FinishMaster Announces First Quarter Financial Results
INDIANAPOLIS--FinishMaster, Inc. (Pink Sheets:FMST) today reported net income for the quarter ended March 31, 2007 of $3,203,000, or $0.41 per diluted share, compared with net income of $4,331,000, or $0.55 per diluted share, in the prior year period. The decline in net income resulted primarily from a change in an accounting estimate and higher total operating expenses.
- A change in the estimated residual value of product consigned with customers negatively impacted net sales, gross margins and income from operations by $1,600,000, net income by $955,000 and diluted earning per share by $0.12.
- Excluding the impact of the accounting estimate change, net sales increased 0.7 percent. Same branch sales growth in the Company’s traditional business customer segment was partially offset by a decline in sales in the Company’s fulfillment business customer segment. The Company has experienced over the last three quarters a weakening in demand for automotive paint and accessories in certain geographic regions. Regional factors such as weather and economic conditions were the main factors contributing to this weakness in demand. The Company also completed four acquisitions during the first quarter.
- Excluding the impact of the accounting estimate change, gross margin dollars increased $1,070,000 to $34,549,000 and as a percentage of net sales, 0.7 percent to 30.2 percent.
- Excluding the impact of the accounting estimate change, total expenses as a percentage of net sales increased 120 basis points to 23.3 percent for the quarter. The increase in expense dollars was due primarily to higher salary expense associated with wage increases, headcount additions, and incentive plan costs; increased commission expense associated with higher sales in the Company’s traditional business customer segment; higher bad debt expense; and increased travel expenses primarily associated with the implementation of the new enterprise resource planning system at the Company’s branch locations.
- Lower interest expense resulted from lower average outstanding borrowings. Average outstanding borrowings for the quarter were approximately $11,600,000 lower than the prior year period. The $19,850,000 subordinated note payable to LDI Ltd., LLC was repaid at its maturity on March 29, 2007. The repayment was funded with cash and borrowings from the Company’s senior credit facility.
- Lower income tax expense was due to lower income before income taxes. The Company’s effective tax rate remained stable at 40.1 percent.
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 168 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/.
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Selected Historical Financial Data (000’s omitted, except per share data) |
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| Three Months Ended | |||
| March 31, | |||
| 2007 | 2006 | ||
| Net sales | $ 112,650 | $ 113,457 | |
| Gross margin | 32,949 | 33,479 | |
| Gross margin % | 29.2% | 29.5% | |
| Operating and SG&A expenses | 26,198 | 24,695 | |
| Amortization of intangible assets | 408 | 412 | |
| Total expenses | 26,606 | 25,107 | |
| Income from operations | 6,343 | 8,372 | |
| Interest expense | 997 | 1,143 | |
| Income tax expense | 2,143 | 2,898 | |
| Net income | $ 3,203 | $ 4,331 | |
| Diluted earnings per share | $ 0.41 | $ 0.55 | |
| Diluted weighted average shares outstanding | 7,832 | 7,816 | |
| March 31, | December 31, | ||
| 2007 | 2006 | ||
| Cash | $ 4,547 | $ 3,785 | |
| Accounts receivable, net | 41,194 | 36,727 | |
| Inventories | 59,288 | 66,760 | |
| Goodwill and intangible assets, net | 105,728 | 100,689 | |
| Property, equipment & all other assets | 37,575 | 44,464 | |
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Total assets |
$ 248,332 | $ 252,425 | |
| Accounts payable | $ 39,394 | $ 37,862 | |
| Current & long-term debt | 39,549 | 51,073 | |
| Accrued expenses & all other liabilities | 25,757 | 23,061 | |
| Shareholders’ equity | 143,632 | 140,429 | |
| Total liabilities & shareholders’ equity | $ 248,332 | $ 252,425 | |