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Letter to the Editor

Keystone Automotive Industries, Inc. Reports Fiscal Third Quarter and Nine Months Sales and Earnings

POMONA, Cailf. -- Keystone Automotive Industries, Inc. has reported net income for fiscal third quarter ended December 29, 2000 of $716,000, or $0.05 per diluted share, on net sales of $85.5 million, compared with net income of $1.3 million, or $0.09 per diluted share, on net sales of $86.2 million for the same period last year.

Net income for the 39-week period year to date was $2.5 million, or $0.18 per diluted share, on net sales of $254.9 million, compared with net income of $10 million, or $0.62 per diluted share, on net sales of $280 million for the 40-week period of the previous year.

Charles J. Hogarty, president and chief executive officer, said: "We are encouraged by the results of the third quarter. In particular, the month of December was very strong in most markets and that strength has carried over through January."

Hogarty attributed the improved business climate to two factors:

• "Most importantly, we have begun to feel the impact of certain auto insurers once again beginning to write aftermarket parts on collision repair estimates. This confirms our belief in the economic value provided by high quality aftermarket collision replacement parts."
• Much of the country has experienced severe winter weather conditions for the first time in three years.

Gross margins were negatively impacted primarily as a result of two factors: In response to the fact that insurers were writing less aftermarket parts on estimates, Keystone emphasized the sale of non-affected product lines including paint, paint supplies, radiators, condensers, wheels and recycled bumpers. Certain products, primarily paint and related supplies have lower gross margins. In addition, margins were pressured by price competition, which is directly related to lower volumes industry-wide. Hogarty said, "We are continuing to adjust our pricing and manage our costs in an effort to regain historical gross margins."

According to Keystone, while expenses were generally in line with expectations, the company did incur higher costs related to increased fuel costs of $189,000 for the quarter and $862,000 year to date and advertising costs of approximately $349,000 related to the Platinum Plus rollout.

Hogarty concluded, "We expect the last quarter of the year and next year to build on the momentum established at the end of the third quarter."

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