FinishMaster Reports Improved Q3 Operating Results
28 October 1998
FinishMaster Reports Improved Third-Quarter Operating Results; Consolidation of Acquisitions Continues on Pace
INDIANAPOLIS--Oct. 28, 1998--FinishMaster, Inc. today reported record sales and strong operating income in the third quarter ended September 30, 1998.FinishMaster, a leading national distributor of automotive paints and related accessories, said sales increased 162% to $80.3 million in the 1998 third quarter, compared with net sales of $30.7 million in the same period in 1997. The increase in net sales was due to the acquisitions of Thompson PBE and LDI AutoPaints during the past 12 months.
"We are pleased with our third-quarter sales and operating performance, which reflect our expanded presence in the national marketplace as well as our efforts to assimilate the strategic acquisitions of the past year," said Thomas U. Young, President and Chief Operating Officer of FinishMaster. "Increased sales, coupled with our continuing cost management efforts and synergies related to consolidating former Thompson and LDI operations, contributed favorably to our gains in operating income and EBITDA compared with the prior-year third quarter."
Operating income increased to $3.8 million in the current quarter, versus $1.5 million in the same period last year. EBITDA (as defined later in this release) grew to $6.6 million in the third quarter of 1998, compared with EBITDA of $2.5 million in the same period in 1997. Increased amortization of intangible assets, higher interest costs, and an increase in the effective tax rate, primarily related to the Thompson acquisition, contributed to decreased net income in the quarter. The increase in the effective tax rate is attributable to the effects of non-deductible goodwill on the Company's overall tax position.
FinishMaster's net income in the 1998 third quarter was $79,000 or $0.01 per share, compared with $712,000, or $0.12 per share, in the same period last year. FinishMaster's historical 1997 results do not include the results of Thompson PBE prior to its November 1997 acquisition and do not include the results of LDI AutoPaints, which was acquired in 1998.
"Our efforts to integrate recently acquired facilities and operations are continuing on pace," Young said. "Additionally, we are continuing to look for and implement the `best practices' that exist throughout our combined organization in order to improve productivity, streamline the organization and maximize profits."
FinishMaster benefited from continued focus on cost control in the third quarter, reducing total operating expenses as a percentage of sales to 30.5%, compared with 31.5% in last year's third quarter. FinishMaster's gross margin percentage for the third quarter of 1998 was 35.2%, compared with 36.3% for the third quarter of 1997. The decrease was due primarily to lower margin sales at former Thompson operations, which FinishMaster has targeted with margin-improvement programs.
For the nine months ended September 30, 1998, FinishMaster's net sales and operating income more than doubled. The Company posted operating income of $11.7 million on net sales of $233.1 million in the 1998 period, compared with operating income of $4.6 million on net sales of $91.0 million in the 1997 nine months. EBITDA grew to $19.1 million for the first nine months of 1998, compared with EBITDA of $7.7 million for the same period in 1997.
FinishMaster's net income in the 1998 nine month period was $1.3 million, or $0.20 per share, compared with net income of $2.1 million, or $0.35 per share, in the same period last year. Costs related to the Thompson acquisition were the primary contributor to decreased net income in the quarter.
"We have made great strides in executing our business strategy over the past nine months, as our historical results are beginning to show," Young said. "However, we believe FinishMaster's progress is best illustrated by comparing our year-to-year results inclusive of acquisitions."
Assuming the acquisitions of Thompson PBE and LDI AutoPaints, Inc. occurred as of January 1, 1997, the Company would have reported pro forma net income of $79,000, or $0.01 per share, on net sales of $80.3 million in the 1998 third quarter, compared with a net loss of $1.9 million, or $0.26 per share, on net sales of $85.8 million in the third quarter of 1997.
For the nine months ended September 30, 1998, FinishMaster would have reported pro forma net income of $1.8 million, or $0.24 per share, on net sales of $244.9 million, compared with a net loss of $4.8 million, or $0.64 per share, on net sales of $261.2 million for the same period in 1997. The nine months ended September 30, 1997 include a $3.6 million charge for the closure of certain Thompson PBE sites. Pro forma EBITDA would have been $20.7 million for the nine-month period of 1998, versus pro-forma EBITDA of $14.9 million in the same period in 1997.
"FinishMaster's improved pro-forma results through the first nine months of 1998, compared with the previous year, paint a clear picture of our opportunities to increase profitability and cash flow," FinishMaster Chairman and CEO Andre Lacy said. "I am particularly pleased with our progress in the face of continuing soft market conditions. This is a reflection of the management team's ability to integrate acquisitions and manage our growth to ensure we are continually building shareholder value."
FinishMaster is the leading national distributor of automotive paints, coatings, and related accessories to the automotive collision repair industry. The Company and its wholly owned subsidiaries, Thompson PBE and LDI AutoPaints, have a combined 153 sales outlets and three distribution centers in 22 states, including stores in 25 of the 35 largest metropolitan areas in the country.
EBITDA represents income (loss) before interest, income taxes, charges in connection with the sale, consolidation or closure of certain sites, depreciation and amortization. EBITDA is included because management understands that such information is considered to be an additional basis on which to evaluate the Company's ability to pay interest, repay debt and provide funds for acquisitions and growth. EBITDA is not intended to represent and should not be considered more meaningful than, or an alternative to, measures of operating performance as determined in accordance with generally accepted accounting principles.
This press release contains forward-looking statements pertaining to, among other things, the Company's future results of operations, cash flows and liquidity, operating efficiencies and acquisitions. Those statements are based largely on the Company's current expectations and are subject to a number of risks and uncertainties, including, among other things, the Company's ability to rapidly and successfully integrate its acquired operations. Actual results may differ. Additional information concerning factors that could cause results to differ is contained in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1998.
For more information on FinishMaster via the Internet visit our Corporate News on the Net page at http://www.businesswire.com/cnn/fmst.htm or via fax through our NewsOnDemand service call 800/411-3989.
HISTORICAL
FINISHMASTER, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
Three Months Ended Nine Months Ended
__________________ ___________________
9/30/98 9/30/97 9/30/98 9/30/97
__________________ ___________________
(in thousands, except (in thousands, except
per share data) per share data)
NET SALES $ 80,338 $ 30,696 $233,120 $ 90,968
COST OF SALES 52,032 19,539 150,842 57,610
________ ________ ________ ________
GROSS MARGIN 28,306 11,157 82,278 33,358
EXPENSES
Operating 11,899 4,739 35,142 13,998
Selling, general and
administrative 9,815 3,903 27,993 11,647
Depreciation 1,054 311 2,554 873
Amortization 1,734 746 4,910 2,227
________ ________ ________ ________
TOTAL EXPENSES 24,502 9,699 70,599 28,745
________ ________ ________ ________
INCOME FROM OPERATIONS 3,804 1,458 11,679 4,613
Interest Expense, net 2,853 310 8,392 1,209
INCOME BEFORE INCOME TAXES 951 1,148 3,287 3,404
Income tax expense 872 436 1,981 1,281
________ ________ ________ ________
NET INCOME $ 79 $ 712 $ 1,306 $ 2,123
________ ________ ________ ________
________ ________ ________ ________
NET INCOME PER SHARE $ 0.01 $ 0.12 $ 0.20 $ 0.35
________ ________ ________ ________
________ ________ ________ ________
WEIGHTED AVERAGE NUMBER
OF SHARES OF COMMON
STOCK OUTSTANDING 7,535 5,993 6,518 5,993
________ ________ ________ ________
________ ________ ________ ________
EBITDA 6,592 2,515 19,143 7,713
PRO FORMA
FINISHMASTER, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
Three Months Ended Nine Months Ended
__________________ ___________________
9/30/98 9/30/97 9/30/98 9/30/97
__________________ ___________________
(in thousands, except (in thousands, except
per share data) per share data)
NET SALES $ 80,338 $ 85,793 $244,884 $261,156
COST OF SALES 52,032 57,136 158,085 169,700
________ ________ ________ ________
GROSS MARGIN 28,306 28,657 86,799 91,456
EXPENSES
Operating 11,899 13,938 36,495 41,472
Selling, general and
administrative 9,815 13,071 29,608 35,084
Depreciation 1,054 960 2,786 2,705
Amortization 1,734 1,782 5,430 5,442
Charge in connection with
the sale, consolidation
or closure of certain sites 3,616
________ ________ ________ ________
TOTAL EXPENSES 24,502 29,751 74,319 88,319
________ ________ ________ ________
INCOME FROM OPERATIONS 3,804 (1,094) 12,480 3,137
Interest Expense, net 2,853 3,196 8,427 9,993
________ ________ ________ ________
2,853 3,196 8,427 9,993
INCOME (LOSS) BEFORE INCOME
TAXES 951 (4,290) 4,054 (6,856)
Income tax expense 872 (2,368) 2,276 (2,002)
________ ________ ________ ________
NET INCOME (LOSS) $ 79 $ (1,922) $ 1,778 $ (4,854)
________ ________ ________ ________
________ ________ ________ ________
NET INCOME (LOSS) PER
SHARE $ 0.01 $ (0.26) $ 0.24 $ (0.64)
________ ________ ________ ________
________ ________ ________ ________
WEIGHTED AVERAGE NUMBER
OF SHARES OF COMMON
STOCK OUTSTANDING 7,535 7,535 7,535 7,535
________ ________ ________ ________
________ ________ ________ ________
EBITDA 6,592 1,648 20,696 11,284
FINISHMASTER, INC.
SELECTED BALANCE SHEET HIGHLIGHTS
September
30, 1998 December 31,
(unaudited) 1997
___________________________
(in thousands)
CURRENT ASSETS $ 89,361 $ 90,444
PROPERTY AND EQUIPMENT 10,092 10,296
INTANGIBLE AND OTHER ASSETS 118,595 114,678
________ ________
TOTAL ASSETS $218,048 $215,418
________ ________
________ ________
CURRENT LIABILITIES $ 47,179 $ 48,351
LONG-TERM OBLIGATIONS, NET 122,203 134,135
STOCKHOLDERS' EQUITY 48,666 32,932
________ ________
LIABILITIES AND STOCKHOLDERS
EQUITY $218,048 $215,418
________ ________
________ ________