FinishMaster Announces First Quarter Financial Results
INDIANAPOLIS--FinishMaster, Inc. (Pink Sheets: FMST) today reported net income for the quarter ended March 31, 2009 of $2,462,000, or $0.31 per diluted share, compared with net income of $6,347,000, or $0.80 per diluted share, in the prior year period. The receipt of $5,224,000 in proceeds from settlement of a lawsuit favorably impacted 2008 results by $0.39 per diluted share and affects the year over year comparison of these quarterly results. After considering the impact of this item, comparable net income declined from $0.41 per diluted share in 2008 to $0.31 per diluted share in 2009.
Economic conditions throughout the United States continued to result in lower repairable automobile claim activity, impacting the Company’s overall market opportunity for the sale of its products and services. In response to the current market conditions, the Company continues to reduce expense levels and net working capital, and remain focused on longer-term growth strategies. Cost reductions have been achieved through various initiatives including headcount reductions, reduced work hours, company-wide wage freeze, branch consolidations and heightened control over all discretionary spending.
2009 Reported Quarterly Results
For the first quarter of 2009, net sales decreased 12.1% to $110,760,000 due entirely to a same branch sales decline. All geographic sales regions of the Company experienced a decline in same branch sales.
Gross margin dollars decreased 11.4% for the quarter due to lower sales volume, partially offset by higher margin rate. The margin rate increased 20 basis points to 30.0% as a result of the timing of vendor price increases passed through to customers.
Total expenses as a percentage of net sales increased 110 basis points to 25.6% for the quarter as a result of expenses decreasing at a slower rate than net sales. Total expenses decreased $2,516,000 or 8.1% as a result of lower wages associated with reduced headcount, lower incentive plan costs related to reduced Company profitability, lower commission expense due to reduced sales, and lower intangible amortization. Higher bad debt expenses partially offset these lower expenses.
Reduced interest expense for the quarter resulted from lower annualized effective interest rates and average outstanding borrowings.
Lower income tax expense for the quarter was due primarily to lower pre-tax earnings. The Company’s effective tax rate for the quarter was 40.4% compared to 40.6% in the prior year period.
Inventory and accounts payable levels have decreased from the prior year-end as management brings net working capital in line with historical levels.