SHERMAN OAKS, CA — Earl Scheib, a national auto paint and body shop operator, reported its results for the third quarter and nine months ending Jan. 31, and fiscal year ending April 30.

Net sales for the third quarter of fiscal 2006 were $10.2 million, an increase of 4.8 percent over the third quarter of fiscal 2005 which experienced net sales of $9.7 million, despite operating a weighted average four fewer retail paint shops as of Jan. 31, compared to 2005. On a same-day basis, same-shop (shops open one year or more) sales increased by 9.1 percent.

Net sales for the nine months were $36 million, as compared to $35 million for the nine months ending Jan. 31, 2005, an increase of 3.1 percent. The company operated a weighted average of six fewer retail paint shops during the nine months ending Jan. 31, 2006 compared to 2005. The company had one additional sales day in the nine months. On a same-day basis, same-shop sales increased by 6.2 percent; and combined sales in the fleet and truck center and commercial coatings operations increased by $271,000, or 12.8 percent, 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 $1.1 million. Gross margins increased by 1.7 percent 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 percent 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 ending Jan. 31, 2005. The better operating results were primarily attributable to the same-shop sales increase. While gross margins decreased by 1.4 percent 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 percent 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, 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 ending Jan. 31, 2005.

Overall, the net loss for the third quarter of fiscal 2006 was $352,000, or 8 cents per diluted share, compared to a net loss of $1,303,000, or 30 cents per diluted share, for the third quarter of fiscal 2005. For the nine months, the company earned a net profit of $99,000, or 2 cents per diluted share, compared to a loss of $688,000, or 16 cents per diluted share, for the nine months ending Jan. 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.”

For more information about Earl Scheib, visit: www.earlscheib.com.

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