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Letter to the Editor

Earl Scheib Announces Second Quarter Fiscal 2002 Results; Plans to Close 41 Shops

SHERMAN OAKS, Calif. -- Earl Scheib, Inc. reported its results for the second quarter and six months of the fiscal year ending April 30, 2002.

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 three years and result in the closing of at least 41 owned and leased 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.

Net sales for the second quarter of fiscal 2002 were $13,743,000, a decrease of 7.1 percent from the second quarter of fiscal 2001 net sales of $14,788,000. This resulted primarily from the Company operating 27 fewer retail paint and body shops at October 31, 2001, as compared to October 31, 2000, and a same shop sales decrease of 2.2 percent during the second quarter of fiscal 2002 from the second quarter of fiscal 2001. For the six months ended October 31, 2001, net sales were $28,550,000, as compared to $30,324,000 for the same period in the prior fiscal year, a decrease of 5.9 percent, with same shop sales decreasing 2.1 percent.

The operating loss for the second quarter of fiscal 2002 was $809,000, as compared to a loss of $188,000 in the second quarter of fiscal 2001. The decrease in the operating results was primarily attributable to the adverse effect of the same shop sales decrease, increased insurance costs of $531,000 ($733,000 increase for the six months ended October 31, 2001) and operating losses at the Company's two fleet and truck centers, partially offset by reduced administrative costs. The operating loss for the six months ended October 31, 2001, was $518,000, as compared to operating income of $358,000 for the six months ended October 31, 2000.

During the first six months of fiscal 2002 the company sold nine parcels of real estate and its corporate office building for a pretax gain of $3,140,000, and moved into its new leased corporate offices in Sherman Oaks, Calif.

The net loss for the second quarter of fiscal 2002 was $97,000, or $0.02 loss per diluted share, as compared to a net loss of $317,000 during the second quarter of fiscal 2001, or $0.07 loss per diluted share. For the six months ended October 31, 2001 and 2000, net income was $1,512,000 and $289,000, or earnings of $0.35 and $0.07 per diluted share, respectively.

Chris Bement, Chief Executive Officer and President, stated, "As of October 31, 2001, we have closed 23 owned and leased shops and expect to close six more by the end of the current fiscal year. I am happy to report this is ahead of our restructuring schedule. In our other business areas, the lack of significant growth in our commercial coatings business and the fact that we have not yet attained profitability at the fleet and trucks centers remain a concern. We are working hard to improve these results."

Earl Scheib, Inc., founded in 1937, is a nationwide operator of 136 auto paint and body shops located in more than 100 cities throughout the United States.

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