Lithia Motors $85 million convertible talked at 2.75-3.25%, up 35-40%

By Ronda Fears

Nashville, April 26 - Lithia Motors Inc. launched $85 million of 10-year convertible notes talked to yield 2.75% to 3.25% with a 35% to 40% initial conversion premium.

Morgan Stanley is sole bookrunner of the Rule 144A deal, which is slated to price after the close Tuesday.

The senior subordinated notes will be non-callable for five years with a put in year five.

There is a 120% contingent conversion trigger and a 120% continent payment trigger.

Holders will have dividend protection for quarterly cash dividends in excess of 8 cents per share.

A $15 million greenshoe is available.

Proceeds will be used to pay down lines of credit used to finance prior acquisitions and vehicle inventories.

In first quarter, the Medford, Ore.-based dealership company completed two acquisitions; a Chrysler-Jeep store in Reno, Nev., and a Chevrolet store in Helena, Mont. The two stores have about $95 million in annualized revenues.

Also Monday, Lithia Motors reported first quarter net income of $7.5 million, or 39 cents per diluted share, compared with $4.2 million, or 23 cents per diluted share, in first quarter 2003. Net income from continuing operations was $7.6 million, or 40 cents per diluted share, up from $4.3 million, or 24 cents per diluted share, in first quarter 2003. Sales rose 14% to $637.8 million from $559.6 million.

For second quarter, the company is forecasting earnings per share from continuing operations in a range of 51 to 53 cents.

For 2004, the company raised its earnings guidance from continuing operations to a range of $2.06 to $2.14 per diluted share from a previous forecast of $1.95 to $2.05.

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