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%"><FONT SIZE=2>Class B</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="21%" ALIGN=RIGHT><FONT SIZE=2>4,110,000</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="25%" ALIGN=RIGHT><FONT SIZE=2>0</FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="32%"><FONT SIZE=2>R. Bradford Gray</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%"><FONT SIZE=2>Class A</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="21%" ALIGN=RIGHT><FONT SIZE=2>3,692,963</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="25%" ALIGN=RIGHT><FONT SIZE=2>502</FONT></TD> </TR> <TR VALIGN=TOP bgcolor="#CCFFFF"> <TD WIDTH="32%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%"><FONT SIZE=2>Class B</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="21%" ALIGN=RIGHT><FONT SIZE=2>4,110,000</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="25%" ALIGN=RIGHT><FONT SIZE=2>0</FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="32%"><FONT SIZE=2>William J. Young</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%"><FONT SIZE=2>Class A</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="21%" ALIGN=RIGHT><FONT SIZE=2>3,693,263</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="25%" ALIGN=RIGHT><FONT SIZE=2>202</FONT></TD> </TR> <TR VALIGN=TOP bgcolor="#CCFFFF"> <TD WIDTH="32%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%"><FONT SIZE=2>Class B</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="21%" ALIGN=RIGHT><FONT SIZE=2>4,110,000</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="25%" ALIGN=RIGHT><FONT SIZE=2>0</FONT></TD> </TR> </TABLE> <UL> <DL compact> <DT><FONT SIZE=2><SUP>(1)</SUP></FONT></DT><DD><FONT SIZE=2> Each Class A share represents one vote and each Class B share represents 10 votes.</FONT> </DD></DL> <BR> </UL> <DL compact> <DT><FONT SIZE=2>2.</FONT></DT><DD><FONT SIZE=2> The shareholders approved an amendment to the Lithia Motors, Inc. 1996 Stock Incentive Plan to increase the number of shares of the Company's Common Stock that may be issued thereunder by 615,000 shares to a total of 1,700,000 shares. 1,952,968 Class A shares and 4,110,000 Class B shares voted for, 255,300 Class A shares voted against, 500 Class A shares abstained from voting and 1,484,697 Class A shares did not vote.</FONT> <p align=center><font size=2>15</font></p> <P><FONT SIZE=2> <!-- SEQ.=1,EFW="9919732",CP="LITHIA MOTORS, INC.",DN="1",FOLIO=15,FILE="DISK004:[99SFO5.99SFO1995.EDGAR]10Q_F_1995.CHC",USER="BHUGHES",CD='10-AUG-1999;17:24' --> </FONT></P> </DD></DL> <P><FONT SIZE=2><B><U>Item 6. Exhibits and Reports on Form 8-K </U></B></FONT></P> <P><FONT SIZE=2> (a) Exhibits</FONT><br> <FONT SIZE=2> The exhibits filed as a part of this report are listed below and this list constitutes the exhibit index.</FONT> <TABLE WIDTH="100%" CELLSPACING=0 CELLPADDING=0> <TR VALIGN=BOTTOM> <TD align="left" COLSPAN=3><FONT SIZE=2><U>Exhibit No. </U></FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="5%" align="right"><FONT SIZE=2>10.1</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="94%"><FONT SIZE=2>Agreement and Plan of Reorganization dated January 1, 1999 by and between Lithia Motors, Inc. and Moreland Auto Limited Partnership, RLLLP and G. Michael Downey and Moreland Auto Corp., previously filed as Exhibit 10.1 to the Company's Form 10-Q for the quarter ended March 31, 1999 as filed with the Securities and Exchange Commission on May 12, 1999 and is incorporated herein by reference. </FONT></TD> </TR> <TR VALIGN=TOP bgcolor="#CCFFFF"> <TD WIDTH="5%" align="right"><FONT SIZE=2>10.2</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="94%"><FONT SIZE=2>Agreement and Plan of Reorganization dated January 1, 1999 by and between Lithia Motors, Inc. and L.A.H. Automotive Limited Partnership, RLLLP and L.A.H. Automotive Enterprises, Inc., previously filed as Exhibit 10.2 to the Company's Form 10-Q for the quarter ended March 31, 1999 as filed with the Securities and Exchange Commission on May 12, 1999 and is incorporated herein by reference. </FONT></TD> </TR> <TR VALIGN=TOP bgcolor="#FFFFFF"> <TD WIDTH="5%" align="right"><FONT SIZE=2>10.3</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="94%"><FONT SIZE=2>Agreement and Plan of Reorganization dated January 1, 1999 by and between Lithia Motors, Inc. and William D. Limited Partnership, RLLLP and James Jannicelli and William D.Corp., previously filed as Exhibit 10.3 to the Company's Form 10-Q for the quarter ended March 31, 1999 as filed with the Securities and Exchange Commission on May 12, 1999 and is incorporated herein by reference.</FONT></TD> </TR> <TR VALIGN=TOP bgcolor="#CCFFFF"> <TD WIDTH="5%" align="right"><FONT SIZE=2>10.4</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="94%"><FONT SIZE=2>Agreement and Plan of Reorganization dated January 1, 1999 by and between Lithia Motors, Inc. and Cherry Creek Dodge Limited Partnership, RLLLP and Cherry Creek Dodge, Incorporated, previously filed as Exhibit 10.4 to the Company's Form 10-Q for the quarter ended March 31, 1999 as filed with the Securities and Exchange Commission on May 12, 1999 and is incorporated herein by reference. </FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="5%" align="right"><FONT SIZE=2>10.5</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="94%"><FONT SIZE=2>Agreement and Plan of Reorganization dated January 1, 1999 by and between Lithia Motors, Inc. and Colorado Springs Jeep Eagle Limited Partnership, RLLLP and Alex Jannicelli and Colorado Springs Jeep/Eagle, Inc., previously filed as Exhibit 10.5 to the Company's Form 10-Q for the quarter ended March 31, 1999 as filed with the Securities and Exchange Commission on May 12, 1999 and is incorporated herein by reference.</FONT></TD> </TR> <TR VALIGN=TOP bgcolor="#CCFFFF"> <TD WIDTH="5%" align="right"><FONT SIZE=2>10.6</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="94%"><FONT SIZE=2>Agreement and Plan of Reorganization dated January 1, 1999 by and between Lithia Motors, Inc. and Foothills Automotive Plaza Limited Partnership, RLLLP and Jerry Cash and Foothills Automotive Plaza, Inc., previously filed as Exhibit 10.6 to the Company's Form 10-Q for the quarter ended March 31, 1999 as filed with the Securities and Exchange Commission on May 12, 1999 and is incorporated herein by reference.</FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="5%" align="right"><FONT SIZE=2>10.7</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="94%"><FONT SIZE=2>Agreement and Plan of Reorganization dated January 1, 1999 by and between Lithia Motors, Inc. and Reno Auto Sales Limited Partnership, RLLLP and Reno Auto Sales, Inc., previously filed as Exhibit 10.7 to the Company's Form 10-Q for the quarter ended March 31, 1999 as filed with the Securities and Exchange Commission on May 12, 1999 and is incorporated herein by reference.</FONT></TD> </TR> <TR VALIGN=TOP bgcolor="#CCFFFF"> <TD WIDTH="5%" align="right"><FONT SIZE=2>27 </FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="94%"><FONT SIZE=2>Financial Data Schedule</FONT></TD> </TR> </TABLE> <br> <table width="100%" border="0" cellspacing="0" cellpadding="0"> <tr> <td colspan="3"><font size=2>(b) Reports on Form 8-K</font></td> </tr> <tr> <td width="5%" valign="top" align="right">• </td> <td width="1%" valign="top"> </td> <td width="94%" valign="top"><font size=2>Under Item 2, Acquisition or Disposition of Assets, and Item 7, Financial Statements and Exhibits, filed on May 27, 1999, and dated May 14, 1999, regarding Lithia's acquisition of all of the stock of Moreland Automotive Group.</font> </td> </tr> </TABLE> <p align=center><font size=2>16</font> <!-- SEQ.=1,EFW="9919732",CP="LITHIA MOTORS, INC.",DN="1",FOLIO=16,FILE="DISK004:[99SFO5.99SFO1995.EDGAR]10Q_G_1995.CHC",USER="BHUGHES",CD='10-AUG-1999;17:24' --> </p> <P><FONT SIZE=2><B>SIGNATURES</B></FONT></P> <P><FONT SIZE=2>Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.</FONT></P> <TABLE WIDTH="100%" CELLSPACING=0 CELLPADDING=0> <TR VALIGN=TOP> <TD WIDTH="48%"><FONT SIZE=2>Date: August 10, 1999</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="50%"><FONT SIZE=2>LITHIA MOTORS, INC.</FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="48%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="50%"><FONT SIZE=2> <BR> </FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="48%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="50%"><FONT SIZE=2>By <U>/s/ SIDNEY B. DEBOER </U><BR> Sidney B. DeBoer<BR> Chairman of the Board,<BR> Chief Executive Officer and Secretary<BR> (Principal Executive Officer)</FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="48%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="50%"><FONT SIZE=2> <BR> </FONT></TD> </TR> <TR VALIGN=TOP> <TD WIDTH="48%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="50%"><FONT SIZE=2>By <U>/s/ BRIAN R. NEILL </U><BR> Brian R. Neill<BR> Senior Vice President and<BR> Chief Financial Officer<BR> (Principal Financial and Accounting Officer)</FONT></TD> </TR> </TABLE> <p align=center><font size=2>17</font></p> <P><FONT SIZE=2> <!-- SEQ.=1,EFW="9919732",CP="LITHIA MOTORS, INC.",DN="1",FOLIO=17,FILE="DISK004:[99SFO5.99SFO1995.EDGAR]10Q_H_1995.CHC",USER="BHUGHES",CD='11-AUG-1999;06:44' --> </FONT></P> <!-- Generated by Merrill Corporation (www.merrillcorp.com) --> </BODY> </HTML>