Earl Scheib Announces Improved Operating Results Second Quarter 2006
SHERMAN OAKS, Calif.--Dec. 8, 2005--Earl Scheib, Inc. (Pink Sheets:ESHB) reported its results for the second quarter and six months ended October 31, 2005 of the fiscal year ending April 30, 2006.Net sales for the second quarter of fiscal 2006 were $12,727,000, an increase of 2.2% over the second quarter of fiscal 2005 net sales of $12,448,000, despite operating a weighted average nine fewer retail paint shops at October 31, 2005 compared to 2004. The Company had one additional sales day in the second quarter of fiscal 2006. On a same-day basis, same-shop (shops open one year or more) sales increased by 5.4%; and combined sales in the fleet and truck center and commercial coatings operations increased by $82,000 in the second quarter of fiscal 2006 compared to the second quarter of fiscal 2005
Net sales for the six months ended October 31, 2005 were $25,741,000, as compared to $25,139,000 for the six months ended October 31, 2004, an increase of 2.4%. The Company operated a weighted average seven fewer retail paint shops during the six months ended October 31, 2005 compared to 2004. The Company had one additional sales day in the six months ended October 31, 2005. On a same-day basis, same-shop sales increased by 5.0%; and combined sales in the fleet and truck center and commercial coatings operations increased by $287,000 in the first six months of fiscal 2006 from the first six months of fiscal 2005.
Operating income for the second quarter of fiscal 2006 was $425,000, an improvement of $194,000 over the second quarter of fiscal 2005 operating income of $231,000. While gross margins decreased by 1.4% in the second quarter of fiscal 2006 compared to fiscal 2005 due primarily to increases in material and direct labor costs at the shops and higher insurance expenses, primarily medical insurance; selling, general and administrative expenses decreased by 1.9% of sales. Additionally, the second quarter of fiscal 2005 included closed shop exit and fixed asset disposal expenses of $120,000 while there were no such expenses in the fiscal 2006 quarter.
Operating income for the six months ended October 31, 2005 was $661,000 compared to $1,003,000 in the six months ended October 31, 2004. The decrease in operating results was primarily attributable to a decrease of 2.5% in gross margins resulting from higher material and direct labor costs in the shops and increased medical insurance expenses and the lack of last year's $240,000 benefit from a workers' compensation insurance credit that was not available this year.
Net interest expense decreased by $106,000 in the second quarter and decreased by $69,000 for the six month period of fiscal 2006 from fiscal 2005 due primarily to a reduction in financing costs for the Company's secured $11,500,000 credit facility.
For the six month period ended October 31, 2005, the Company sold two previously closed auto paint shops for a net gain of $124,000 compared to the sale of one closed paint shop for a gain of $15,000 in the six months ended October 31, 2004.
Overall, net income for the second quarter of fiscal 2006 was $315,000, or $0.07 per diluted share, compared to $21,000, or $0 per diluted share, for the second quarter of fiscal 2005. For the six months ended October 31, 2005, net income was $451,000, or $0.10 per diluted share, compared to $615,000, or $0.14 per diluted share, for the six months ended October 31, 2004.
Chris Bement, Chief Executive Officer and President, stated that, "Our second quarter of fiscal 2006 results improved over last year in spite of increased medical insurance costs of $196,000. Positive sales trends continued with the second quarter of fiscal 2006, representing the tenth consecutive quarter of same-day, same-shop sales increases. Additionally, the sales increase continued into November 2005.
"In September, we temporarily closed two leased shops in Louisiana as a result of damage from hurricane Katrina, and in October we temporarily closed a third leased shop (in Texas) due to storm damage to that shop. One of the Louisiana shops reopened in November. The other two shops will not reopen until the facilities are repaired by the landlords. We have no firm reopening dates at this time."
Earl Scheib, Inc., founded in 1937, is a nationwide operator of 103 auto paint and body shops located in approximately 100 cities throughout the United States. In addition, through a wholly-owned subsidiary, Earl Scheib, Inc. manufactures paint coating systems that are used not only by its paint and body shops, but are also sold to original equipment manufacturers and used by architectural construction firms. For more information, visit Earl Scheib on the web at www.earlscheib.com.
Earl Scheib, Inc.
Consolidated Statements of Operations
(thousand of dollars, except per share data)
Unaudited
Three Months Six Months
ended ended
October 31, October 31,
----------------- -----------------
2005 2004 2005 2004
------- ------- ------- -------
Net Sales $12,727 $12,448 $25,741 $25,139
Cost of Sales 9,468 9,089 19,267 18,184
------- ------- ------- -------
Gross Margin 3,259 3,359 6,474 6,955
Selling, General & Administrative
Expense 2,834 3,128 5,813 5,952
------- ------- ------- -------
Operating Income 425 231 661 1,003
Gain (loss) on Sales of Real
Property (6) 0 124 15
Interest Expense, net (79) (185) (284) (353)
------- ------- ------- -------
Income Before Income Tax 340 46 501 665
Income Tax Provision 25 25 50 50
------- ------- ------- -------
Net Income $ 315 $ 21 $ 451 $ 615
======= ======= ======= =======
Income Per Share
Basic $ 0.07 $ 0.00 $ 0.10 $ 0.14
Diluted 0.07 0.00 0.10 0.14
======= ======= ======= =======
Average Shares Outstanding
Basic 4,393 4,380 4,393 4,380
Diluted 4,417 4,402 4,415 4,402
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Earl Scheib, Inc.
Consolidated Balance Sheets
(thousands of dollars, except share data)
Unaudited
----------------
October 31, April 30,
Assets 2005 2005
--------------- --------------
Current assets:
Cash and cash equivalents $ 3,458 $ 3,024
Accounts receivable, less
allowances of $48 at October 31
and $81 at April 30, 2005 672 638
Inventories 2,280 1,739
Prepaid expenses, including
advertising costs of $450 at
October 31 and $415 at April 30,
2005 1,654 1,488
Deferred income taxes 1,496 1,496
Property held for sale 0 314
Other current assets 104 300
--------------- --------------
Total current assets 9,664 8,999
Property, plant and equipment 8,231 7,937
Deferred income taxes 445 445
Other, including cash surrender value
of life insurance of $2,784 at
October 31 and $2,740 at April 30,
2005 3,137 2,978
--------------- --------------
$ 21,477 $ 20,359
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Liabilities
Current liabilities:
Accounts payable $ 1,272 $ 775
Accrued expenses:
Payroll and related taxes 1,246 1,403
Insurance 3,133 2,789
Interest 93 117
Advertising 480 418
Legal and professional 276 401
Other 1,210 1,120
Income taxes payable 41 28
--------------- --------------
Total current liabilities 7,751 7,051
Deferred management compensation 2,773 2,800
Long-term debt and obligations 1,683 1,683
Shareholders' Equity
Capital stock $1 par - 12,000,000
shares authorized; 4,808,000
issued; 4,392,000 outstanding at
October 31 and 4,393,000 at April
30, 2005 4,808 4,808
Additional paid-in capital 6,766 6,766
Retained earnings 605 154
Treasury stock, at cost (416,000
shares at October 31 and 415,000
at April 30, 2005) (2,909) (2,903)
--------------- --------------
Total shareholders' equity 9,270 8,825
--------------- --------------
$ 21,477 $ 20,359
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Earl Scheib, Inc.
Condensed Consolidated Statements of Cash Flows
(thousands of dollars)
Unaudited
Six Months Ended
October 31,
--------------------------------
2005 2004
--------------- --------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES $ 856 $ 1,694
--------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (829) (87)
Proceeds from sale or disposal of
property and equipment 431 46
--------------- --------------
Net cash provided by (used in)
investing activities (398) (41)
CASH FLOWS USED IN FINANCING
ACTIVITIES:
Credit facility financing costs (18) (97)
--------------- --------------
Net increase in cash and cash
equivalents 440 1,556
Cash and cash equivalents, at
beginning of the period 3,024 2,188
--------------- --------------
Cash and cash equivalents, at end of
the period $ 3,464 $ 3,744
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