SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 30, 1999.
SEC Registration No. 333-43593
LITHIA MOTORS, INC. SALARY REDUCTION PROFIT SHARING PLAN
LITHIA MOTORS, INC.
360 E. Jackson St.
Medford, OR 97501
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CONTENTS
Page
INDEPENDENT AUDITOR'S REPORT ............................................. 1
FINANCIAL STATEMENTS
Statements of net assets available for benefits ........................ 2
Statement of changes in net assets available for benefits .............. 3
Notes to financial statements .......................................... 4-7
SUPPLEMENTAL SCHEDULE
Schedule of assets held for investment purposes at end of year ......... 8
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INDEPENDENT AUDITOR'S REPORT
To the Board of Trustees
Lithia Motors, Inc. Salary Reduction Profit Sharing Plan Trust
We have audited the accompanying statements of net assets available for
benefits of the Lithia Motors, Inc. Salary Reduction Profit Sharing Plan Trust
as of December 30, 1999 and December 31, 1998 and the related statement of
changes in net assets available for benefits for the period from January 1,
1999 to December 30, 1999. These financial statements are the responsibility
of the Plan's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Lithia
Motors, Inc. Salary Reduction Profit Sharing Plan Trust as of December 30,
1999 and December 31, 1998 and the changes in the net assets available for
benefits for the period from January 1, 1999 to December 30, 1999 in
conformity with generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule on page 8 is
presented for the purpose of additional analysis and is not a required part of
the basic financial statements but is supplemental information required by the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. The supplemental schedule
has been subjected to the auditing procedures applied in the audit of the
basic financial statements and, in our opinion, is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
June 22, 2000
Medford, Oregon
1
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LITHIA MOTORS, INC.
SALARY REDUCTION PROFIT SHARING PLAN TRUST
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
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December 30, December 31,
1999 1998
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ASSETS
Investments, at fair value
Shares of pooled separate accounts
Principal Money Market $ 2,545,258 $ 2,389,963
Principal Bond and Mortgage 990,477 563,621
Principal Large Cap Stock Index 3,515,583 1,963,132
Principal Large Company Value 1,422,689 983,905
Principal Medium Company Blend 762,436 785,716
Principal Small Company Growth 1,330,564 810,913
Principal International Stock 464,891 256,534
Principal International Emerging Markets 384,098 82,475
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11,415,996 7,836,259
Lithia Motors, Inc. Class A Common Stock 2,037,448 1,078,918
Participant loans 642,639 398,040
Loan payments in transit -- 10,940
Employer contributions receivable 590,944 285,192
Employee contributions receivable -- 152,807
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NET ASSETS AVAILABLE FOR BENEFITS $14,687,027 $ 9,762,156
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See accompanying notes.
2
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LITHIA MOTORS, INC.
SALARY REDUCTION PROFIT SHARING PLAN TRUST
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
PERIOD FROM JANUARY 1 TO DECEMBER 30, 1999
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ADDITIONS TO NET ASSETS
ATTRIBUTED TO
Investment income
Net appreciation
in fair
value of investments $ 1,223,578
Interest and dividends 41,411
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1,264,989
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Contributions
Employer 591,825
Employee 3,741,147
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4,332,972
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5,597,961
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DEDUCTIONS FROM NET
ASSETS ATTRIBUTED TO
Benefits paid to participants 647,944
Administrative expenses 25,146
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673,090
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NET INCREASE 4,924,871
NET ASSETS AVAILABLE
FOR BENEFITS
Beginning of year 9,762,156
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End of year $14,687,027
===========
See accompanying notes.
3
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LITHIA MOTORS, INC., SALARY REDUCTION PROFIT SHARING PLAN TRUST
NOTES TO FINANCIAL STATEMENTS
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NOTE 1 - DESCRIPTION OF PLAN
The following description of Lithia Motors, Inc. Salary Reduction Profit
Sharing Plan Trust (the Plan) provides only general information. Participants
should refer to the Plan agreement for a more complete description of the
Plan's provisions.
General - The Plan is a defined contribution plan covering all full-time
employees of Lithia Motors, Inc. (the Company) who have one year of service
with at least 1,000 hours of service and are age twenty-one or older and who
are not members of a union. The Plan is subject to the provisions of the
Employee Retirement Income Security Act of 1974 (ERISA).
The Company, and as a result, the Plan, have grown primarily due to the
Company's acquisition and integration of automobile dealerships and by
obtaining new dealer franchises. As the Company continues to grow and to
acquire dealerships, the existing retirement plans at the acquired
dealerships, if any, are terminated. Employees of the acquired dealerships are
given the option of participating in the Plan and are given credit for years
of service prior to the acquisitions.
Contributions - Each year, the Company contributes to the Plan an amount
determined annually by the Company's Board of Directors. Participants may
contribute, under a salary reduction agreement, the maximum allowed by the
Internal Revenue Service under Code Section 402(g).
Participant Accounts - Each participant's account is credited with the
participant's contribution and an allocation of the Company's contribution and
Plan earnings, and is charged with an allocation of administrative expenses.
Allocations are based on account balances, as defined. Forfeited balances of
terminated participants' non-vested accounts are used to pay administrative
expenses of the Plan and to reduce future Company contributions. The benefit
to which a participant is entitled is the benefit that can be provided from
the participant's account.
Vesting - Participants are immediately vested in their voluntary contributions
plus actual earnings thereon. Vesting in the remainder of their accounts is
based on years of continuous service. A participant is 100% vested after seven
years of credited service.
Investment Options - Upon enrollment in the Plan, a participant may direct
employee contributions in any one of the following investment options:
Principal Money Market Account - The Money Market Account is a pooled
investment account, which invests in money market instruments.
Principal Bond and Mortgage Account - The Bond and Mortgage Account is a
pooled investment account invested in intermediate-term fixed income
loans.
Principal Large Cap Stock Index Account - The Large Cap Stock Index
Account is a pooled investment account invested primarily in common
stocks of those firms included in the Standard & Poor's 500 Stock Index.
4
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NOTE 1 - DESCRIPTION OF PLAN (Continued)
Principal Large Company Value Account - The Large Company Value Account
is a pooled investment account invested primarily in common stocks of
large companies that are undervalued at the time of purchase and whose
earnings are expected to grow at above average rates.
Principal Medium Company Blend Account - The Medium Company Blend Account
is a pooled investment account invested in common stocks of medium sized
companies that generate long-term capital growth.
Principal Small Company Growth Account - The Small Company Growth Account
is a pooled investment account invested in common stocks of small
companies who are at or near development stage with above average growth
characteristics.
Principal International Stock Account - The International Stock Account
is a pooled investment account invested primarily in common stocks of
corporations located outside the United States and may also occasionally
be invested in preferred stocks or convertible bonds of these
corporations. Account assets may also be invested in U.S. or non-U.S.
securities other than stocks or retained in cash.
Principal International Emerging Markets Account - The International
Emerging Markets Stock Account is a pooled investment account invested
primarily in common stocks of companies located in other countries with
rapid economic growth and improved standards of living.
Lithia Motors, Inc. Class A Common Stock - Participants may invest in
shares of Class A Common Stock of the Plan sponsor, Lithia Motors, Inc.
Participant Loans - Participants may borrow from their fund accounts a minimum
of $1,000 and maximum equal to the lessor of $50,000 or 50% of their account
balance. Loan transactions are treated as a transfer from the investment fund
to the participant loan fund. Loan terms range from one to five years or up to
fifteen years for the purchase of a primary residence. The loans are secured
by the balance in the participant's account and bear interest at a rate of
8.00% to 9.75%. Principal and interest are paid ratably through semimonthly
payroll deductions.
Payment of Benefits - Benefits are recorded when paid. There were no
participant balances attributable to participants who had withdrawn from the
Plan but whose balances had not been paid at December 30, 1999. On termination
of service or upon reaching retirement age, a participant receives a lump-sum
amount equal to the value of his or her account.
Forfeited Accounts - In 1999, forfeited non-vested accounts amounted to
$25,568 and are used to reduce Plan administrative expenses.
5
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NOTE 2 - SUMMARY OF ACCOUNTING POLICIES
Principles of Accounting - Assets of the Plan are stated at quoted market
prices, where available. Unrealized appreciation or depreciation has been
reflected in the statement of changes in net assets available for benefits.
The amount of realized gains and losses on investment transactions is
determined based on the historical cost of the investment being sold.
Unrealized appreciation or depreciation recognized in prior years on
investments sold is offset against unrealized appreciation or depreciation in
the year of the sale.
The Plan sponsor has voluntarily paid for certain administrative expenses of
the Plan, and these expenses are not reflected in these financial statements.
Use of Estimates - The preparation of the financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Basis of Accounting - The financial statements of the Plan are prepared under
the accrual method of accounting.
Investment Valuation and Income Recognition - The Plan's investments are
stated at fair value. Shares of pooled separate accounts and shares of Lithia
Motors, Inc. are valued at quoted market prices, which represent the net asset
value of shares held by the Plan at year-end. Participant loans are valued at
cost, which approximates fair value.
Purchases and sales of securities are recorded on trade-date basis. Interest
income is recorded on the accrual basis. Dividends are recorded on the
ex-dividend date.
NOTE 3 - PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the right
under the Plan to discontinue its contributions at any time and to terminate
the Plan subject to the provisions of ERISA. In the event of Plan termination,
participants will become 100% vested in their accounts.
NOTE 4 - INCOME TAX STATUS
The Plan obtained its latest determination letter on November 3, 1995, in
which the Internal Revenue Service stated that the Plan, as then designed, was
in compliance with the applicable requirements of the Internal Revenue Code.
The Plan has been amended since receiving the determination letter. However,
the Plan administrator believes that the Plan is currently designed and being
operated in compliance with the applicable requirements of the Internal
Revenue Code. Therefore, no provision for income taxes has been included in
the Plan's financial statements.
6
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NOTE 5 - INVESTMENTS
During 1999, the Plan's investments, including gains and losses on investments
bought and sold, as well as held during the year, appreciated or depreciated
in value as follows:
Principal Money Market $ 101,750
Principal Bond and Mortgage (714)
Principal Large Cap Stock Index 554,376
Principal Large Company Value (111,658)
Principal Medium Company Blend 80,241
Principal Small Company Growth 412,361
Principal International Stock 91,671
Principal International Emerging Markets 117,628
Lithia Motors, Inc. Class A Common Stock (22,077)
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$ 1,223,578
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NOTE 6 - FISCAL YEAR CHANGE
Effective December 1999, the Plan changed from a fiscal year end of December
31 to December 30. As a result, the period from January 1, 1999 to December
30, 1999 is a short year consisting of 364 days.
7
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LITHIA MOTORS, INC. SALARY REDUCTION PROFIT SHARING PLAN TRUST
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES AT END OF YEAR
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<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Identity of Issuer, borrower, lessor Description of investment including Cost Current value
or similar party maturity date, rate of interest,
collateral, par or maturity date
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<S> <C> <C>
* Principal Life Insurance Company Pooled Separate Accounts $ 2,436,965.66 $ 2,545,257.92
Money Market
* Principal Life Insurance Company Pooled Separate Accounts $ 969,363.70 $ 990,477.03
Bond & Mortgage
* Principal Life Insurance Company Pooled Separate Accounts $ 2,856,766.35 $ 3,515,582.68
Large Cap Stock Index
* Principal Life Insurance Company Pooled Separate Accounts $ 1,460,535.02 $ 1,422,689.26
Large Company Value
* Principal Life Insurance Company Pooled Separate Accounts $ 696,319.84 $ 762,436.18
Medium Company Blend
* Principal Life Insurance Company Pooled Separate Accounts $ 968,772.14 $ 1,330,564.29
Small Company Growth
* Principal Life Insurance Company Pooled Separate Accounts $ 297,864.81 $ 384,098.06
Intl Emerging Markets
* Principal Life Insurance Company Pooled Separate Accounts $ 397,524.94 $ 464,890.90
Intl Stock
* Principal Life Insurance Company Employer Security - Common $ 2,024,043.90 $ 2,037,447.66
Lithia Motors, Inc. Employer S
* Participant Loans Range of Interest Rates $ -- $ 642,639.00
Rates Range From 8.00% to 9.75%
</TABLE>
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SIGNATURE PAGE
The Plan. Pursuant to the requirements of the Securities Exchange Act of
1934, the trustees (or other persons who administer the employee benefit plan)
have duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
LITHIA MOTORS, INC. SALARY REDUCTION
PROFIT SHARING PLAN TRUST
/s/ Dorothy Crockett
By: ---------------------------------
Dorothy Crockett
Trustee
8
