ITASCA, Ill.--(BUSINESS WIRE)--Oct. 25, 2007--Midas, Inc. (NYSE: MDS) reported net earnings of $3.0 million--or $0.21 per diluted share--for the third quarter ended Sept. 29, 2007, compared to net earnings of $2.4 million--or $0.16 per diluted share--in the prior year. Third quarter results in both years included special items of $0.02 per share, primarily consisting of business transformation charges related to the continuing shop re-imaging program.
For the first nine months of 2007, Midas reported net income of $8.2 million--or $0.56 per diluted share--compared to $8.8 million--or $0.56 per diluted share--a year ago. The 2006 nine-month net income included a $3.4 million gain on asset sales that added $0.13 to earnings per share.
"Operating income was virtually flat for the quarter, despite a challenging retail environment that saw a 3.2 percent comparable shop sales decline in the U.S.," said Alan D. Feldman, Midas' chairman and chief executive officer.
"Third quarter retail sales trends for the Midas system were similar to many retailers in North America," Feldman said. "Also, our September results were comparing to a very strong month last year when U.S. comparable shops sales were up five percent, led by an eight percent increase in brakes.
"Importantly, profit improvements and expense reductions in other parts of our business offset the decline of $1 million in worldwide franchise royalties," Feldman said. "This, combined with a more normalized tax rate in 2007 and a reduced share count due to our ongoing share buyback, enabled the company to post a 31 percent increase in earnings per share."
Feldman said the comparable sales decline in U.S. shops occurred despite continuing gains of nearly nine percent in tires and nearly 11 percent in oil changes.
"These increases could not offset comparable sales declines of seven percent in brakes and 11 percent in exhaust," he said.
In Canada, comparable shop sales declined by 1.5 percent in the third quarter, including declines of five percent in brakes and nine percent in exhaust.
"Comparable retail sales at company shops declined 2.4 percent, the first comparable shop sales decline in 14 quarters," he said. "Comparable shop sales were up 7.4 percent in our Chicago company shops. However, we experienced significant weakness in our Florida markets."
Midas ended the third quarter with 80 company shops, an increase of four during the quarter.
The company's third quarter marketing message focused on maintenance services.
"In July, we began a heavy schedule of advertising, which runs through mid-November for the $29.95 Midas Touch Maintenance Package including oil and filter replacement, tire inspection and rotation and a multi-point vehicle inspection," Feldman said. "The promotion helped drive an increase in oil changes of more than 10 percent."
Strong operating cash flow continues
Selected Cash Flow Information YTD Q3 YTD Q3
($ in millions except per share) 2007 2006
Cash provided by operating activities
before cash outlays for business
transformation costs and net changes in
assets and liabilities $24.8 $22.2
Cash outlays for business transformation
costs (2.4) (4.8)
Net changes in assets and liabilities 2.0 2.9
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Net cash provided by operating activities $24.4 $20.3
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Net cash provided by operating activities
per diluted share $1.65 $1.30
Capital investments $(2.9) $(2.9)
Net borrowings (retirements) of long-term
debt and leases 7.5 (4.2)
Cash paid for treasury shares (21.1) (13.3)
MIDAS, INC.
CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
(In millions, except for earnings per share)
For the quarter For the nine months
ended fiscal ended fiscal
September September
--------------------- ---------------------
2007 2006 2007 2006
---------- ---------- ---------- ----------
(13 weeks) (13 weeks) (39 weeks) (39 weeks)
Sales and revenues:
Franchise royalties and
license fees $15.6 $16.6 $46.2 $48.7
Real estate revenues 9.1 9.1 27.0 27.3
Company-operated shop
retail sales 12.9 10.8 32.9 30.8
Replacement part sales
and product royalties 7.4 7.8 23.7 23.3
Other 1.1 1.0 3.3 2.9
---------- ---------- ---------- ----------
Total sales and
revenues 46.1 45.3 133.1 133.0
---------- ---------- ---------- ----------
Cost of sales and revenues:
Real estate cost of
revenues 5.5 5.4 16.4 16.7
Company-operated shop
cost of sales 3.1 2.7 7.9 7.4
Replacement part cost of
sales 6.2 6.1 19.4 18.5
Warranty expense 1.2 1.4 3.6 4.3
Other cost of sales 0.3 0.3 0.9 0.8
---------- ---------- ---------- ----------
Total cost of sales
and revenues 16.3 15.9 48.2 47.7
---------- ---------- ---------- ----------
Gross profit 29.8 29.4 84.9 85.3
Selling, general, and
administrative expenses 21.9 21.4 62.5 65.8
Gain on sale of assets ( 0.2) -- ( 0.2) ( 3.4)
Business transformation
charges 0.6 0.4 2.1 0.9
---------- ---------- ---------- ----------
Operating income 7.5 7.6 20.5 22.0
Interest expense ( 2.3) ( 2.3) ( 6.8) ( 6.8)
Other income, net -- 0.3 0.3 0.8
---------- ---------- ---------- ----------
Income before income
taxes 5.2 5.6 14.0 16.0
Income tax expense 2.2 3.2 5.8 7.2
---------- ---------- ---------- ----------
Net income $3.0 $2.4 $8.2 $8.8
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Earnings per share:
Basic $0.22 $0.16 $0.58 $0.58
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Diluted $0.21 $0.16 $0.56 $0.56
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Average number of shares:
Common shares outstanding 13.8 15.0 14.1 15.2
Common stock warrants 0.1 0.1 0.1 0.1
---------- ---------- ---------- ----------
Shares applicable to
basic earnings 13.9 15.1 14.2 15.3
Equivalent shares on
outstanding stock awards 0.6 0.4 0.6 0.3
---------- ---------- ---------- ----------
Shares applicable to
diluted earnings 14.5 15.5 14.8 15.6
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Capital expenditures $1.8 $1.4 $2.9 $2.9
========== ========== ========== ==========
MIDAS, INC.
CONDENSED BALANCE SHEETS
(In millions)
Fiscal Fiscal
September December
2007 2006
----------- -----------
(Unaudited)
Assets:
Current assets:
Cash and cash equivalents $2.5 $2.4
Receivables, net 27.6 28.7
Inventories 2.6 3.1
Deferred income taxes 6.7 7.6
Prepaid assets 3.7 3.3
Other current assets 3.5 4.3
----------- -----------
Total current assets 46.6 49.4
Property and equipment, net 95.2 99.4
Goodwill and other intangibles, net 11.1 1.5
Deferred income taxes 52.5 57.2
Other assets 7.2 8.9
----------- -----------
Total assets $212.6 $216.4
=========== ===========
Liabilities and equity:
Current liabilities:
Current portion of long-term obligations $1.8 $2.0
Accounts payable 13.0 15.9
Current portion of accrued warranty 4.7 4.6
Accrued expenses 21.8 21.5
----------- -----------
Total current liabilities 41.3 44.0
Long-term debt 70.0 61.1
Obligations under capital leases 2.3 3.0
Finance lease obligation 33.1 33.9
Accrued warranty 29.1 28.8
Other liabilities 5.3 8.3
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Total liabilities 181.1 179.1
----------- -----------
Temporary equity:
Non-vested restricted stock subject to
redemption 3.9 2.3
Shareholders' equity:
Common stock ($.001 par value, 100 million
shares authorized, 17.7 million shares
issued) and paid-in capital 8.2 10.3
Treasury stock, at cost (3.4 million
shares and 2.7 million shares) (72.9) (57.8)
Retained income 97.3 89.1
Accumulated other comprehensive loss (5.0) (6.6)
----------- -----------
Total shareholders' equity 27.6 35.0
----------- -----------
Total liabilities and shareholders'
equity $212.6 $216.4
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Midas is a provider of automotive services, offering brake, maintenance, tires, exhaust, steering and suspension services.