FinishMaster Announces Year-End Financial Results

Economic conditions throughout the United States continued to result in lower repairable automobile claim activity, impacting the Company's overall market opportunity for the sale of its products and services. This trend accelerated throughout the year. In the current economic environment, the Company continues to manage expense levels and net working capital, and remains focused on longer-term growth strategies.

2008 Reported Results

For the fourth quarter of 2008, net sales decreased 7.6% to $108,183,000 due entirely to a same branch sales decline. Net sales related to acquisitions partially offset this decline. Net sales for the year increased 4.2% to $486,013,000 compared with $466,626,000 in the prior year period. Net sales from four acquisitions completed during 2008 and the full year affect of 2007 acquisitions accounted for the increase in revenues. Same branch sales growth for the year was negative.

Gross margin dollars decreased 2.8% for the quarter due to lower sales volume, partially offset by higher margin rate. Margin rate increased 150 basis points to 30.3% for the quarter as a result of the timing of vendor price increases passed through to customers and favorable inventory adjustments. Gross margin dollars increased 7.7% for the year due to higher sales volume and margin rate. Margin rate increased 100 basis points to 30.5% for the year due primarily to vendor price increases passed through to customers and the attainment of vendor growth incentives. The non-recurrence in the prior year first quarter of a charge related to a change in the estimated residual value of product consigned with customers also favorably impacted the margin rate. Partially offsetting these favorable margin rate items was an increase in discounts to attract and retain customers.

Total expenses as a percentage of net sales increased 190 basis points to 26.8% for the quarter as a result of expenses decreasing at a slower rate than net sales. For the year, total expenses as a percentage of net sales increased 120 basis points to 24.6% as a result of expenses increasing at a faster rate than net sales. Total expenses for the year increased $10,048,000 or 9.2% as a result of higher expenses associated with acquired operations, health insurance, information technology, bad debts and fuel. Cost reductions implemented by management throughout the year partially offset these cost increases.

Lower income tax expense for the quarter was due primarily to lower pre-tax earnings, partially offset by a higher quarterly effective tax rate. For the year, higher pre-tax earnings resulted in higher income tax expense. The Company's effective tax rate for the year was 40.1% compared to 40.4% in the prior year period.

Selected Historical Financial Data
(000's omitted, except per share data)
                                            Three Months Ended        Twelve Months Ended
                                            December 31,              December 31,
                                            2008         2007         2008         2007
Net sales                                   $   108,183  $   117,069  $   486,013  $   466,626
Gross margin                                    32,831       33,774       148,257      137,648
Gross margin %                                  30.3%        28.8%        30.5%        29.5%
Operating and SG&A expenses                     27,957       27,903       115,466      106,516
Amortization of intangible assets               1,010        1,206        3,914        2,816
Total expenses                                  28,967       29,109       119,380      109,332
Income from operations                          3,864        4,665        28,877       28,316
Other income                                    -            -            5,224        -
Interest expense                                879          944          3,936        3,252
Income tax expense                              1,313        1,368        12,105       10,130
Net income                                  $   1,672    $   2,353    $   18,060   $   14,934
Diluted earnings per share                  $   0.21     $   0.30     $   2.29     $   1.91
Diluted weighted average shares outstanding     7,888        7,834        7,888        7,837

                                         December 31,    December 31,
                                         2008            2007
Cash                                     $      2,461    $      4,230
Accounts receivable, net                        39,969          40,103
Inventories                                     111,723         86,665
Goodwill and intangible assets, net             117,304         119,805
Property, equipment & all other assets          45,903          44,610
Total assets                             $      317,360  $      295,413
Accounts payable                         $      67,135   $      51,186
Current & long-term debt                        82,036          94,661
Accrued expenses & all other liabilities        25,697          24,278
Shareholders' equity                            142,492         125,288
Total liabilities & shareholders' equity $      317,360  $      295,413

                             Twelve Months Ended
                             December 31,
                             2008          2007
Net cash provided (used) in:
Operating activities         $   16,211    $   23,052
Investing activities             (5,556)       (22,609)
Financing activities             (12,424)      2
Increase (decrease) in cash      ($1,769)  $   445
Cash at beginning of period  $   4,230     $   3,785
Cash at end of period        $   2,461     $   4,230

FinishMaster is the largest 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 172 branches in 39 of the 50 largest metropolitan areas in the country. For more information on FinishMaster via the Internet, visit FinishMaster's website at http://www.finishmaster.com/.

SOURCE: FinishMaster, Inc.

FinishMaster, Inc. 
Robert R. Millard, 317-263-5200