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Letter to the Editor
Thursday February 27
FinishMaster Announces Financial Results for 2002 and One Acquisition
FinishMaster, Inc. has reported that net income for the year ended December 31, 2002 was $12,897,000, or $1.64 per share, compared to net income of $6,208,000, or $0.81 per share, in the prior year period. Assuming the adoption of SFAS No. 142 on January 1, 2001, net income in the prior year period would have been $9,352,000, or $1.22 per share.Net income for the year increased by $6,689,000 compared to the prior year period as a result of higher net sales and gross margin dollars, and lower amortization and interest expense. The increase in net sales was entirely due to acquisitions.
Same store sales growth was flat for the year. However, during the last two quarters, same store sales growth was 1.4 percent per quarter. Higher gross margin dollars were driven by increased sales volume and improved margin rate. The improvement in margin rate was a result of lower shipping and handling costs as a percentage of net sales; price increases on two major product lines implemented one month earlier in the current year fourth quarter compared to the prior year; and higher volume rebates earned under normal vendor programs. Despite a growth in sales, operating, selling and G&A expenses as a percentage of net sales increased 20 basis points to 23.8 percent. Increased employee benefit costs, insurance costs, bad debt expense, and sales labor costs were the primary contributors to the 4.2 ercent increase in operating, selling and G&A expenses.
For the fourth quarter ended December 31, 2002, net income was $2,965,000, or $0.38 per share, compared to net income of $1,768,000, or $0.23 per share, in the prior year period. Assuming the adoption of SFAS No. 142 on January 1, 2001, net income in the prior year period would have been $2,621,000, or $0.34 per share.
Net income for the fourth quarter increased $1,197,000 due primarily to lower amortization expenses of $1,138,000 resulting from the adoption of SFAS No. 142 on January 1, 2002. Higher operating, selling and G&A expenses offset increased net sales, higher gross margin dollars and lower interest expense.
The change in year-end accounts payable and debt levels was due to differences in payment terms on large year-end inventory purchases. Less favorable payment terms in 2002 resulted in a lower accounts payable balance and higher debt levels at December 31, 2002.
FinishMaster also announced the acquisition of Caywood's Paint Supply, located in Anaheim, California.
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