FinishMaster Announces Third Quarter Financial Results
INDIANAPOLIS--FinishMaster, Inc. (Pink Sheets:FMST) today reported net income for the quarter ended September 30, 2006 of $5,192,000, or $0.66 per diluted share, compared with net income of $4,303,000, or $0.55 per diluted 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 and margin rate partially offset by higher overall expense levels.
- The increase in net sales for the quarter was due to positive same branch sales growth and acquisitions. This was the eleventh consecutive quarter the Company has experienced same branch sales growth. The primary factor contributing to this growth was supplier price increases passed through to customers. The Company experienced during the current quarter a weakening in demand for automotive paint and accessories in certain geographic regions compared to previous quarters. Regional factors such as weather and economic conditions were the main factors contributing to this weakening demand.
- Higher gross margin dollars resulted from increased sales volume and improved margin rate. A 60 basis point improvement in the margin rate was the result of price increases and lower inventory reserve requirements. Partially offsetting these items were increased customer discounts to meet competitive market conditions.
- Total expenses as a percentage of net sales decreased 10 basis points to 22.1 percent for the quarter as a result of expenses increasing at a lower rate than net sales. The increase in expense dollars was due primarily to higher health insurance and incentive compensation plan expenses.
- Lower average outstanding borrowings and a lower annualized effective interest rate resulted in reduced interest expense for the quarter.
For the nine months ended September 30, 2006, net income was $14,894,000, or $1.90 per diluted share, compared to net income of $11,803,000, or $1.52 per diluted share, in the prior year period. The improvement in net income for the year-to-date period compared to the prior year period was a result of higher net sales and margin rate partially offset by higher operating and selling, general & administrative expenses and income tax expense.
- The increase in net sales for the year-to-date period was due to positive same branch sales growth and acquisitions. Factors contributing to this growth in same branch sales included net customer additions and supplier price increases passed through to customers.
- Higher gross margin dollars resulted from increased sales volume and improved margin rate. A 30 basis point improvement in the margin rate was the result of price increases, the non-recurrence of a charge in the prior year period related to a customer investment write-off, lower inventory reserve requirements and higher amounts earned under vendor incentive programs. Partially offsetting these items were increased customer discounts to meet competitive market conditions.
- Total expenses as a percentage of net sales decreased 30 basis points to 22.0 percent for the year-to-date period as a result of expenses increasing at a lower rate than net sales. The increase in expense dollars was due primarily to higher salary expense associated with wage increases, headcount additions, and incentive plan costs; higher health insurance costs; and increased commission expense associated with higher sales.
- Lower interest expense resulted from lower average outstanding borrowings. Average outstanding borrowings for the year-to-date period were approximately $10,400,000 lower than the prior year period.
- The Company’s effective tax rate fell 2.5 percent to 38.3 percent for the year-to-date period.
|
Selected Historical Financial Data (000’s omitted, except per share data) |
||||||||
| Three Months Ended | Nine Months Ended | |||||||
| September 30, | September 30, | |||||||
| 2006 | 2005 | 2006 | 2005 | |||||
| Net sales | $ | 114,309 | $ | 109,345 | $ | 343,111 | $ | 319,094 |
| Gross margin | 34,841 | 32,647 | 103,239 | 95,015 | ||||
| Gross margin % | 30.5% | 29.9% | 30.1% | 29.8% | ||||
| Operating and SG&A expenses | 24,845 | 23,870 | 74,337 | 69,845 | ||||
| Amortization of intangible assets | 418 | 404 | 1,253 | 1,171 | ||||
| Total expenses | 25,263 | 24,274 | 75,590 | 71,016 | ||||
| Income from operations | 9,578 | 8,373 | 27,649 | 23,999 | ||||
| Interest expense | 1,134 | 1,306 | 3,514 | 4,065 | ||||
| Income tax expense | 3,252 | 2,764 | 9,241 | 8,131 | ||||
| Net income | $ | 5,192 | $ | 4,303 | $ | 14,894 | $ | 11,803 |
| Diluted earnings per share | $ | 0.66 | $ | 0.55 | $ | 1.90 | $ | 1.52 |
| Diluted weighted average shares outstanding | 7,829 | 7,809 | 7,822 | 7,790 | ||||
| September 30, | December 31, | |||
| 2006 | 2005 | |||
| Cash | $ | 2,394 | $ | 3,821 |
| Accounts receivable, net | 39,254 | 38,353 | ||
| Inventories | 61,069 | 52,045 | ||
| Goodwill and intangible assets, net | 101,084 | 101,978 | ||
| Property, equipment & all other assets | 38,805 | 35,575 | ||
| Total assets | $ | 242,606 | $ | 231,772 |
| Accounts payable | $ | 33,720 | $ | 37,204 |
| Current & long-term debt | 52,596 | 54,575 | ||
| Accrued expenses & all other liabilities | 23,429 | 22,055 | ||
| Shareholders’ equity | 132,861 | 117,938 | ||
| Total liabilities & shareholders’ equity | $ | 242,606 | $ | 231,772 |
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 39 of the 50 largest metropolitan areas in the country. For more information on FinishMaster via the Internet, visit FinishMaster’s website at http://www.finishmaster.com/.