Tale of two companies highlights different strategies to business growth.

FOR Earl Scheib Inc. and American Reprographics Inc., the future leads down two separate paths.

Earl Scheib, the Los Angeles chain of auto paint and body shops, has delisted itself from the American Stock Exchange and its rigorous audit and reporting requirements. American Reprographics, a chain of stores that distributes and prints construction blueprints, recently completed an initial public offering and is fully embracing the public markets.

Scheib delist 

The chain of 107 paint and body shops had flourished decades ago with its famous $29.95 paint job. But new, higher quality paints introduced by Detroit in the 1980s cut into its business. So did the company's reputation for shoddy work.

Scheib lost $1.3 million in the quarter ended Jan. 31 on revenue of $9.7 million. That's less than the $2 million it lost a year ago in the like period, but it's pinching pennies as it tries to turn itself around.

There were takeover flirtations, but Chief Executive Chris Bement said the best offer was only $3.50 a share, while the company as valued by its real estate alone is worth at least $4.80 a share.

What about going private? That would have required buying out shareholders. Management then hit upon a simpler idea. Since it had fewer than 300 shareholders, the company was not formally regulated by the Securities and Exchange Commission. It only had to follow listing and audit regulations.

The decision was made to delist from the American Stock Exchange and have shares traded over the counter on the pink sheets, where only annual reports have to be filed and audit requirements are far weaker.

It helped that three shareholders held about 60 percent of the stock (including the estate of founder Earl Scheib). That allowed management to get fast approval for the move, which was completed in March.

Now, there are plans to invest $1 million on a computer sales and ordering system that will reduce inventory, prevent theft, track successful products and services and monitor attendance and payrolls.

Bement expects the savings will bring a return on the investment within 14 months. There also are plans to open another three stores this year, reversing a trend that saw 70 stores close last year.

Growing printer

In going public last February, American Reprographics offered private equity investors the chance to cash out, while the company gained access to capital for acquisitions.

"We've seen a great opportunity to consolidate quickly in this industry, which is very fragmented, into small, local family-owned shops," said K. "Suri" Suriyakumar, chief operating officer and president of the Glendale-based company.

Suri, a Sri Lankan immigrant, and his lifelong friend, S. Chandra Mohan, bought the company in 1989 when it had just two shops and annual sales of $9 million. Using traditional bank financing, they began buying up competing companies.

Growth was accelerated in 1997 when TZS Capital invested $15 million. Suri and Mohan recapitalized two years later, when Code Hennesy & Simmons bought out ZS Capital's investment while providing American Reprographics with an $82.5 million capital injection.

To accelerate growth even more, they completed a $174 million public offering on the New York Stock Exchange. Code Hennesy & Simmons remains a shareholder with about a quarter of the stock, but will now have a chance to cash out. "With private equity investors, it's generally understood that they have a three to five-year cycle before exiting," Suri said.