INDIANAPOLIS - (Business Wire) FinishMaster, Inc. (Pink Sheets: FMST) today reported net income for the quarter ended September 30, 2008 of $4,754,000, or $0.60 per diluted share, compared with net income of $4,785,000, or $0.61 per diluted share, in the prior year period. For the nine months ended September 30, 2008, net income was $16,388,000, or $2.08 per diluted share, compared to net income of $12,581,000, or $1.61 per diluted share, in the prior year period. Affecting the comparability between years of the Company ’s year-to-date financial performance was the receipt from settlement of a lawsuit favorably impacting 2008 year-to-date results by $0.40 per diluted share and a non-recurring prior year charge unfavorably impacting 2007 results by $0.12 per diluted share. After considering the impact of these two items, comparable net income for the year-to-date periods declined from $1.73 per diluted share in 2007 to $1.68 per diluted share in 2008. 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. 2008 Reported Results For the third quarter of 2008, net sales increased 4.1% to $122,997,000 compared with $118,199,000 in the prior year period. Net sales related to acquisitions completed since October 2007 accounted entirely for the increase in revenues. In 2008, the Company has completed three acquisitions with annualized net sales of approximately $5,500,000. Same branch sales growth for the quarter was negative. Year-to-date net sales increased 8.1% to $377,830,000 compared with $349,557,000 in the prior year period. Net sales from acquisitions and the non-recurrence of a charge in the prior year first quarter related to a change in the estimated residual value of product consigned with customers accounted for the increase in revenues. Same branch sales growth year-to-date was flat. Gross margin dollars increased 1.9% for the quarter due to higher sales volume. Margin rate decreased 60 basis points to 29.8% for the quarter as a result of the timing of vendor price increases passed through to customers and higher discounts to attract and retain customers. Gross margin dollars increased 11.1% for the year-to-date period due to higher sales volume and margin rate. Margin rate increased 80 basis points to 30.5% for the year-to-date period due primarily to vendor price increases passed through to customers and the attainment of vendor growth incentives. The non-recurrence of a charge in the prior year first quarter related to a change in the estimated residual value of product consigned with customers also favorably impacted the year-to-date margin rate. Total expenses as a percentage of net sales increased 10 basis points to 22.9% for the quarter and 100 basis points to 23.9% for the year-to-date period as a result of expenses increasing at a faster rate than net sales. The finalization of the purchase price accounting for the Auto Color Co., Inc. acquisition completed in October 2007 favorably impacted intangible amortization for the quarter and year-to-date period by $868,000. Non-amortizable goodwill of $4,740,000 was recorded related to this acquisition. Higher average outstanding borrowings, partially offset by lower annualized effective interest rates, contributed to increased interest expense for the quarter and year-to-date period. Higher other income on a year-to-date basis resulted from a lawsuit settlement that was received and recorded in the current year first quarter. Lower income tax expense for the quarter was due primarily to lower pre-tax earnings and effective tax rates. For the year-to-date period, higher pre-tax earnings resulted in higher income tax expense. The Company’s effective tax rate decreased for the quarter and year-to-date period as a result of a reduction in the Company’s FIN 48 liability. | Selected Historical Financial Data (000’s omitted, except per share data) | | | | | | | | Three Months Ended | | Nine Months Ended | | | September 30, | | September 30, | | | 2008 | | 2007 | | 2008 | | 2007 | | Net sales | | $ | 122,997 | | | $ | 118,199 | | | $ | 377,830 | | | $ | 349,557 | | | Gross margin | | | 36,644 | | | | 35,947 | | | | 115,426 | | | | 103,874 | | | Gross margin % | | | 29.8 | % | | | 30.4 | % | | | 30.5 | % | | | 29.7 | % | | Operating and SG&A expenses | | | 27,783 | | | | 26,390 | | | | 87,509 | | | | 78,613 | | | Amortization of intangible assets | | | 407 | | | | 601 | | | | 2,904 | | | | 1,610 | | | Total expenses | | | 28,190 | | | | 26,991 | | | | 90,413 | | | | 80,223 | | | Income from operations | | | 8,454 | | | | 8,956 | | | | 25,013 | | | | 23,651 | | | Other income | | | - | | | | - | | | | 5,224 | | | | - | | | Interest expense | | | 926 | | | | 689 | | | | 3,057 | | | | 2,308 | | | Income tax expense | | | 2,774 | | | | 3,482 | | | | 10,792 | | | | 8,762 | | | Net income | | $ | 4,754 | | | $ | 4,785 | | | $ | 16,388 | | | $ | 12,581 | | | Diluted earnings per share | | $ | 0.60 | | | $ | 0.61 | | | $ | 2.08 | | | $ | 1.61 | | | Diluted weighted average shares outstanding | | | 7,888 | | | | 7,834 | | | | 7,888 | | | | 7,832 | | | | | | | | | | | | | | | | | | | | | September 30, | | December 31, | | | 2008 | | 2007 | | Cash | | $ | 2,096 | | $ | 4,230 | | Accounts receivable, net | | | 45,517 | | | 40,103 | | Inventories | | | 94,976 | | | 86,665 | | Goodwill and intangible assets, net | | | 118,306 | | | 119,805 | | Property, equipment & all other assets | | | 46,369 | | | 44,610 | | Total assets | | $ | 307,264 | | $ | 295,413 | | | | | | | Accounts payable | | $ | 59,755 | | $ | 51,186 | | Current & long-term debt | | | 78,397 | | | 94,661 | | Accrued expenses & all other liabilities | | | 27,504 | | | 24,278 | | Shareholders’ equity | | | 141,608 | | | 125,288 | | Total liabilities & shareholders’ equity | | $ | 307,264 | | $ | 295,413 | | | | | | | | | Three Months Ended | | Nine Months Ended | | September 30, | | September 30, | | 2008 | | 2007 | | 2008 | | 2007 | | Net cash provided (used) in: | | | | | | | | | Operating activities | $ 3,376 | | | ($ 1,366 | ) | | $ 17,947 | | | $ 14,941 | | | Investing activities | (1,063 | ) | | (470 | ) | | (4,232 | ) | | (5,200 | ) | | Financing activities | (5,133 | ) | | 1,705 | | | (15,849 | ) | | (9,034 | ) | | Increase (decrease) in cash | ($ 2,820 | ) | | ($ 131 | ) | | ($ 2,134 | ) | | $ 707 | | | | | | | | | | | Cash at beginning of period | $ 4,916 | | | $ 4,623 | | | $ 4,230 | | | $ 3,785 | | | Cash at end of period | $ 2,096 | | | $ 4,492 | | | $ 2,096 | | | $ 4,492 | | 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 177 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/. FinishMaster, Inc.
Robert R. Millard, 317-263-5200
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