Friday June 3
Keystone Automotive Industries Q4 Net Sales Up But Net Income DownKeystone Automotive Industries, Inc. has reported results for its fourth quarter and fiscal year ended April 1, 2005.
Net income for the fiscal fourth quarter was $3.8 million, or $0.24 per diluted share, compared with $6.3 million, or $0.41 per diluted share, a year ago. Net sales for the fiscal fourth quarter increased 8.9 percent to a record $152.5 million compared with $140.0 million last year. For the full fiscal year, net income was $14.3 million, or $0.90 per diluted share, compared with $17.7 million, or $1.16 per diluted share, a year earlier. Net sales for the fiscal year climbed 11.3 percent to $557.7 million from $501.1 million in fiscal 2004. Same store sales growth for the fourth quarter and fiscal year were 7.6 percent and 6.4 percent, respectively.
Results for the fourth quarter and the fiscal year were negatively impacted by a number of factors. Lease expense of approximately $1.2 million was booked as a result of a SFAS No. 13 adjustment which requires straight-line lease expense over the term of a lease when a lease contains fixed escalation clauses. Of this amount, $900,000 is related to prior fiscal years. As previously announced, the company wrote off $700,000 of wheel inventory in the quarter in addition to the $600,000 write-off during the third fiscal quarter. Additional expenses included Sarbanes-Oxley compliance costs of $350,000 for the quarter and $565,000 for the year. As a result of the company's Sarbanes-Oxley compliance efforts, the company wrote-off fixed assets in the amount of $324,000 in the quarter and $439,000 for the year that were no longer in service and increased its new computer system depreciation expense by $400,000. Other expenses totaling approximately $850,000 which were booked in the fourth quarter were accounts receivable write-offs, the pending sale of the Tijuana, Mexico facility, a sales tax audit and the accrual of additional fuel costs and performance bonuses.
The company also noted that fuel expenses in the fourth quarter were $700,000 higher compared with the same quarter a year earlier and $2.2 million higher for the full fiscal year.
"Fiscal 2005 was a transition year for the company. With that behind us, we are moving forward with enthusiasm. The market dynamics of the aftermarket collision replacement parts business remain strong and we have worked diligently this year to position Keystone to take full advantage of the anticipated growth which will come from greater use of aftermarket parts in the repair of damaged vehicles. Body shops and insurance companies continue to seek alternative products for automotive collision repair and Keystone's reputation and distribution network are major competitive strengths in this industry," said Richard L. Keister, president and chief executive officer.
"In the latter half of fiscal 2005, we put a lot of effort into making certain that our inside and outside sales representatives, General Managers, Regional Managers, Financial Staff and the Executive Team were all in alignment and committed to increasing the leverage of Keystone's market position as the leader in the industry for fiscal 2006 and beyond. While the year-over-year profit numbers do not show improvement due primarily to the factors discussed above, I'm very proud of what we accomplished this past year and extremely optimistic about our future," Keister said.
He indicated that management is focusing on several key initiatives in fiscal 2006, including improving inventory turns, enhancing the fulfillment rate to our customers, improved gross margins and achieving a high, single-digit organic growth rate.
"Our focus in fiscal 2006 is on expanding the business and significantly improving the company's operating leverage. Further, we are now prepared as a team to continue our growth through acquisitions," Keister explained.
He added that Keystone converted 61 locations to its new enterprise management systems during fiscal 2005.
"With the exception of our acquisition in Maine and the company's Canadian operations, all of our locations are now on a common system. We will continue to fine-tune and develop the system to maximize its utility. In addition, we are currently working on new IT initiatives which will add value to our business -- including a B2B solution for the collision repair industry," Keister commented.
Keister also noted that in April 2005, the company began selling the headlights for the Ford Taurus and Pontiac Grand Am which it had discontinued selling in September 2004.
"We have documented that these lights meet federal standards as tested by an independent laboratory also used by NHTSA. While several insurance companies continue to suspend the use of aftermarket lighting products, the lighting manufacturers and CAPA are working together to allow CAPA certification of the most popular lighting products. The Company is optimistic that CAPA certified lights will be introduced into the market place before the end of the current fiscal year and that insurance companies will again specify aftermarket lighting in the repair of vehicles," Keister concluded.
©2005 Collision Repair Industry INSIGHT