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Letter to the Editor

FinishMaster Announces Improved Third Quarter Financial Results

INDIANAPOLIS -- FinishMaster, Inc., a leading national independent distributor of automotive paints and related accessories, reported that net income for the quarter ended September 30, 2001 increased 69 percent to $1,619,000 on net sales of $83,706,000, compared to net income of $957,000 on net sales of $85,600,000 in the prior year. Earnings per share increased 62% to $0.21 from $0.13 in the prior year.

For the nine months ended September 30, 2001, net income increased 52 percent to $4,440,000 on net sales of $253,182,000, compared to net income of $2,922,000 on net sales of $257,613,000 in the prior year. Earnings per share increased 49 percent to $0.58 from $0.39 in the prior year. Net income before extraordinary loss on early extinguishment of debt for the current year was $4,935,000 or $0.65 per share.

Increased operating income resulting from higher gross margins and lower overall expense levels, and reduced interest expense were the primary contributors to the improved financial performance for both the third quarter and year-to-date. Gross margins benefited from large inventory purchases in late 2000 made prior to manufacturers' price increases, supplier purchasing incentive programs, and improved inventory management procedures. Lower overall debt levels were the major contributor to the decrease in interest expense.

Continued weakness in demand for automotive paints and related accessories had an impact on the Company's quarterly net sales, which declined 2.2 percent compared to the prior year. Several factors contributed to this softness in demand. They include continued productivity improvements in the use of automotive paint, flat to declining number of automobiles being repaired, and slower overall economic conditions. These industry dynamics are not expected to reverse in the next several quarters.

"While our operating performance reflects solid improvement, we are concerned with our declining sales," said Wes Dearbaugh, President and Chief Operating Officer. "We have already initiated actions designed to improve customer service levels and to grow sales."

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