FinishMaster Announces Third Quarter Financial Results

INDIANAPOLIS--FinishMaster, Inc. (Pink Sheets: FMST) today reported net income for the quarter ended September 30, 2009 of $2,996,000, or $0.38 per diluted share, compared with net income of $4,754,000, or $0.60 per diluted share, in the prior year period. For the nine months ended September 30, 2009, net income was $9,300,000, or $1.18 per diluted share, compared to net income of $16,388,000, or $2.08 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 $0.40 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 $1.68 per diluted share in 2008 to $1.18 per diluted share in 2009.

Net sales decreased 14.6% to $105,004,000 for the quarter and 14.1% to $324,384,000 for the year-to-date period due to a decline in same branch sales. Lower repairable automobile claim activity throughout the United States impacted the Company’s overall market opportunity for the sale of its products and services. 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 14.0% to $31,515,000 and 15.1% to $97,949,000, respectively, due primarily to lower sales volume.

Total expenses as a percentage of net sales increased 170 basis points to 24.6% for the quarter and 90 basis points to 24.8% for the year-to-date period as a result of expenses decreasing at a slower rate than net sales. Despite the challenging operating environment, the Company was able to effectively reduce expenses by $2,366,000 for the quarter and $9,850,000 for the year-to-date period through an expense reduction plan. Higher bad debt expenses for the year-to-date period and increased intangible amortization for the quarter partially offset these lower expenses. Intangible amortization was lower than normal in the prior year quarter due to a favorable purchase accounting adjustment.

Reduced interest expense for the quarter and year-to-date period resulted from lower annualized effective interest rates and average outstanding borrowings.

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 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/.

Selected Historical Financial Data (000’s omitted, except per share data)
				Three Months Ended									Nine Months Ended
				September 30,									September 30,
				2009				2008					2009				2008
Net sales				$	105,004			$	122,997				$	324,384			$	377,830
Gross margin					31,515				36,644					97,949				115,426
Gross margin %					30.0%				29.8%					30.2%				30.5%
Operating and SG&A expenses					24,845				27,783					77,731				87,509
Amortization of intangible assets					979				407					2,832				2,904
Total expenses					25,824				28,190					80,563				90,413
Income from operations					5,691				8,454					17,386				25,013
Other income					-				-					-				5,224
Interest expense					584				926					1,866				3,057
Income tax expense					2,111				2,774					6,220				10,792
Net income				$	2,996			$	4,754				$	9,300			$	16,388
Diluted earnings per share				$	0.38			$	0.60				$	1.18			$	2.08
Diluted weighted average shares outstanding					7,892				7,888					7,890				7,888

				September 30,				December 31,
				2009				2008
Cash				$	4,096			$	2,461
Accounts receivable, net					36,911				39,969
Inventories					91,122				111,723
Goodwill and intangible assets, net					114,467				117,304
Property, equipment & all other assets					42,951				45,903
Total assets				$	289,547			$	317,360
Accounts payable				$	56,905			$	67,135
Current & long-term debt					53,160				82,036
Accrued expenses & all other liabilities					27,476				25,697
Shareholders’ equity					152,006				142,492
Total liabilities & shareholders’ equity				$	289,547			$	317,360

				Nine Months Ended
				September 30,
				2009				2008
Net cash provided (used) in:
Operating activities				$	33,243			$	17,947
Investing activities					(2,257)				(4,232)
Financing activities					(29,351)				(15,849)
Increase (decrease) in cash				$	1,635			$	(2,134)
Cash at beginning of period				$	2,461			$	4,230
Cash at end of period				$	4,096			$	2,096