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Letter to the Editor
Wednesday August 6
FinishMaster Net Income Down 18.9% in Q2
FinishMaster, Inc. has reported that net income for the second quarter of 2003 decreased 18.9 percent, to $2,971,000, or $0.38 per share, compared with net income of $3,664,000, or $0.46 per share, in the prior year period. For the six months ended June 30, 2003, net income was $5,744,000, or $0.73 per share, compared to net income of $6,788,000, or $0.87 per share, in the prior year period."Industry-wide declines in demand resulting from a reduction in the number of repairable vehicles continued throughout the second quarter," stated J. A. Lacy, President and Chief Operating Officer. "Factors leading to the reduction in repairable vehicles included slow overall economic conditions, lower accident rates and a higher incident of vehicular totals."
The decrease in net income for the second quarter and year-to-date period compared to the prior year periods was a result of lower net sales and gross margin dollars and higher overall expense levels.
The decline in net sales was due to reduced demand throughout the distribution network.
Lower gross margin dollars resulted from decreased sales volume and a decline in the margin rate. The deterioration in margin rate was a result of higher shipping and handling costs as a percentage of net sales and increased customer discounts. Operating, selling and G&A expenses as a percentage of net sales increased 90 basis points to 23.6 percent for the quarter, and 70 basis points to 23.8 percent for the year-to-date period. Higher costs related to wages and benefits, bad debts and insurance, and the lack of fixed-cost overhead recovery due to lower sales were the primary contributors to the increased expense levels.
Lower effective interest rates resulted in a decrease in interest expense.
Increased cash generated from operating activities, principally from favorable net working capital changes, resulted in a $22,733,000 reduction in debt since the prior year-end.
FinishMaster is a 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 158 branches in 25 of the 35 largest metropolitan areas in the country.
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