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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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(MARK ONE)
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/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
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FOR THE FISCAL YEAR ENDED APRIL 30, 2000
OR
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/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER 1-4822
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EARL SCHEIB, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 95-1759002
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8737 WILSHIRE BOULEVARD
BEVERLY HILLS, CALIFORNIA 90211-2795
(Address of principal executive (Zip Code)
offices)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (310) 652-4880
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Capital Stock, $1.00 Par Value American Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for at least the past 90 days.
Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K. / /
As of July 7, 2000 the registrant had 4,358,682 shares of its Capital Stock,
$1.00 par value, issued and outstanding, and the aggregate market value of the
voting stock held by non-affiliates of the registrant was $14,165,716
(approximately based upon the closing price of the Capital Stock on the American
Stock Exchange on such date).
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Annual Report to Stockholders for the fiscal
year ended April 30, 2000 are incorporated into Part II by reference.
Portions of the registrant's Proxy Statement dated July 25, 2000 for use at
the registrant's annual meeting of stockholders are incorporated into Part III
by reference.
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PART I
ITEM 1. BUSINESS
GENERAL
Earl Scheib, Inc., a Delaware corporation, and its subsidiaries
(collectively referred to as the "Company") is celebrating over 60 years in the
automobile paint and repair business as the successor to a business founded as a
sole proprietorship by Earl A. Scheib in 1937. The Company's principal executive
offices are located at 8737 Wilshire Boulevard, Beverly Hills, California 90211.
The Company maintains personnel, systems, advertising, real estate and
accounting functions at its principal executive offices. See ITEM 2.
"PROPERTIES."
At April 30, 2000, the Company operated a chain of 170 automobile production
paint and body shops which specialize in affordably priced repainting of
automobiles and performing body repairs other than major collision repair, frame
straightening (in most instances) or axle work. The Company also offers the
replacement of certain car body parts using new, used and after-market parts,
glass replacement as well as factory style pinstriping, molding and vinyl top
replacement. All of the Company's sales are paid by either cash or credit cards
with the exception of the Company's fleet and trade sales which may be made upon
credit terms.
The Company's shops operate under the name of the New Earl Scheib Paint and
Body Shop. The Company's shops are located in approximately 140 cities
throughout the United States with 59 shops in California
In November 1994, Daniel A. Seigel was employed as President and Chief
Executive Officer and elected to the Company's Board of Directors. Mr. Seigel
resigned as President and Chief Executive Officer effective December 31, 1998.
Christian Bement, the Company's Chief Operating Officer since February, 1995,
was elected President and Chief Executive Officer on January 1, 1999.
Additionally, Philip Wm. Colburn, a board member since 1992, was elected
Chairman of the Board on January 1, 1999.
During the fiscal year ended April 30, 1996, ("fiscal 1996"), the Company
renovated and converted 137 of its shops to the New Earl Scheib Paint and Body
Shop Format (the "New Shop Format"). Conversion to a New Shop Format included
new paint and graphics, new exterior signage, a new customer information center,
the installation of a "dust" wall to separate the vehicle preparation area from
the vehicle detail and delivery area, and the installation of a new Infrared
Quartz Finish Drying System. New Shop Format conversions occurred in California
during the first quarter of fiscal 1996. Because of the significant comparable
shop-for-shop sales increases in the California New Shop remodels (New Shop
remodels experienced a 37% comparable shop-for-shop sales increase during the
period from August 1, 1995, through April 30, 1996) the Company decided to
remodel the remainder of the Company's shops to the New Shop Format.
The cost of the New Shop Format conversions during fiscal 1996 was
approximately $4.6 million and was financed from the sale of 22 Company owned
properties (which had previously been occupied by unprofitable paint and body
shops closed during the restructuring) and from internal cashflow.
The Company also restructured its operational management organization in
fiscal 1996 resulting in the Company's Division Managers supervising fewer
shops. The restructure has improved the quality of the shop supervision and has
enabled the shop managers to directly benefit from the Division Managers' years
of experience.
During the latter part of the fiscal year ended April 30, 1997 ("fiscal
1997"), the Company began a new shop expansion campaign to expand in existing
markets where the Company believes that it underserved the market. During fiscal
1997, the Company opened 5 new shops in existing underserved markets.
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During the fiscal year ended April 30, 1998 ("fiscal 1998"), the Company
opened 12 new shops implementing certain new design features. These new shops
incorporate much of the New Shop Format but also include other improvements,
where feasible, such as the installation of state of the industry cross-draft or
semi-downdraft paint booths with combination fully enclosed dryers, the
separation of the production process into three distinct areas, vehicle
preparation, masking and detail to further improve quality; and the installation
of exterior graphics to emphasize the Company's core business and attractive
prices.
During fiscal 1998, the Company implemented an extensive Division Manager
training program. This program is designed to attract and train individuals from
outside the industry for eventual promotion to a Division Manager position. The
program is considered a "fast track" program which involves a 4 to 12 month
training program.
During the fiscal year ended April 30, 1999 ("fiscal 1999"), the Company
began operations in 19 new shops. These shops are located in California,
Arizona, Texas, Indiana, Illinois, Virginia, Washington and Michigan. All of
these new shops provide the Company with greater penetration into these existing
markets. The Company believes that by continuing to increase shop concentration
and market penetration, in some instances doubling the number of shops in a
market, it will be able to achieve economies of scale and improve the Company's
overall performance in these areas.
During the fiscal year ended April 30, 2000 ("fiscal 2000"), the Company
opened 8 new shops and closed 12 shops. During fiscal 2000, the Company decided
to evaluate certain of its shops which are located in single markets and shops
which may not possess suitable sales growth potential for possible closure. The
Company expects this evaluation will continue during the fiscal year ending
April 30, 2001. During fiscal 2000, the Company also decided to scale back its
three-year retail shop expansion and focus future expansion on larger fleet
centers discussed under the heading "Fleet Service."
SERVICES
The Company currently offers primarily three paint packages which range in
price based upon the color of the paint, number of coats of paint applied,
additional services and length of warranty provided in each package. Customers
may also purchase options to the paint packages such as UV Supergloss,
Pearlescent paint colors and Euroclear-Registered Trademark- clear coat for an
additional cost.
The Company paints vehicles on a production line basis. The vehicle is
sanded to prepare the surface for paint adhesion. Removal of scratches, chips,
rust and peeling also occurs at this time for an extra charge. The vehicle is
then air-blown using a high pressured air hose to remove excess dust. The
exposed chrome and glass areas are masked and the vehicle is spray painted in a
dust-free, fully filtered and sprinklered spray booth. The vehicle is then dried
in a either a semi-enclosed or fully enclosed Infrared Quartz Finish Drying
System. This drying process dries the paint by quartz infrared waves increasing
the metal temperature just enough to heat the paint such that the paint on the
vehicle dries from the inside to the outside. The quartz heat tubes utilize high
intensity electromagnetic waves to heat the metal and are controlled by infrared
sensors and computer aided temperature controls. Finally, the vehicle is
detailed, which involves removing the masking paper and tape, removing overspray
and reinstalling any accessories removed during the painting process.
In connection with its painting operations, the Company also performs, for
an additional cost, body repair work as well as extra sanding and preparation
mentioned above. All bodywork performed is incidental to the painting process.
Body work accounted for approximately 20% of the Company's sales during fiscal
2000, 20% in fiscal 1999 and 21% in fiscal 1998.
During fiscal 1997, the Company began the manufacture and distribution of a
new Company developed EuroPaint-Registered Trademark- coating system.
EuroPaint-Registered Trademark- is a true two (2) component acrylic polyurethane
coating which offers superior quality and performance.
EuroPaint-Registered Trademark- is characterized by having extremely
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high gloss and distinctness of image, outstanding exterior durability and
exceptional chemical resistance. This type of paint is generally considered the
highest quality aftermarket paint and far superior to many of the paint
formulation used by the Company's competitors and is commonly used by many
European luxury car manufacturers. EuroPaint-Registered Trademark- was rated
best in a blind test conducted by an independent laboratory against the best
paints used in popular production auto painting. The paint test measured gloss
(the ability of paint to reflect light), distinctiveness of image (which
represents the ability of the painted surface to reflect images like a mirror)
and the ability of the paint to resist harmful chemicals and UV rays.
The Company also offers a product called EuroClear-Registered Trademark-.
EuroClear-Registered Trademark- is an option which offers customers a true and
separate clear coat with the same superior quality and performance properties
offered by EuroPaint-Registered Trademark-. EuroClear-Registered Trademark-
enhances and intensifies the high gloss and distinctiveness of image of
EuroPaint-Registered Trademark- providing a very deep gloss look characteristic
of basecoat/clearcoat (two stage) paint systems.
Over the past few fiscal years, the Company's color offering was expanded to
include a new, unique line of colors which capture the glamour and allure of
pearlescence. Such new colors offer an iridescence and lustre creating a visual
effect which can only be achieved by the use of pearlescent pigments.
Pearlescent colors are two and three-stage color systems, which offer customers
a unique production shop product.
During fiscal 1996, the Company introduced a new Company developed product
called UV Supergloss. This new product is sold as an additive for two of the
Company's paint packages. The UV Supergloss provides the car with a brighter
shine and is designed to protect the paint from the harmful effects of
Ultraviolet rays.
COMMERCIAL COATINGS
During fiscal 2000, the Company, through a wholly owned subsidiary, built
the infrastructure for the outside commercial sales of Company-manufactured
industrial coatings. The Company believes that it can leverage the extra
capacity at its manufacturing facility by manufacturing and selling coating
systems, similar to the paints it currently produces for its retail automotive
needs, to primarily small to mid-sized original equipment manufacturers. The
Company also believes with its competitive pricing that it will be able to
effectively compete with existing manufacturers in this market. Currently, the
Company employs 4 inside sales people and has 2 outside sales representatives.
FLEET SERVICE
During the fourth quarter of fiscal 1998, the Company developed a fleet
sales department. The department is dedicated to developing multi-vehicle fleet
and over-sized vehicle accounts in designated geographical regions. These
accounts range from smaller neighborhood businesses to large municipal, state,
federal and national accounts. In fiscal 2000, fleet sales totaled $1,987,000,
as compared to fleet sales totaling $1,432,000 in fiscal 1999. In the fourth
quarter of fiscal 1998 (the only quarter fleet sales were operating in fiscal
1998) sales totaled $185,000.
The Company intends to grow its fleet sales business by opening large,
approximately 15,000 to 20,000 square feet, industrial facilities dedicated to
painting and collision repair work for large fleets and oversized vehicles, such
as trucks, cabs and trailers, buses and recreational vehicles. The first fleet
center opened in July 2000 and is located in Southern California. Based on the
performance of this initial fleet center, the Company will establish others in
select areas.
RAW MATERIALS
Most of the raw materials used by the Company in manufacturing its paint,
including silicones, resins and pigments, are available from a number of
sources. A majority of such raw materials are provided to the Company by a
variety of wholesale chemical companies, including DuPont and Akzo-Nobel. The
Company
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has not encountered any major difficulty in obtaining adequate supplies of its
major raw materials and does not expect to encounter any such difficulty in the
foreseeable future.
By manufacturing its own paint and paint-related products, including primers
and sealers, the Company is better able to ensure the quality of its products,
to comply with environmental regulations and to control product availability and
cost. However, if necessary, automotive paint can be obtained from other sources
at a higher cost.
SEASONALITY
The Company's sales are seasonal in nature. Because of weather conditions
and Christmas holidays, sales for the months of November, December, January and
February are lower than the sales in the remaining months of the year. As a
result, a proportionately greater share of the Company's sales and earnings have
historically occurred in the first half of its fiscal year.
COMPETITION
The automobile painting business in which the Company is engaged is highly
competitive. The Company competes not only with nationally and regionally based
companies and franchisees engaged in production-style automobile painting
utilizing techniques similar to its own, but also with thousands of individual
automobile paint and body shops. Most of the Company's competitors generally
price their services higher than those charged by the Company.
In the field of non-franchised production line automobile painting, the
Company believes that it is substantially larger than any of its competitors and
that its experience, and the reasonable prices of its services, will enable it
to continue to compete effectively. The Company expects that its recently
completed new shop expansion, developing fleet sales, ongoing shop renovations
and technological improvements, along with new products, operational
restructuring and improved training programs will enable it to continue it to be
an effective competitor.
TRADEMARKS
The Company's success is dependent upon, among other things, its name. The
Company relies primarily on a combination of the protections provided in
applicable copyright, trademark and trade secret laws. The Company owns various
trademarks but believes that the marks Earl Scheib-Registered Trademark-,
Europaint-Registered Trademark-, and Euroclear-Registered Trademark- are
material to the business of the Company.
RESEARCH AND DEVELOPMENT
The Company is engaged in certain research and development to continue to
improve its existing paint products, update product lines, change formulations
in order to comply with changing environmental regulations, and develop new
products which can be introduced to the shops without significant cost or
training such as the Europaint-Registered Trademark- and
Euroclear-Registered Trademark-, UV Supergloss and new colors introduced during
fiscal 1997 and 1996. The Company constantly reviews new products and techniques
developed by its suppliers and others in its and related industries for their
applicability to the Company's operations. Although the Company's research and
development costs are increasing to accomplish these objectives, such
expenditures during the three years ended April 30, 2000 were not a significant
percentage of sales.
COMPLIANCE WITH ENVIRONMENTAL REGULATIONS
The Company's automobile painting and paint manufacturing operations are
subject to federal, state and local environmental regulations in many of the
areas in which it operates. The Company believes its operations substantially
comply with existing regulations in those geographic areas in which it now
operates. The Company, since it manufactures its owns products, has the ability
to modify and/or develop
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paint and paint related product formulations to reasonably ensure continued
compliance with new and changing environmental regulations. In addition, since
the Company primarily paints vehicles in its own colors, there is little waste
product produced.
EMPLOYEES
At April 30, 2000, the Company employed 1,038 employees, of which 278 were
sales, administrative, management or executive personnel and 760 were production
personnel. Production employees are represented by the International Brotherhood
of Teamsters under a collective bargaining agreement which extends through
September 15, 2001. None of the Company's executive, administrative, shop
management or clerical personnel are represented by a union. Management believes
its employee relations are good.
YEAR 2000 COMPLIANCE
Many computer systems, as well as certain hardware and equipment containing
date sensitive data, were structured to utilize a two-digit date field meaning
that they may not be able to properly recognize dates in the Year 2000. This
could result in significant system and equipment failures. Beginning in fiscal
1997, the Company began a process of evaluating its systems, as well as its
critical vendors, to identify potential Year 2000 issues and implement
solutions. It was decided that the best approach would be to replace the
majority of the Company's old information systems. The Company did not
experience any material Year 2000 disruption. The cost to address Year 2000
issues did not have a material impact on the Company's business, operations or
financial conditions.
ITEM 2. PROPERTIES
The Company owns the land and buildings occupied by 65 of the Company's
operating shops as of April 30, 2000. The remaining 105 of the Company's 170
shops were leased from outside third parties. The 170 shops are located in 140
cities in 28 states. In fiscal 2000, the Company began operations in 8 new shops
and ceased operations in 12 shops.
Leases for shop premises vary as to their terms, rental provisions,
expiration dates and the existence of renewal options. The number of years
remaining on leases for the Company's shops (excluding unexercised options)
range from a month-to-month tenancy to approximately 11 years. All of the
leases, with two exceptions, have fixed rentals with no additional rents based
upon shop sales. Many leases also require the Company to pay all or a portion of
the real estate taxes, insurance charges and maintenance expenses relating to
the leased premises. The Company maintains fire and liability insurance as well
as umbrella earthquake coverage for its shops and other real estate interests.
The Company secures sites for new stores by a variety of methods, including
lease, purchase, assignment or sublease of existing facilities, build-to-suit
leases, or purchase and development of sites that may be owned by the Company or
sold and leased back by the Company under sale-and-leaseback arrangements. In
many cases, the Company is able to lease or sublease existing buildings that
have been previously used for other purposes, such as automobile repair shops or
retail establishments. These sites must be suitable for the Company's needs, at
a lease rate that is within the Company's guidelines and without the need for
substantial expenditures to convert the facilities to the Company's needs. In
connection with the opening of new retail paint and body shops, the Company
generally makes capital investments and incurs expenditures (excluding
expenditures to purchase land, buildings or leasehold interest) of approximately
$175,000. In connection with the opening of new large fleet centers, the Company
expects expenses and capital investments (excluding expenditures to purchase
land, buildings or leasehold interest) to be approximately $300,000 to $400,000.
These costs consist of construction of improvements, paint and supply
inventories, fixtures, equipment, signs and pre-opening expense.
The Company intends to scale back the opening of new retail paint and body
shops in the fiscal year ending April 30, 2001, ("fiscal 2001"). Currently, the
Company plans to open one new retail shop in
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Vallejo, California. Additionally, the Company may need to open replacement
shops for shops which may be closed during fiscal 2001 as a result of lease
expirations, eminent domain or the like.
The majority of the Company's stores are in stand-alone sites on main
streets and have adjacent parking facilities. Store hours are generally from
7:30 a.m. to 6:00 p.m. Monday through Friday and 8:00 a.m. to 12:00 p.m. on
Saturday. The Company's shops are generally 6,000 square feet with new shops
ranging from approximately 3,500 square feet to 7,000 square feet and existing
shops ranging in size from approximately 3,500 square feet to approximately
12,000 square feet.
As of April 30, 2000, the Company had one parcel of real estate for sale.
The property had a net book value at April 30, 2000, of approximately $70,000
which is shown in the financial statements as Property Held for Sale.
The Company owns its corporate offices, located at 8737 Wilshire Boulevard,
Beverly Hills, California 90211. The facility has three floors and approximately
10,500 square feet of office space. In addition, the Company owns a
manufacturing and warehousing facility in Springfield, Missouri. The Company
manufactures and warehouses paint and related products used by the shops (and
warehouses other necessary supplies) in this facility until needed by the
Company's shops. This facility occupies approximately 30,600 square feet.
The Company believes its operating properties are in good operating
condition.
ITEM 3. LEGAL PROCEEDINGS
The Company is a defendant in a lawsuit filed in Los Angeles, California in
March 2000. The lawsuit essentially alleges that the Company, in California,
failed to pay overtime benefits to shop managers and assistant managers and made
unlawful deductions from the compensation of certain managers and assistant
managers. The applicable law provides for up to a four years statute of
limitations and the plaintiff is seeking class certification in this case. In
June 2000, after oral arguments, the Court denied plaintiff's motion for a
court-issued precertification notice to the potential class and stated it will
require plaintiff to move for class certification. The Company intends to
vigorously defend against this action, but at this point the ultimate outcome of
this matter cannot be determined with certainty. Unfavorable rulings and/or the
cost of resolution of any unfavorable rulings cannot be determined at this time,
but the Company believes that its ultimate exposure should not materially affect
its financial position.
The Company is involved in certain other legal proceedings and claims
arising in the ordinary course of its business. Aside from the litigation
mentioned above, management believes that the final disposition of such matters
should not have a material adverse effect on the Company's financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company, their ages and their positions are
set forth below.
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NAME AGE POSITION
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Christian K. Bement 58 Director, President and Chief Executive Officer
Charles E. Barrantes 48 Vice President and Chief Financial Officer
David I. Sunkin 33 Vice President and General Counsel, Secretary
James E. Smith 52 Vice President--Shop Operations
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Mr. Bement became President and Chief Executive Officer on January 1, 1999.
Mr. Bement previously served the Company as its Executive Vice President and
Chief Operating Officer since February 1995 and became a director in 1997. Prior
thereto and for over 25 years, Mr. Bement served in various senior executive
positions at Thrifty Corporation, most recently, from 1990-1994, as Executive
Vice President.
Mr. Barrantes became Vice President and Chief Financial Officer of the
Company in August 1999. Previously, he was Vice President, Chief Financial
Officer and Secretary of Medical Device Alliance Inc., a public company that
provided medical devices for liposuction and vertebroplasty procedures, from
July 1998 through July 1999. Prior to that, Mr. Barrantes was Vice President and
Chief Financial Officer in 1997 for Whittaker Corporation, a NYSE-listed
diversified company involved in the aerospace, defense electronics and global
networking industries; Executive Vice President, Chief Financial Officer and
Secretary of Thompson PBE, Inc., a Nasdaq-traded company that distributed paint
and related supplies to the collision repair industry, from March 1996 through
April 1997; and Vice President, Corporate Controller and Secretary of Superior
Industries International, Inc., a NYSE-listed company that primarily
manufactured cast aluminum wheels to original equipment manufacturers, from
January 1991 through March 1996.
Mr. Sunkin has served as Vice President and General Counsel, Secretary since
November, 1995. Mr. Sunkin also supervises the Company's Real Estate Department.
Prior to that, Mr. Sunkin was an Associate in the Business Practices Group of
the law firm Buchalter, Nemer, Fields & Younger.
Mr. Smith has served as Vice President--Shop Operations since December 1995.
Prior to that and for more than five years, Mr. Smith served the Company in
various operational capacities.
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PART II
The Company's Annual Report to Stockholders for the year ended April 30,
2000 ("2000 Annual Report") is filed as Exhibit 13 to this Report on Form 10-K.
The responses to Items 5, 6, 7 and 8 are contained in the 2000 Annual Report on
the pages noted and are specifically incorporated herein by reference in this
Report on Form 10-K. With the exception of these items, the 2000 Annual Report
is not deemed filed as a part of this Report.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
"Market Information" appearing on page 14 of the 2000 Annual Report is
incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
"Selected Financial Data" appearing on page 13 of the 2000 Annual Report is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing on pages 2 through 3 of the 2000 Annual Report is
incorporated herein by reference.
ITEM 7.A QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing on pages 2 through 3 of the 2000 Annual Report is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Company appearing on pages 4
through 12 of the 2000 Annual Report are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The Company, effective April 20, 1999, dismissed Deloitte & Touche, LLP,
independent auditors, as its principal independent accountant. The dismissal was
recommended by the Audit Committee of the Board of Directors.
Deloitte & Touche, LLP's report on the Company's financial statements for
fiscal years 1998 and 1997 did not contain an adverse opinion or disclaimer of
opinion, nor was the report qualified or modified as to uncertainty, audit scope
or accounting principles.
Effective April 22, 1999, following the recommendation of the Audit
Committee, the Company engaged Arthur Andersen, LLP, independent public
accountants, as its new principal independent accountant to audit the Company's
financial statements. The Company did not consult Arthur Andersen, LLP during
the two most recent fiscal years prior to the engagement with regard to any of
the matters described in Items 304(a) (1) or (2) of Regulation S-K.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The information required by Item 10 is incorporated by reference from page 8
of Part I included herein and the Company's definitive Proxy Statement dated
July 25, 2000.
ITEMS 11., 12. AND 13.
The information required by these items is contained in the Company's
definitive Proxy Statement dated July 25, 2000, which relates to election of the
Company's directors and which was filed with the Commission within 120 days
after the close of the Company's fiscal year pursuant to Regulation 14A of the
Securities Exchange Act of 1934.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. FINANCIAL STATEMENTS
The following consolidated financial statements of the Company and Report of
Independent Auditors, appearing on pages 4 through 12 of the 2000 Annual Report,
are filed as part of this Report on Form 10-K:
For the Fiscal Years Ended April 30, 2000, 1999 and 1998:
Consolidated Statements of Operations
Consolidated Statements of Shareholders' Equity
Consolidated Balance Sheets as of April 30, 2000 and 1999
Consolidated Statements of Cash Flows
Report of Independent Public Accountants
2. FINANCIAL STATEMENT SCHEDULES
Schedules have been omitted because they are not applicable or the
information required to bet set forth therein is either included in
the consolidated financial statements or is not significant.
3. EXHIBITS
The Exhibits required to be filed hereunder are indexed on pages 12
through 13.
(b) REPORTS ON FORM 8-K
None
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995
The statements which are not historical facts contained in this Annual
Report on Form 10-K are forward-looking statements that involve risks and
uncertainties, including, but not limited to, the effect of weather, the effect
of economic conditions, the impact of competitive products, services and
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 or closing of shops, new
product rollout, fleet painting operations and commercial coatings business, the
potential adverse effects of certain litigation and the impact of various tax
positions taken by the Company.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
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EARL SCHEIB, INC.
By /s/ CHRISTIAN K. BEMENT
------------------------------------------
Christian K. Bement
Date: July 25, 2000 President
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Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
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SIGNATURES TITLE DATE
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<S> <C> <C> <C>
By /s/ CHRISTIAN K. BEMENT President and Director [Chief Executive July 25, 2000
------------------------------- Officer]
Christian K. Bement
By /s/ PHILIP WM. COLBURN Chairman of the Board of Directors July 25, 2000
-------------------------------
Philip Wm. Colburn
By /s/ DANIEL A. SEIGEL Director July 25, 2000
-------------------------------
Daniel A. Seigel
By /s/ GREGORY J. HELM Director July 25, 2000
-------------------------------
Gregory J. Helm
By /s/ ALEXANDER L. KYMAN Director July 25, 2000
-------------------------------
Alexander L. Kyman
By /s/ STUART D. BUCHALTER Director July 25, 2000
-------------------------------
Stuart D. Buchalter
By /s/ DAVID EISENBERG Director July 25, 2000
-------------------------------
David Eisenberg
By /s/ CHARLES E. BARRANTES Vice President and Chief Financial July 25, 2000
------------------------------- Officer [Principal Financial Officer]
Charles E. Barrantes
By /s/ JOHN K. MINNIHAN Vice President [Principal Accounting July 25, 2000
------------------------------- Officer]
John K. Minnihan
</TABLE>
11
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT NO. PAGE NO.
----------- -----------
<S> <C> <C>
3(a)(1) Certificate of Incorporation of Earl Scheib, Inc., dated
December 22, 1961, as amended, filed as Exhibit 3(a) to
Registrant's Registration Statement No. 2-21540, effective
as of August 7, 1963, and hereby incorporated herein by
reference.
3(a)(2) Amendment to Certificate of Incorporation dated October 28,
1969, filed as Exhibit 1 to Registrant's Form 8-K Current
Report for the month of October, 1969 and hereby
incorporated herein by reference.
3(a)(3) Amendment to Certificate of Incorporation dated August 16,
1971, filed as Exhibit 1 to Registrant's Form 8-K Current
Report for the month of August, 1971 and hereby incorporated
herein by reference.
3(a)(4) Amendment to Certificate of Incorporation dated November 4,
1983, filed as Exhibit 3(a)(1) to Registrant's Form 8-K
Current Report for the month of August, 1983 and hereby
incorporated herein by reference.
3(a)(5) Amendment to Certificate of Incorporation dated October 2,
1986, as set forth in the Proxy Statement dated July 22,
1986 and Registrant's 10-Q Quarterly Report for the quarter
ended July 31, 1986 and hereby incorporated herein by
reference.
3(b) Amended and Restated Bylaws of Earl Scheib, Inc., filed as
an exhibit to Registrant's Current Report on Form 8-K dated
August 15, 1995, and hereby incorporated herein by
reference.
10(d) Earl Scheib, Inc. 1982 Incentive Stock Option Plan, filed as
Exhibit 10(d) to Registrant's Annual Report on Form 10-K
for the fiscal year ended April 30, 1982 and hereby
incorporated herein by reference.
10(i) Stock Option Agreement dated as of January 10, 1995 between
Registrant and Christian Bement filed as Exhibit 10(i) to
the Registrant's 1995 Form 10-K and hereby incorporated
herein by reference.
10(j) Earl Scheib, Inc. 1994 Performance Employee Stock Option
Plan, June 27, 1994 filed as Exhibit 10(l) to the
Registrant's 1995 Form 10-K and hereby incorporated herein
by reference.
10(k) Earl Scheib, Inc. 1994 Board of Directors Stock Option Plan,
June 27, 1994 filed as Exhibit 10(m) to the Registrant's
1995 Form 10-K and hereby incorporated herein by reference.
10(l) Agreement for Issuance of Letters of Credit dated as of
February 16, 1995 between Registrant and City National
Bank, filed as Exhibit 10(a) to Registrant's Quarterly
Report on Form 10-Q for the quarter ended January 31, 1995,
and hereby incorporated herein by reference.
10(m) Amended Supplemental Terms Letter dated March 10, 2000
between City National Bank and Registrant, filed as
Exhibit 10 to Registrant's Quarterly Report on Form 10-Q for
the quarter ended January 31, 2000, and hereby incorporated
by reference.
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT NO. PAGE NO.
----------- -----------
<S> <C> <C>
13 2000 Annual Report to Stockholders of Earl Scheib, Inc. (not
deemed filed except to the extent that sections thereof are
specifically incorporated into this report on Form 10-K by
reference).
22 Subsidiaries of the Registrant filed as Exhibit 22 to the
Registrant's 1999 Form 10-K and hereby incorporated herein
by reference.
24.1 Consent of Current Independent Public Accountants.
24.2 Consent of Prior Independent Auditors.
99.1 Report of Prior Independent Auditors.
27.1 Financial Data Schedule.
</TABLE>
13
<PAGE>
EARL SCHEIB INC. AND SUBSIDIARIES
AVAILABILITY OF EXHIBITS
------------------------
<TABLE>
<S> <C> <C>
The Company will furnish upon
request copies of the
exhibits indicated on pages
12 through 13 of the
Form 10-K at a cost of
25 CENTS per page, which is
the reasonable cost to the
Company in fulfilling the
request.
</TABLE>
14
