Earl Scheib Announces Its Strongest Fiscal Third Quarter since 1987
SHERMAN OAKS, Calif.--March 15, 2006--Earl Scheib, Inc. (PINK SHEETS:ESHB) reported its results for the third quarter and nine months ended January 31, 2006 of the fiscal year ending April 30, 2006. Historically, the third quarter has been the most difficult quarter for the Company's industry because of adverse winter weather and the holiday season.Net sales for the third quarter of fiscal 2006 were $10,202,000, an increase of 4.8% over the third quarter of fiscal 2005 which experienced net sales of $9,732,000, despite operating a weighted average four fewer retail paint shops at January 31, 2006 compared to 2005. On a same-day basis, same-shop (shops open one year or more) sales increased by 9.1%.
Net sales for the nine months ended January 31, 2006 were $35,943,000, as compared to $34,871,000 for the nine months ended January 31, 2005, an increase of 3.1%. The Company operated a weighted average six fewer retail paint shops during the nine months ended January 31, 2006 compared to 2005. The Company had one additional sales day in the nine months ended January 31, 2006. On a same-day basis, same-shop sales increased by 6.2%; and combined sales in the fleet and truck center and commercial coatings operations increased by $271,000, or 12.8%, in the first nine months of fiscal 2006 from the first nine months of fiscal 2005.
The operating loss for the third quarter of fiscal 2006 was $708,000, a significant improvement of $384,000 over the third quarter of fiscal 2005 operating loss of $1,092,000. Gross margins increased by 1.7% in the third quarter of fiscal 2006 compared to fiscal 2005 due primarily to the increases in same-shop sales; while selling, general and administrative expenses decreased by 2.5% of sales due primarily to reductions in salary and advertising expenses.
The operating loss for the nine months ended January 31, 2006 was $47,000, compared to the loss of $89,000 in the nine months ended January 31, 2005. The better operating results were primarily attributable to the same-shop sales increase. While gross margins decreased by 1.4% in the nine months of fiscal 2006 compared to fiscal 2005, due primarily to increases in labor and material costs at the shops; selling, general and administrative expenses decreased by 1.6% of sales, primarily from reductions in salary and advertising expenses. Additionally, the nine months ended January 31, 2005 included closed shop exit and fixed asset disposal expenses of $122,000, while there were no such expenses in fiscal 2006. The increase in labor and material costs was due to the shops performing more collision repair and due to the increase in raw material costs related to "petroleum based" products.
Net interest expense decreased by $90,000 in the third quarter and decreased by $159,000 in the nine month period of fiscal 2006 compared to fiscal 2005 due primarily to a reduction in financing costs for the Company's secured $11,500,000 credit facility.
For the nine month period ended January 31, 2006, the Company sold three previously closed auto paint shops for a net gain of $608,000 compared to the sale of one closed paint shop for a gain of $15,000 in the nine months ended January 31, 2005.
Overall, the net loss for the third quarter of fiscal 2006 was $352,000, or $0.08 per diluted share, compared to a net loss of $1,303,000, or $0.30 per diluted share, for the third quarter of fiscal 2005. For the nine months ended January 31, 2006, the Company earned a net profit of $99,000, or $0.02 per diluted share, compared to a loss of $688,000, or $0.16 per diluted share, for the nine months ended January 31, 2005.
Chris Bement, Chief Executive Officer and President, stated that, "We are pleased to be consistently improving our comparable-period operating results. We are also glad to see that the positive business trends developed last fiscal year, specifically increases in same-shop, same-day sales in our retail shops, continue into the current fiscal year representing the eleventh consecutive quarter of same-day, same-shop sales increases. Further, the third quarter operating loss was the lowest third quarter loss since the third quarter ended January 31, 1987.
"While the Company's historical focus has been the painting of an entire vehicle, we have successfully positioned the Company to be a low cost provider of collision and spot painting services to consumers. We believe that the collision repair business provides Scheib with great additional sales opportunities. Finally, we are actively seeking new shop locations primarily in California and the southwestern states."
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 ended Nine Months ended
January 31, January 31,
----------------- -----------------
2006 2005 2006 2005
------- ------- ------- -------
Net Sales $10,202 $ 9,732 $35,943 $34,871
Cost of Sales 8,689 8,455 27,956 26,639
------- ------- ------- -------
Gross Margin 1,513 1,277 7,987 8,232
Selling, General &
Administrative Expense 2,221 2,369 8,034 8,321
------- ------- ------- -------
Operating Loss (708) (1,092) (47) (89)
Gain on Sales of Real
Property 484 0 608 15
Interest Expense, net (101) (191) (385) (544)
------- ------- ------- -------
Income (Loss) Before Income
Tax (325) (1,283) 176 (618)
Income Tax Provision 27 20 77 70
------- ------- ------- -------
Net Income (Loss) $ (352) $(1,303) $ 99 $ (688)
======= ======= ======= =======
Income (Loss) Per Share
Basic $ (0.08) $ (0.30) $ 0.02 $ (0.16)
Diluted (0.08) (0.30) 0.02 (0.16)
======= ======= ======= =======
Average Shares Outstanding
Basic 4,394 4,388 4,393 4,382
Diluted 4,394 4,388 4,420 4,382
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Earl Scheib, Inc.
Consolidated Balance Sheets
(thousands of dollars, except share data)
Unaudited
------------
January 31, April 30,
Assets 2006 2005
------------ ------------
Current assets:
Cash and cash equivalents $ 2,564 $ 3,024
Accounts receivable, less allowances
of $61 at January 31, 2006 and $81
at April 30, 2005 594 638
Inventories 2,333 1,739
Prepaid expenses, including advertising
costs of $393 at January 31, 2006 and
$415 at April 30, 2005 1,481 1,488
Deferred income taxes 1,496 1,496
Property held for sale 0 314
Other current assets 90 300
------------ ------------
Total current assets 8,558 8,999
Property, plant and equipment 8,499 7,937
Deferred income taxes 445 445
Other, including cash surrender value of
life insurance of $2,807 at January 31,
2006 and $2,740 at April 30, 2005 3,167 2,978
------------ ------------
$ 20,669 $ 20,359
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Liabilities
Current liabilities:
Accounts payable $ 1,029 $ 775
Accrued expenses:
Payroll and related taxes 1,157 1,403
Insurance 3,309 2,789
Interest 86 117
Advertising 99 418
Legal and professional 283 401
Other 1,236 1,120
Income taxes payable 49 28
------------ ------------
Total current liabilities 7,248 7,051
Deferred management compensation 2,802 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; 4,396,000
outstanding at January 31, 2006 and
4,393,000 at April 30, 2005 4,808 4,808
Additional paid-in capital 6,766 6,766
Retained earnings 239 154
Treasury stock, at cost (412,000 shares
at January 31, 2006 and 415,000 at
April 30, 2005) (2,877) (2,903)
------------ ------------
Total shareholders' equity 8,936 8,825
------------ ------------
$ 20,669 $ 20,359
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Earl Scheib, Inc.
Condensed Consolidated Statements of Cash Flows
(thousands of dollars)
Unaudited
Nine Months ended
January 31,
---------------------------
2006 2005
------------ ------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES $ (22) $ 499
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,362) (506)
Proceeds from sale or disposal of
property and equipment 942 46
------------ ------------
Net cash used in investing activities (420) (460)
CASH FLOWS USED IN FINANCING ACTIVITIES:
Credit facility financing costs (18) (120)
------------ ------------
Net decrease in cash and cash
equivalents (460) (81)
Cash and cash equivalents, at beginning
of the period 3,024 2,188
------------ ------------
Cash and cash equivalents, at end of
the period $ 2,564 $ 2,107
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