Earl Scheib Announces First-Quarter Fiscal 2002 Results

    BEVERLY HILLS, Calif.--Sept. 11, 2001--Earl Scheib Inc. (AMEX:ESH) reported its results for the quarter ended July 31, 2001, the first quarter of the fiscal year ending April 30, 2002.
    Net sales for the first quarter of fiscal 2002 were $14,807,000, a decrease of 4.7% from the first quarter of fiscal 2001 net sales of $15,536,000. This resulted from the company operating 15 fewer retail paint and body shops at July 31, 2001, compared to July 31, 2000, and a same-shop sales decrease of 2.1% during the first quarter of fiscal 2002 from the first quarter of fiscal 2001.
    Operating income for the first quarter of fiscal 2002 was $291,000, a decrease of $255,000 from $546,000 in the first quarter of fiscal 2001. The decrease in operating income was primarily attributable to the 15 less shops, the adverse effect of the same-shop sales decrease, operating losses at the company's first fleet and truck center and, with the opening of the second center, additional costs for an enhanced sales and marketing infrastructure.
    As the company previously announced, the board of directors approved a plan during the fourth quarter of fiscal 2001 to restructure and reorganize the retail paint and body business. The plan will be implemented over 3 years and result in the closing of 41 shops located primarily in single-shop areas and in markets where seasonal weather adversely impacts operating results. The restructuring should result in a leaner infrastructure and ultimately allow the company to concentrate its efforts and growth in those geographic areas, primarily the Southwest, where it has historically been profitable.
    During the first quarter of fiscal 2002, the company, pursuant to the planned restructuring of the retail paint and body business, sold five parcels of real estate and its corporate office building for a net gain of $628,000 and $1,779,000, respectively. The company expects to move into leased corporate offices in Sherman Oaks, Calif., by the end of October 2001. During the first quarter of fiscal 2001, the company sold two parcels of real estate for a net gain of $186,000.
    Net income for the first quarter of fiscal 2002 was $1,609,000, or $0.37 per diluted share, compared to $606,000, or $0.14 per diluted share, for the first quarter of fiscal 2001.
    Chris Bement, chief executive officer and president, stated: "The operating results for the first quarter, though below last year, were what we expected as we commenced the restructuring of our retail paint and body business. As of July 31, 2001, we have closed nine shops under the restructuring plan and expect to close at least 16 more by the end of the current fiscal year.
    "We are progressing ahead of schedule, and even though closing these shops reduced our first-quarter profitability since they have historically contributed during the summer months, the benefit of these closures should be realized in the late fall and winter months, when bad weather would otherwise adversely impact operating results.
    "In addition, we have reduced administrative costs at the operating and corporate levels, with further reductions planned as additional shops are closed. The full benefit of these cost reductions should be realized later in the fiscal year.
    "Disappointing, however, is the decrease in same-shop sales during the quarter, as well as not yet attaining profitability at the initial fleet and truck center and the lack of significant growth in our commercial coatings business. These are important matters for the company which we are working hard to improve."
    Earl Scheib Inc., founded in 1937, is a nationwide operator of 151 auto paint and body shops located in more than 100 cities throughout the United States.

                           EARL SCHEIB INC.
            CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                              (Unaudited)

                                          For The Quarter Ended
                                                 July 31, 
                                         2001                2000

Net Sales                          $   14,807,000      $   15,536,000
Operating Income                          291,000             546,000
Gain on Sales of Real Properties        2,407,000             186,000
Interest Expense, net                    (104,000)           (105,000)
Income Before Income Taxes              2,594,000             627,000
Provision For Income Taxes                985,000              21,000
Net Income                         $    1,609,000      $      606,000

Basic Earnings Per Share           $         0.37      $         0.14
Diluted Earnings Per Share         $         0.37      $         0.14

Weighted Average Shares
 Outstanding - Basic                    4,359,000           4,359,000
Weighted Average Shares
 Outstanding - Diluted                  4,359,000           4,359,000