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Letter to the Editor

FinishMaster Announces First Quarter Financial Results and New Credit Facility

INDIANAPOLIS -- FinishMaster, Inc., a national independent distributor of automotive paints and related accessories, has reported that net income for the quarter ended March 31, 2001 was $839,000 on net sales of $83,235,000, compared to net income of $904,000 on net sales of $84,670,000 in the prior year. Earnings per share were $0.11 compared to $0.12 in the prior year.

The company also announced that on March 29, 2001 it had entered into a new five year $100 million senior secured credit facility with a syndicate of banks and a new six year $20 million senior subordinated term credit facility with LDI, Ltd. The new credit facilities provide sufficient capital to allow FinishMaster to execute its long-term business strategy. The proceeds from the new credit facilities were used to repay the company's existing senior secured and senior subordinated credit facilities. An extraordinary loss on the early extinguishment of debt of $495,000, net of $324,000 in income tax benefit, resulted from the write-off of the unamortized debt issuance costs related to these expired facilities. Net income before extraordinary loss on early extinguishment of debt for the current year quarter was $1,334,000 or $0.18 per share.

The soft automotive paint aftermarket in the United States had an impact on the Company's net sales which declined 1.7 percent compared to the first quarter of 2000. Several factors contributing to this softening in demand included slower overall economic conditions; weather conditions in the Northeastern United States; ongoing drought conditions in Florida; and continued productivity improvements in the use of automotive paint by our customers. A reduction in vendor supported marketing programs used to attract and retain customers also impacted sales. "Based upon discussions with vendors and other distributors, the Company believes the weak market for automotive paint has affected the entire industry," said Wes Dearbaugh, President and Chief Operating Officer. "Sales growth is a key area of focus for the Company in 2001."

Despite the weakness in sales, net income before extraordinary loss improved 47.6 percent as a result of strong gross margins and lower interest expense. Gross margins as a percentage of net sales were 36.5 percent versus 35.4 percent in the prior year period. This improvement was primarily the result of large inventory purchases made prior to manufacturers' price increases. Lower overall debt levels were the major contributor to the decrease in interest expense.

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