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Letter to the Editor
Monday November 10
FinishMaster Q3 Earnings up 15%
FinishMaster, Inc. has reported that net income for the third quarter of 2003 increased 15 percent, to $3,615,000, or $0.47 per share, compared with net income of $3,144,000, or $0.40 per share, in the prior year period. The improvement in net income for the quarter compared to the prior year period was a result of higher net sales, lower operating and selling, general and administrative expenses, and decreased interest expense.The increase in net sales was due to acquisitions. During the quarter, the company announced two acquisitions: Advance Paint in Denver, Colorado on July 3, 2003; and Automotive Refinish Technologies branch locations in ten new markets on September 18, 2003. Same stores sales were negative for the quarter as a result of continued weakness in demand for automotive paint and accessories throughout our distribution network.
Lower gross margin dollars resulted from a decline in the margin rate. The deterioration in margin rate was a result of an inventory reserve adjustment for excess and obsolete inventory and higher shipping and handling costs as a percentage of net sales. Excluding the negative impact of the excess and obsolete reserve adjustment, margin rate was comparable to the prior year period.
Operating and selling, general and administrative expenses as a percentage of net sales decreased 160 basis points to 21.8 percent due primarily to reduced wage expense and lower insurance costs.
Lower effective interest rates resulted in a decrease in interest expense.
For the nine months ended September 30, 2003, net income was $9,359,000, or $1.19 per share, compared to net income of $9,932,000, or $1.27 per share, in the prior year period. The decrease in net income for the year-to-date period compared to the prior year period was due primarily to lower net sales and gross margin dollars.
FinishMaster attributed the decline in net sales to reduced demand throughout its 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 an inventory reserve adjustment for excess and obsolete inventory, higher shipping and handling costs as a percentage of net sales, and increased customer discounts.
Operating and selling, general and administrative expenses as a percentage of net sales decreased 10 basis points to 23.1 percent.
Lower effective interest rates resulted in a decrease in interest expense. FinishMaster is a leading 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 167 branches in 27 of the 35 largest metropolitan areas in the country.
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