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Letter to the Editor
Friday November 5
FinishMaster Announces Q3 Financial Results
FinishMaster, Inc. has reported that net income for the third quarter of 2004 was $3,495,000, or $0.45 per share, compared with net income of $3,615,000, or $0.47 per share, in the prior year period. The decrease in net income for the quarter compared to the prior year period resulted primarily from total expenses increasing at 13.2 percent while gross margin dollars increased at 8.6 percent.The increase in net sales for the quarter was due to positive same branch sales growth and acquisitions. The increase in same branch sales was attributable to the implementation of various sales and marketing initiatives designed to increase the company's competitiveness and market presence. This same branch sales growth was accomplished despite a weakness in sales in our Florida region during the several weeks following severe weather in this area. Three acquisitions over the last year also had a significant impact on the Company's current quarter increase in sales.
Higher gross margin dollars resulted from increased sales volume, partially offset by a decline in the margin rate. The deterioration in margin rate was a result of increased discounts to attract and retain customers and the lower margin-rate fulfillment business representing a greater share of overall sales in the current versus the prior year quarter.
Total expenses as a percentage of net sales increased 60 basis points to 22.8 percent in the third quarter as a result of expenses increasing at a higher rate than net sales. The increase in overall expense dollars was due to the selling and operating expenses associated with the ten branch locations acquired in the prior year from Automotive Refinish Technologies; higher wages and benefits associated with the Company's initiative to increase sales by expanding its sales force; higher health insurance costs; and increased selling related expenses associated with attracting and retaining customers.
Lower average outstanding borrowings and annualized effective interest rates resulted in the decrease in interest expense.
For the nine months ended September 30, 2004, net income was $9,940,000, or $1.28 per share, compared to net income of $9,359,000, or $1.19 per share, in the prior year period. The increase in net income for the year-to-date period compared to the prior year resulted from higher net sales and corresponding gross margin dollars, lower total expenses as a percentage of net sales, and lower interest expense.
FinishMaster, a leading national independent distributor of automotive paints, coatings, and related accessories to the automotive collision repair industry, headquartered in Indianapolis, Indiana, operates four major distribution centers and 168 branches in 28 of the 35 largest metropolitan areas in the country.
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