FinishMaster Announces Third Quarter Earnings up 15%
INDIANAPOLIS--Nov. 6, 2003--FinishMaster, Inc. (OTC:FMST) today reported that net income for the third quarter of 2003 increased 15 percent, to $3,615,000, or $0.47 per share, compared with net income of $3,144,000, or $0.40 per share, in the prior year period. The improvement in net income for the quarter compared to the prior year period was a result of higher net sales, lower operating and selling, general and administrative expenses, and decreased interest expense.-- The increase in net sales was due to acquisitions. During the quarter, the Company announced two acquisitions: Advance Paint in Denver, Colorado on July 3, 2003; and Automotive Refinish Technologies branch locations in ten new markets on September 18, 2003. Same stores sales were negative for the quarter as a result of continued weakness in demand for automotive paint and accessories throughout our distribution network.
-- Lower gross margin dollars resulted from a decline in the margin rate. The deterioration in margin rate was a result of an inventory reserve adjustment for excess and obsolete inventory and higher shipping and handling costs as a percentage of net sales. Excluding the negative impact of the excess and obsolete reserve adjustment, margin rate was comparable to the prior year period.
-- Operating and selling, general and administrative expenses as a percentage of net sales decreased 160 basis points to 21.8 percent due primarily to reduced wage expense and lower insurance costs.
-- Lower effective interest rates resulted in a decrease in interest expense.
For the nine months ended September 30, 2003, net income was $9,359,000, or $1.19 per share, compared to net income of $9,932,000, or $1.27 per share, in the prior year period. The decrease in net income for the year-to-date period compared to the prior year period was due primarily to lower net sales and gross margin dollars.
-- The decline in net sales was a result of reduced demand throughout our distribution network.
-- Lower gross margin dollars resulted from decreased sales volume and a decline in the margin rate. The deterioration in margin rate was a result of an inventory reserve adjustment for excess and obsolete inventory, higher shipping and handling costs as a percentage of net sales, and increased customer discounts.
-- Operating and selling, general and administrative expenses as a percentage of net sales decreased 10 basis points to 23.1 percent.
-- Lower effective interest rates resulted in a decrease in interest expense.
FinishMaster is the leading national independent distributor of automotive paints, coatings, and related accessories to the automotive collision repair industry. The Company is headquartered in Indianapolis, Indiana, and operates three major distribution centers and 167 branches in 27 of the 35 largest metropolitan areas in the country. For more information on FinishMaster via the Internet, visit FinishMaster's website at http://www.finishmaster.com/.
Selected Historical Financial Data
(000's omitted, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
2003 2002 2003 2002
---------- ------- -------- ---------
Net sales $89,243 $88,362 $259,660 $260,411
Gross margin (1) 27,161 27,854 81,292 83,297
Gross margin % 30.4% 31.5% 31.3% 32.0%
Operating and SG&A expenses 19,497 20,671 60,056 60,389
Amortization of intangible assets 331 248 927 737
Total expenses 19,828 20,919 60,983 61,126
Income from operations 7,333 6,935 20,309 22,171
Interest expense 1,562 1,775 4,888 5,487
Income tax expense 2,156 2,016 6,062 6,752
Net income $3,615 $3,144 $9,359 $9,932
Diluted earnings per share $0.47 $0.40 $1.19 $1.27
Diluted weighted average shares
outstanding 7,761 7,874 7,844 7,847
Note (1): Shipping and handling costs are now included in cost of
goods sold. Prior period reported results have been revised to conform
to the current year presentation.
September 30, December 31,
2003 2002
--------------------------
Cash $5,358 $2,070
Accounts receivable, net 32,132 30,023
Inventory 50,616 55,566
Intangible assets, net 103,908 102,137
Property, equipment & all other assets 16,565 15,831
Total assets $208,579 $205,627
Accounts payable $17,523 $15,744
Current & long-term debt 87,720 96,297
Accrued expenses & all other liabilities 18,088 17,206
Shareholders' equity 85,248 76,380
Total liabilities & shareholders' equity $208,579 $205,627