FinishMaster Announces Second Quarter Financial Results
INDIANAPOLIS--FinishMaster, Inc. (Pink Sheets:FMST) today reported net income for the quarter ended June 30, 2009 of $3,842,000 or $0.49 per diluted share, compared with net income of $5,287,000, or $0.67 per diluted share, in the prior year period. For the six months ended June 30, 2009, net income was $6,304,000, or $0.80 per diluted share, compared to net income of $11,634,000, or $1.47 per diluted share, in the prior year period. Affecting the comparability of the Company’s year-to-date financial performance and favorably impacting 2008 results by $0.39 per diluted share was the receipt of $5,224,000 in proceeds from the settlement of a lawsuit. After considering the impact of this item, comparable year-to-date net income declined from $1.08 per diluted share in 2008 to $0.80 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 the current economic environment, the Company continues to manage expense levels and net working capital, and remains focused on longer-term growth strategies.
2009 Reported Results
Net sales decreased 15.7% to $108,620,000 for the quarter and 13.9% to $219,380,000 for the year-to-date period due entirely to same branch sales decline. The sales decline was greater in the Company’s industrial and fulfillment businesses relative to its traditional business with collision repair centers.
For the quarter and year-to-date period, gross margin dollars decreased by 19.5% to $33,242,000 and 15.7% to $66,434,000, respectively, due to lower sales volume and a decline in margin rate. The decrease in margin rate of 140 basis points for the quarter and 60 basis points for the year-to-date period resulted from the timing of vendor price increases and our ability to pass those increases through to customers, lower vendor growth incentives and increased customer investment amortization relative to sales.
Total expenses as a percentage of net sales remained stable at 24.3% for the quarter and increased 60 basis points to 25.0% for the year-to-date period. The decrease in total expense dollars of $4,968,000 for the quarter and $7,484,000 for the year-to-date period resulted from lower wages and benefits associated with reduced headcount, lower incentive plan costs related to reduced Company profitability, lower commission expense due to reduced sales, and lower intangible amortization and travel and entertainment costs. Higher bad debt expenses partially offset these lower expenses.
Reduced interest expense for the quarter and year-to-date period resulted from lower annualized effective interest rates and average outstanding borrowings.
Lower income tax expense for the quarter and year-to-date period was due primarily to lower pre-tax earnings. The Company’s effective tax rate also was lower than the prior year periods.
Inventory and accounts payable levels have decreased from the prior year end as management brings net working capital in line with historical levels.
| Selected Historical Financial Data | ||||||||||||||||
| (000’s omitted, except per share data) | ||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
|
2009 |
2008 |
2009 |
2008 |
|||||||||||||
| Net sales | $ | 108,620 | $ | 128,891 | $ | 219,380 | $ | 254,833 | ||||||||
| Gross margin | 33,242 | 41,301 | 66,434 | 78,782 | ||||||||||||
| Gross margin % | 30.6 | % | 32.0 | % | 30.3 | % | 30.9 | % | ||||||||
| Operating and SG&A expenses | 25,429 | 30,067 | 52,886 | 59,726 | ||||||||||||
| Amortization of intangible assets | 927 | 1,257 | 1,853 | 2,497 | ||||||||||||
| Total expenses | 26,356 | 31,324 | 54,739 | 62,223 | ||||||||||||
| Income from operations | 6,886 | 9,977 | 11,695 | 16,559 | ||||||||||||
| Other income | - | - | - | 5,224 | ||||||||||||
| Interest expense | 607 | 1,016 | 1,282 | 2,131 | ||||||||||||
| Income tax expense | 2,437 | 3,674 | 4,109 | 8,018 | ||||||||||||
| Net income | $ | 3,842 | $ | 5,287 | $ | 6,304 | $ | 11,634 | ||||||||
| Diluted earnings per share | $ | 0.49 | $ | 0.67 | $ | 0.80 | $ | 1.47 | ||||||||
| Diluted weighted average shares outstanding | 7,890 | 7,888 | 7,888 | 7,888 | ||||||||||||
| June 30, | December 31, | |||||
|
2009 |
2008 |
|||||
| Cash | $ | 2,456 | $ | 2,461 | ||
| Accounts receivable, net | 38,183 | 39,969 | ||||
| Inventories | 93,613 | 111,723 | ||||
| Goodwill and intangible assets, net | 115,440 | 117,304 | ||||
| Property, equipment & all other assets | 43,704 | 45,903 | ||||
| Total assets | $ | 293,396 | $ | 317,360 | ||
| Accounts payable | $ | 56,918 | $ | 67,135 | ||
| Current & long-term debt | 61,247 | 82,036 | ||||
| Accrued expenses & all other liabilities | 26,275 | 25,697 | ||||
| Shareholders’ equity | 148,956 | 142,492 | ||||
| Total liabilities & shareholders’ equity | $ | 293,396 | $ | 317,360 | ||
| Six Months Ended | ||||||||
| June 30, | ||||||||
|
2009 |
2008 |
|||||||
| Net cash provided (used) in: | ||||||||
| Operating activities | $ | 22,199 | $ | 14,571 | ||||
| Investing activities | (976 | ) | (3,718 | ) | ||||
| Financing activities | (21,228 | ) | (10,167 | ) | ||||
| Increase (decrease) in cash | $ | (5 | ) | $ | 686 | |||
| Cash at beginning of period | $ | 2,461 | $ | 4,230 | ||||
| Cash at end of period | $ | 2,456 | $ | 4,916 | ||||
FinishMaster is the largest 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/.