FinishMaster Announces Second Quarter Financial Results, an Acquisition, and Change of Auditors
INDIANAPOLIS--July 29, 2004--FinishMaster, Inc. (Pink Sheets:FMST) today reported that net income for the second quarter of 2004 was $3,163,000, or $0.41 per share, compared with net income of $2,971,000, or $0.38 per share, in the prior year period. For the six months ended June 30, 2004, net income was $6,445,000, or $0.83 per share, compared to net income of $5,744,000, or $0.73 per share, in the prior year period.The Company also announced the acquisition of two automotive paint distributing locations in Durham and Greenville, North Carolina from Hutchins Auto Supply Company, Inc., effective May 2, 20041, 2004. "The Hutchins acquisition allows us to increase our market share in the attractive growth market of Raleigh/Durham and build additional geographic coverage," stated J. A. Lacy, President and Chief Operating Officer. "Furthermore, we were able to expand our team of professional salespeople and customer service representatives while reducing fixed operating costs through the consolidation of overlapping branch locations."
The improvement in net income for the quarter and year-to-date compared to the prior year periods was a result of higher net sales and decreased interest expense.
-- The increase in net sales was due to positive same branch sales growth and prior year acquisitions. The increase in same branch sales is attributable to various sales and marketing initiatives implemented during the current and prior year designed to increase the Company's competitiveness and market presence. The prior year acquisition that had a significant impact on the Company's current quarter and year-to-date sales increase was the Automotive Refinish Technologies acquisition which resulted in the Company entering ten new markets.
-- Higher gross margin dollars resulted from increased sales volume, partially offset by a decline in the margin rate. The deterioration in margin rate was a result of increased discounts to attract and retain customers; inventory reserve adjustments; and the lower margin-rate fulfillment business representing a greater share of our overall sales versus our full-service business.
-- Total expenses as a percentage of net sales decreased 80 basis points to 23.2 percent in the second quarter and to 23.3 percent on a year-to-date basis as a result of expenses increasing at a lower rate than net sales. The increase in overall expense dollars was due to the selling and operating expenses associated with the ten branch locations acquired in the prior year from Automotive Refinish Technologies; higher wages and benefits associated with the Company's initiative to increase sales personnel; and increased bonus expense associated with the Company's improved performance.
-- Lower average outstanding borrowings and annualized effective interest rates resulted in the decrease in interest expense.
Based upon a periodic review of its accounting services, the Audit Committee of the Company's Board of Directors announced the selection and appointment of Ernst and Young LLP as the Company's independent accountants for the audit of its December 31, 2004 financial statements.
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 166 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 Six Months Ended
June 30, June 30,
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2004 2003 2004 2003
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Net sales $97,469 $86,922 $192,235 $170,417
Gross margin 29,791 27,424 58,881 54,131
Gross margin % 30.6% 31.6% 30.6% 31.8%
Operating and SG&A expenses 22,231 20,536 43,977 40,559
Amortization of intangible
assets 388 288 779 595
Total expenses 22,619 20,824 44,756 41,154
Income from operations 7,172 6,600 14,125 12,977
Interest expense 1,564 1,609 3,109 3,327
Income tax expense 2,445 2,020 4,571 3,906
Net income $3,163 $2,971 $6,445 $5,744
Diluted earnings per share $0.41 $0.38 $0.83 $0.73
Diluted weighted average shares
outstanding 7,753 7,866 7,756 7,885
June 30, December 31,
2004 2003
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Cash $807 $2,022
Accounts receivable, net 34,687 30,329
Inventory 57,323 69,710
Goodwill and intangible assets, net 102,909 103,698
Property, equipment & all other assets 18,302 17,257
Total assets $214,028 $223,016
Accounts payable $25,016 $44,119
Current & long-term debt 75,759 73,972
Accrued expenses & all other liabilities 18,544 17,027
Shareholders' equity 94,709 87,898
Total liabilities & shareholders' equity $214,028 $223,016