SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For The Quarter Ended September 30, 2000
Commission File Number 0-23222
FINISHMASTER, INC.
(Exact Name of Registrant as Specified in its Charter)
Indiana 38-2252096
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
54 Monument Circle, Suite 600, Indianapolis, IN 46204
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including area code: (317) 237-3678
Indicate by check mark whether the registrant (1) has filed all annual,
quarterly and other reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding twelve months and (2) has
been subject to the filing requirements for at least the past 90 days.
Yes X No
--- ---
On November 9, 2000, there were 7,540,804 shares of the Registrant's common
stock outstanding.
<PAGE>
FINISHMASTER, INC.
FORM 10-Q
For the Quarter Ended September 30, 2000
TABLE OF CONTENTS
PAGE
Part I. Financial Information 4
Item 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets 4
Condensed Consolidated Statements of Operations 5
Condensed Consolidated Statements of Cash Flows 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 13
Part II. Other Information 14
Item 1. Legal Proceedings 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (unaudited)
FINISHMASTER, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999 (1)
------------- ------------
ASSETS (unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $ 1,252 $ 619
Accounts receivable, net of allowance for doubtful
accounts of $1,707 and $1,419, respectively 32,301 30,135
Inventory 56,946 56,830
Prepaid expenses and other current assets 7,028 6,924
------------- ------------
TOTAL CURRENT ASSETS 97,527 94,508
PROPERTY AND EQUIPMENT, NET 8,196 7,720
OTHER ASSETS
Intangible assets, net 103,303 108,115
Other 5,914 3,892
-------------- ------------
109,217 112,007
-------------- ------------
$ 214,940 $ 214,235
============== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 33,637 $ 26,623
Accrued expenses and other current liabilities 9,966 8,220
Current portion of long-term debt 11,930 11,518
-------------- ------------
TOTAL CURRENT LIABILITIES 55,533 46,361
LONG-TERM OBLIGATIONS 103,406 114,805
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred stock, no par value, 1,000,000 shares
authorized; no shares issued or outstanding --- ---
Common stock, $1 stated value, 25,000,000
shares authorized; 7,539,140 and 7,537,636
shares issued and outstanding 7,540 7,538
Additional paid-in capital 27,367 27,359
Retained earnings 21,094 18,172
-------------- ------------
56,001 53,069
-------------- ------------
$ 214,940 $ 214,235
============== ============
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
(1) The year-end condensed balance sheet data was derived from audited financial
statements, but does not include all disclosures required by generally accepted
accounting principles.
<PAGE>
FINISHMASTER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ----------------------------------
2000 1999 2000 1999
-------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
NET SALES $ 85,600 $ 82,460 $ 257,613 $ 245,778
COST OF SALES 54,209 52,582 164,930 157,503
------------- -------------- -------------- --------------
GROSS MARGIN 31,391 29,878 92,683 88,275
------------- -------------- -------------- --------------
EXPENSES
Operating 12,266 12,465 39,038 37,035
Selling, general and administrative 12,613 10,950 33,972 30,998
Amortization of intangible assets 1,532 1,735 4,593 5,171
------------- -------------- -------------- --------------
TOTAL 26,411 25,150 77,603 73,204
------------- -------------- -------------- --------------
INCOME FROM OPERATIONS 4,980 4,728 15,080 15,071
Interest expense, net 2,968 2,652 8,906 8,060
------------- -------------- -------------- --------------
INCOME BEFORE INCOME TAXES 2,012 2,076 6,174 7,011
Income tax expense 1,055 1,025 3,252 3,482
------------- -------------- -------------- ---------------
NET INCOME $ 957 $ 1,051 $ 2,922 $ 3,529
============= ============== ============== ===============
NET INCOME PER SHARE--BASIC $ 0.13 $ 0.14 $ 0.39 $ 0.47
============= ============== ============== ===============
NET INCOME PER SHARE--DILUTED $ 0.13 $ 0.14 $ 0.39 $ 0.47
============= ============== ============== ===============
WEIGHTED AVERAGE SHARES OF COMMON STOCK
OUTSTANDING--BASIC
7,539 7,536 7,539 7,536
============= ============== ============== ===============
WEIGHTED AVERAGE SHARES OF COMMON STOCK
OUTSTANDING--DILUTED 7,545 7,548 7,554 7,541
============= ============== ============= ===============
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
<PAGE>
FINISHMASTER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------------------------
OPERATING ACTIVITIES 2000 1999
--------------- -----------------
<S> <C> <C>
Net income $ 2,922 $ 3,529
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 7,751 8,002
Amortization of financing costs 445 256
Changes in operating assets and liabilities:
Accounts receivable (1,652) (776)
Inventories 1,728 7,015
Prepaid expenses and other current assets (2,585) 2,724
Accounts payable and accrued expenses 8,601 (12,509)
--------------- ---------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 17,210 8,241
--------------- ---------------
INVESTING ACTIVITIES
Business acquisitions (1,907) (231)
Purchases of property and equipment (1,859) (840)
Other (291) (88)
--------------- ----------------
NET CASH USED IN INVESTING ACTIVITIES (4,057) (1,159)
--------------- ----------------
FINANCING ACTIVITIES
Borrowings from long-term debt 75,848 79,483
Repayments of long-term debt (88,209) (86,409)
Debt issuance costs (159) ---
---------------- ----------------
NET CASH USED IN FINANCING ACTIVITIES (12,520) (6,926)
---------------- ----------------
INCREASE (DECREASE) IN CASH 633 156
CASH AT THE BEGINNING OF PERIOD 619 1009
--------------- ----------------
CASH AT THE END OF PERIOD $ 1,252 $ 1,165
=============== ================
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
<PAGE>
FINISHMASTER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
Basis of Presentation: The interim financial statements are unaudited but, in
the opinion of management, reflect all adjustments necessary for a fair
presentation of financial position, results of operations and cash flows for the
periods presented. These adjustments consist of normal recurring items. The
results of operations for any interim period are not necessarily indicative of
results for the full year. The condensed consolidated financial statements and
notes are presented as permitted by the requirements for Form 10-Q and do not
contain certain information included in the Company's annual consolidated
financial statements and notes. This Form 10-Q should be read in conjunction
with the Company's consolidated financial statements and notes included in its
1999 Annual Report on Form 10-K.
Nature of Business: FinishMaster, Inc. ("the Company" or "FinishMaster") is the
largest independent distributor of automotive paints, coatings, and
paint-related accessories primarily to the automotive collision repair industry
in the United States. As of September 30, 2000, the Company operated 158
distribution branches and three major distribution centers in 22 states, making
it the only national independent distributor in the industry. The Company is
organized into three major geographic regions and operating segments - the
Southeastern, Western, and Central/Northeastern Divisions. These three operating
segments are aggregated into a single reportable segment. The Company has over
30,000 customers to which it provides a comprehensive selection of brand name
products supplied by BASF, DuPont, 3M and PPG, in addition to its own
FinishMaster Private Brand refinishing accessory products. The Company is highly
dependent on the key suppliers mentioned above, which account for approximately
80% of the Company's purchases.
Principles of Consolidation: The Company's consolidated financial statements
include the accounts of FinishMaster Inc., Refinishers Warehouse, Inc., and
Thompson PBE, Inc. All significant intercompany accounts and transactions have
been eliminated. References to the Company or FinishMaster throughout this
report relate to the consolidated entity.
Majority Shareholder: Lacy Distribution, Inc. ("Distribution"), an Indiana
corporation, which is a wholly-owned subsidiary of LDI, Ltd. ("LDI"), an Indiana
limited partnership, is the majority shareholder of the Company with 5,587,516
shares of common stock, representing 74.1% of the outstanding shares at
September 30, 2000. Throughout the remainder of this report, LDI and
Distribution are collectively referred to as "LDI."
Recent Accounting Pronouncement: In June 1998, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging
Activities." In June 1999, the FASB issued SFAS No. 137, which delayed the
effective date of SFAS No. 133 to January 1, 2001. The Company is not routinely
involved in derivative and hedging activities and adoption of this Statement is
not expected to have a material impact on financial condition or results of
operations.
Reclassification: Certain amounts in the condensed consolidated financial
statements have been reclassified to conform to the current period presentation.
2. ACQUISITIONS
During the first nine months of 2000, the Company completed five acquisitions
that are not material to its results of operations. Pro forma effects of the
current and prior year acquisitions have not been presented, as the effects are
not material.
<PAGE>
3. NET INCOME PER SHARE
The following table sets forth the computation of basic and diluted net income
per share:
<TABLE>
<CAPTION>
(in thousands, except per share data) Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------------- ------------------------------------
2000 1999 2000 1999
----------------- ----------------- ----------------- ---------------
Numerator:
<S> <C> <C> <C> <C>
Net income $ 957 $ 1,051 $ 2,922 $ 3,529
================ ================ ================ ===============
Denominator:
Basic-weighted average shares 7,539 7,536 7,539 7,536
Effect of dilutive stock options 6 12 15 5
---------------- ---------------- ---------------- ---------------
Diluted-weighted average shares 7,545 7,548 7,554 7,541
================ ================ ================ ===============
Basic net income per share $ 0.13 $ 0.14 $ 0.39 $ 0.47
== ============= ================ ================ ===============
Diluted net income per share $ 0.13 $ 0.14 $ 0.39 $ 0.47
================ ================ ================ ===============
</TABLE>
4. COMMITMENTS AND CONTINGENCIES
In January 1999, the Company was named in an unfair business practices lawsuit
by an automotive paint distributor located in the State of California. The
plaintiff in such suit alleged that the Company offered, in a manner that
injured the plaintiff, rebates and cash bonuses to businesses in the Southern
California area if those businesses would buy exclusively from the Company and
use the Company's products. The plaintiff claimed damages in the amount of $3.8
million, trebled to $11.4 million. The court recently granted summary judgment
in favor of the Company. The plaintiff has not appealed the judgment against it,
and the decision is now final.
The Company is subject to various claims and contingencies arising out of the
normal course of business, including those relating to commercial transactions,
product and vehicle liability, taxes, discrimination, employment and other
matters. Management believes that the ultimate liability, if any, in excess of
amounts already provided or covered by insurance, is not likely to have a
material adverse effect on the Company's financial condition, results of
operations or cash flows.
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Net Sales
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------------- --------------------------------------------- -- --------------------------------------------
(In thousands) 2000 Change 1999 2000 Change 1999
-------------------------------------- --- ---------- ----------- --- --- ---------- -- ---- ----------- ----------- -- -- ---------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $ 85,600 3.8% $ 82,460 $ 257,613 4.8% $ 245,778
-------------------------------------- --- ---------- ----------- --- --- ---------- -- ---- ----------- ----------- -- -- ---------
</TABLE>
Net sales for the third quarter increased $3.1 million, or 3.8%, and for the
nine months ended September 30, 2000, $11.8 million, or 4.8%, due to same branch
sales growth and acquisitions. Net sales resulting from acquisitions accounted
for approximately one half of the net sales growth in both the three and
nine-month periods ended September 30, 2000.
Gross Margin
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
------------------------------------------------------------------------------------------------------------------------------------
(In thousands) 2000 Change 1999 2000 Change 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Gross Margin $ 31,391 5.1% $ 29,878 $ 92,683 5.0% $ 88,275
Percentage of net sales 36.7% 36.2% 36.0% 35.9%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Gross margin in the third quarter increased $1.5 million, or 5.1%, due to the
increase in net sales volume and higher gross margins as a percentage of net
sales. Higher net sales volume impacted gross margin by approximately $1.1
million.
Gross margin for the nine months ended September 30, 2000, increased $4.4
million or 5.0% due to the increase in net sales volume. Gross margin as a
percentage of net sales increased slightly from 35.9% to 36.0%, impacting
margins by $0.2 million.
Operating Expenses
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
------------------------------------------------------------------------------------------------------------------------------------
(In thousands) 2000 Change 1999 2000 Change 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operating Expenses $ 12,266 (1.6%) $ 12,465 $ 39,038 5.4% $ 37,035
Percentage of net sales 14.3% 15.1% 15.2% 15.1%
------------------------------------------------------------------- ----------------------------------------------------------------
</TABLE>
Operating expenses consist of wages, facility expenses, vehicle, and related
costs for the Company's branch and distribution locations. Operating expenses
for the third quarter decreased $0.2 million, or 1.6%.
Operating expenses for the nine months ended September 30, 2000 increased $2.0
million, or 5.4%, as a result of higher operating expenses related to increased
sales volume, recently completed acquisitions, and a general overall increase in
expenses, principally wages and vehicle expenses.
<PAGE>
Selling, General and
Administrative Expenses
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
------------------------------------------------------------------------------------------------------------------------------------
(In thousands) 2000 Change 1999 2000 Change 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Selling, General and
Administrative Expenses $ 12,613 15.2% $ 10,950 $ 33,972 9.6% $ 30,998
Percentage of net sales 14.7% 13.3% 13.2% 12.6%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Selling, general and administrative expenses ("SG&A") consist of costs
associated with the Company's corporate support staff and expenses for
commissions, wages, and customer sales support activities. SG&A expenses for the
third quarter increased $1.7 million, or 15.2%, and year-to-date $3.0 million,
or 9.6%, primarily as a result of increased commissions associated with the
higher sales volume, costs associated with attracting and retaining customers,
bad debt expense, professional fees, and non-recurring costs associated with the
implementation of new general ledger and point-of-sale computer systems.
Amortization of Intangible Assets
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
------------------------------------------------------------------------------------------------------------------------------------
(In thousands) 2000 Change 1999 2000 Change 1999
------------------------------------------------------------------------------------------------------------------------------------
Amortization of
<S> <C> <C> <C> <C> <C> <C>
Intangible Assets $ 1,532 (11.7%) $ 1,735 $ 4,593 (11.2%) $ 5,171
Percentage of net sales 1.8% 2.1% 1.8% 2.1%
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Intangible amortization expense for the third quarter decreased $0.2 million, or
11.7%, and for the nine months ended September 30, 2000, $0.6 million, or 11.2%,
primarily as a result of certain intangible assets, principally non-compete
agreements, becoming fully amortized.
Interest Expense, net
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
------------------------------------------------------------------------------------------------------------------------------------
(In thousands) 2000 Change 1999 2000 Change 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest Expense, net $ 2,968 11.9% $ 2,652 $ 8,906 10.5% $ 8,060
Percentage of net sales 3.5% 3.2% 3.5% 3.3%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Interest expense for the third quarter increased $0.3 million, or 11.9%, and for
the nine months ended September 30, 2000, $0.8 million, or 10.5%, primarily due
to higher interest rates and finance cost amortization. Compared to prior year
periods, the Company's annualized effective interest rates in the third quarter
and for nine months of 2000 increased by approximately 125 basis points. Also
impacting interest expense was higher finance cost amortization of $0.2 million
for the third quarter and $0.4 million, year-to-date, as a result of an
amendment to the revolving credit facility in September 1999 and a new revolving
credit facility to finance future acquisitions in February 2000. Partially
offsetting the impact of higher interest rates and finance cost amortization for
the nine months of 2000 were lower average outstanding borrowings of
approximately $8.1 million from the prior year period.
<PAGE>
Income Tax Expense
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
------------------------------------------------------------------------------------------------------------------------------------
(In thousands) 2000 Change 1999 2000 Change 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income Tax Expense $ 1,055 2.9% $ 1,025 $ 3,252 (6.6%) $ 3,482
Percentage of net sales 1.2% 1.2% 1.3% 1.4%
Effective tax rate 52.4% 49.4% 52.7% 49.7%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Income tax expense increased less than $0.1 million, or 2.9%, for the third
quarter, but decreased for the nine months of 2000, by $0.2 million, or 6.6% due
to lower income before income taxes. The effective tax rate varied from the
federal statutory rate as a result of certain expenses, principally
nondeductible intangible amortization. In 1999, the Company's effective tax rate
for the year was 53.3%. A slightly lower effective tax rate is anticipated for
2000.
Net Income and Income Per Share
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
------------------------------------------------------------------------------------------------------------------------------------
(In thousands) 2000 Change 1999 2000 Change 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Income $ 957 (8.9%) $ 1,051 $ 2,922 (17.2%) $ 3,529
Percentage of net sales 1.1% 1.3% 1.1% 1.4%
Net income per share $ .13 $ .14 $ .39 $ .47
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Factors contributing to the changes in net income and the related per share
amounts are discussed above.
<PAGE>
Seasonality and Quarterly Fluctuations
The Company's sales and operating results have varied from quarter to quarter
due to various factors and the Company expects these fluctuations to continue.
Among these factors are seasonal buying patterns of the Company's customers and
the timing of acquisitions. Historically, sales have slowed in the late fall and
winter of each year largely due to inclement weather and the reduced number of
business days during the holiday season. In addition, the timing of acquisitions
may cause substantial fluctuations of operating results from quarter to quarter.
The Company also takes advantage of periodic special incentive programs
available from its suppliers. The timing of these programs can contribute to
fluctuations in the Company's quarterly cash flows. Although the Company
continues to investigate strategies to smooth the seasonal pattern of its
quarterly results of operations, there can be no assurance that the Company's
net sales, results of operations and cash flows will not continue to display
seasonal patterns.
Financial Condition, Liquidity and Capital Resources
<TABLE>
<CAPTION>
(In thousands) September 30, December 31,
2000 1999
----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Working capital $ 41,994 $ 48,147
Long-term debt $ 100,204 $ 111,603
----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30,
----------------------------------------------------------------------------------------------------------------
(In thousands) 2000 1999
----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash provided by operating activities $ 17,210 $ 8,241
Cash used in investing activities $ (4,057) $ (1,159)
Cash used in financing activities $ (12,520) $ (6,926)
----------------------------------------------------------------------------------------------------------------
</TABLE>
Net cash provided by operating activities was $17.2 million through the nine
months of 2000 compared with $8.2 million in the prior year period. This
increase was attributable to cash flow generated from operating assets and
liabilities, principally accounts payable. Changes in accounts payable between
years is due to differences in payment terms on large inventory purchases.
Net cash used in investing activities was $4.1 million for the nine months of
2000 compared to $1.2 million in the prior year period, resulting from increased
acquisition activity in the current year and the implementation of computer
systems. During the first nine months of 2000, the Company completed five
acquisitions compared to four acquisitions in the prior year period.
Net cash used in financing activities, primarily the repayment of debt, was
$12.5 million for the nine months of 2000, up from $6.9 million for the same
period of 1999. This increase in debt repayments was due to the increase in cash
generated by operating activities.
Total capitalization at September 30, 2000 was $168.1 million, comprised of
$112.1 million of debt and $56.0 million of equity. Debt as a percentage of
total capitalization was 66.7% at September 30, 2000 compared to 69.9% at
December 31, 1999.
At September 30, 2000 the Company had term credit and revolving credit
facilities totaling $75.3 million, and senior subordinated debt of $30.0
million. The Company was in compliance with the covenants underlying its credit
facilities, and had estimated availability under its revolving credit facilities
of $16.1 million as of September 30, 2000. The Company also has a $7.5 million
revolving credit facility to finance future acquisitions, of which $5.8 million
is currently available.
Based on current and projected operating results and giving effect to total
indebtedness, the Company believes that cash flow from operations and funds
available from lenders and other creditors will provide adequate funds for
ongoing operations, debt service and planned capital expenditures.
<PAGE>
Forward-Looking Statements
This Report contains certain forward-looking statements pertaining to, among
other things, the Company's future results of operations, cash flow needs and
liquidity, acquisitions, and other aspects of its business. The Company may make
similar forward-looking statements from time to time. These statements are based
largely on the Company's current expectations and are subject to a number of
risks and uncertainties. Actual results could differ materially from these
forward-looking statements. Important factors to consider in evaluating such
forward-looking statements include changes in external market factors, changes
in the Company's business strategy or an inability to execute its strategy due
to changes in its industry or the economy generally, difficulties associated
with assimilating acquisitions, the emergence of new or growing competitors,
seasonal and quarterly fluctuations, governmental regulations, the potential
loss of key suppliers, and various other competitive factors. In light of these
risks and uncertainties, there can be no assurance that the future developments
described in the forward-looking statements contained in this Report will in
fact occur.
ITEM 3
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's long-term debt is made up of both fixed and floating rate
components. To date, the Company has determined that the risk of interest rate
fluctuations has not been sufficient to warrant interest rate hedging
activities, but future interest rate hedging activities may be undertaken if
conditions warrant them. Sensitivity rate risk at September 30, 2000 is
comparable to the amount disclosed in the Company's 1999 Annual Report on Form
10-K.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
(a) In January 1999, the Company was named in an unfair business practices
lawsuit by an automotive paint distributor located in the State of
California. The plaintiff in such suit alleged that the Company
offered, in a manner that injured the plaintiff, rebates and cash
bonuses to businesses in the Southern California area if those
businesses would buy exclusively from the Company and use the Company's
products. The plaintiff claimed damages in the amount of $3.8 million,
trebled to $11.4 million. The court recently granted summary judgment
in favor of the Company. The plaintiff has not appealed the judgment
against it, and the decision is now final.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. The following exhibits, unless otherwise indicated, have been
filed as exhibits to documents otherwise filed by the Registrant, and
are hereby incorporated by reference.
Exhibit No. Description of Document
2.1 Agreement and Plan of Merger, dated as of October 14, 1997, by
and among FinishMaster, Inc., FMST Acquisition Corporation and
Thompson PBE, Inc. (incorporated by reference to Exhibit (c)(2)
of Schedule 14D-1 previously filed by FMST Acquisition
Corporation on October 21, 1997).
2.2 Agreement and Plan of Merger, dated February 16, 1998, by and
among FinishMaster, Inc., LDI AutoPaints, Inc. and Lacy
Distribution, Inc. (previously filed with Form 10-K dated March
31, 1998)
3.1 Articles of Incorporation of FinishMaster, Inc., an Indiana
corporation, as amended June 30, 1998 (previously filed with Form
10-Q dated August 14, 1998)
3.2 Amended and Restated Code of Bylaws of FinishMaster, Inc., an
Indiana corporation (previously filed with Form 10-K/A dated
April 14, 1998)
10.1 FinishMaster, Inc. Stock Option Plan (Amended and Restated as of
April 29, 1999) (previously filed with Registrant's proxy
statement on Schedule 14/A dated April 9, 1999)
21 Subsidiaries of the Registrant (previously filed with Form 10K
dated March 30, 2000)
27.1* Financial Data Schedule
99(a)Amended and Restated Credit Agreement, dated as of February 1,
2000, among FinishMaster, Inc., the Institutions from Time to
Time Parties Thereto as Lenders and Bank One, Indiana, N.A., as
Agent (previously filed with Form 10K dated March 30, 2000)
99(b)Subordinated Note Agreement, dated as of November 19, 1997, by
and between FinishMaster, Inc. and LDI, Ltd. (previously filed
with Form 8-K dated December 3, 1997)
* filed herein.
(b) Reports on Form 8-K.
There were no reports on Form 8-K filed in the quarter ended September 30,
2000.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Date: November 14, 2000 FINISHMASTER, INC.
By: /s/ Wesley N. Dearbaugh
-----------------------
Wesley N. Dearbaugh
President and Chief
Operating Officer
By: /s/ Robert R. Millard
-----------------------
Robert R. Millard
Senior Vice President and
Chief Financial Officer
