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Earl Scheib Announces Operating Results for the Second Quarter of Fiscal Year 2009

Published on 2008-12-23. Author : SpecialChem

SHERMAN OAKS, Calif. -- Earl Scheib, Inc. reported its results for the second quarter and six months ended October 31, 2008 of the fiscal year ending April 30, 2009.

Net sales for the second quarter of fiscal 2009 were $8,453,000, a decrease of 27.8% from the second quarter of fiscal 2008 net sales of $11,704,000. The Company operated the same number of sales days in the second quarter of fiscal 2009 as in 2008, and operated 15 fewer retail paint shops at October 31, 2008 compared to 2007. On a same-day basis, same-shop retail sales decreased by 21.9%; while combined sales in the fleet and truck center, commercial coatings operations and the now closed Florida locations decreased by $246,000 in the second quarter of fiscal 2009 compared to the second quarter of fiscal 2008. The decrease in same shop-same day retail sales is primarily due to a reduction in car volume.

Net sales for the six months ended October 31, 2008 were $18,343,000, as compared to $23,940,000 for the six months ended October 31, 2007, a decrease of 23.4%. The Company operated the same number of sales days in the six months of fiscal 2009 as in 2008. On a same-day basis, same-shop retail sales decreased by 18.3% due primarily to a reduction in car volume; while combined sales in the fleet and truck center, commercial coatings operations and the closed Florida locations decreased by $457,000 in the first six months of fiscal 2009 as compared to the first six months of fiscal 2008.

The second quarter of fiscal 2008 resulted in an operating loss of $849,000 compared to an operating loss of $640,000 in the second quarter of fiscal 2008. Gross margins decreased by 4.8% of sales in the second quarter of fiscal 2009 compared to fiscal 2008, due primarily to the inability to decrease costs proportionally with the decrease in sales. Selling, general and administrative expenses decreased by $910,000 to 27.1% of sales in the second quarter of fiscal 2009 compared with the second quarter of fiscal 2008, due primarily to decreases in payroll and advertising expenses.

The six months ended October 31, 2008 resulted in an operating loss of $1,033,000 compared to an operating loss of $1,284,000 in the six months ended October 31, 2007. Gross margins decreased by 2.8% of sales in the six months ended October 31, 2008 compared to the six months ended October 31, 2007, due primarily to the inability to decrease costs proportionally with the decrease in sales. Selling, general and administrative expenses decreased by $1,961,000 to 24.6% of sales in the six months ended October 31, 2008 compared to the 2007 six month period, due primarily to decreases in payroll and advertising expenses, and a net decrease in other selling, general and administrative expenses. Cost of sales was reduced by $3,887,000 in the six months ended October 31, 2008 compared with the 2007 six month period as a result of both the reduction in sales and improved cost controls. In total, operating costs and expenses were reduced by $5,848,000 in the six months ended October 31, 2008 compared with the six months ended October 31, 2007.

In the six month period ended October 31, 2007, a former retired executive of the Company, on whose life the Company held a life insurance policy, passed away. As a result, the Company received life insurance proceeds of $415,000 after deduction of an outstanding policy loan of $228,000. Estimates of the cash surrender value of the policy were previously recognized in "Other assets" on the financial statements. The excess of the proceeds over the previously recorded cash surrender value, amounting to $275,000, was recognized on the income statement.

The Company sold one closed retail paint shop property in the second quarter of fiscal 2009 for a gain of $526,000 and sold two properties in the six month period ended October 31, 2008 for a net gain of $982,000.

Overall, the net loss for the second quarter of fiscal 2009 was $397,000 or $0.10 per diluted share; compared to a net loss of $376,000, or $0.09 per diluted share, for the second quarter of fiscal 2008. For the six months ended October 31, 2008, the net loss was $200,000, or $0.05 per diluted share, compared to a net loss of $1,030,000, or $0.26 per diluted share, for the six months ended October 31, 2007.

Christian K. Bement, President and Chief Executive Officer, stated "We continue to be affected by the unprecedented economic slowdown throughout the United States. Like all retailers, our sales suffered during the Second Quarter of Fiscal 2009. We continue to take steps to reduce our cost structure while at the same time focusing on the quality of the service we have provided for over 70 years. With significantly less sales than the prior year, the increase in the operating loss over the prior period was much narrower as a result of the cost reductions made by management. Our Board of Directors and management continue to work closely with the Company's exclusive financial advisor, Wedbush Morgan Securities, to identify and pursue strategic alternatives designed to maximize stockholder value. We continue to believe that Earl Scheib possesses a valuable asset base and strong retail locations that, with the leaner cost structure, is well positioned when the general economy begins to reverse its course."

Earl Scheib, Inc., founded in 1937, is a nationwide operator of 86 auto paint and body shops located in approximately 77 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.

Forward looking statements

"Safe Harbor" Statement Under the Private Securities Litigation Reform Act of 1995

Written and oral statements made by the Company that are not historic in nature are "forward looking statements" as defined under the Private Securities Litigation Reform Act of 1995, including statements made in this document and in filings with the Securities and Exchange Commission. Generally, the words "believe," "expect," "hope," "intend," "estimate," "anticipate," "plan," "will," "project," and similar expressions identify forward-looking statements. All statements which address operating performance, events, developments or strategies that the Company expects or anticipates in the future are forward-looking statements.

Forward-looking statements involve risks and uncertainties that could cause actual results or events to differ materially from the Company's past experience or current expectations. The following are some of the risks and uncertainties that may impact the forward-looking statements: the impact of continuing operating losses, the impact of the Company's cost cutting measures, the success of the Company's exploration of strategic alternatives, the impact of the point-of-sale computer system, the effect of weather, the effect of economic conditions, the impact of competitive products, services, pricing, capacity and supply constraints or difficulties, changes in laws and regulations applicable to the Company, the impact of advertising and promotional activities, the impact of the Company's expansion of its fleet services, the impact of new shops, new business initiatives or growth opportunities, new product rollout, Quality Fleet & Truck Centers and commercial coatings business, the potential adverse effects of certain litigation, financing, insurance or lending constraints, and the impact of various tax positions taken by the Company. The Company undertakes no obligation to correct or update any forward-looking statements whether as a result of new information, future events or otherwise.

Source: Earl Scheib, Inc.


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