SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended April 1, 2000
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 01-13409
MIDAS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 36-4180556
(State or Other Jurisdiction of
Incorporation or Organization ) (I.R.S. Employer Identification No.)
1300 Arlington Heights Road Itasca, Illinois 60143
(Address of Principal Executive Offices) (Zip Code)
(630) 438-3000
(Registrant's telephone number, including area code)
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 the past 90 days. Yes X No
The number of shares of the Registrant's Common Stock, $.001 par value per
share, outstanding as of April 1, 2000 was 15,643,299.
PART I. FINANCIAL INFORMATION
Item 1: Financial Statements
MIDAS, INC.
CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
(In millions, except for earnings and dividends per share)
First Quarter
------------------------------
Fiscal Fiscal
2000 1999
---- ----
(13 Weeks) (13 Weeks)
Sales and revenues................................................................ $ 78.6 $ 84.7
Cost of sales and revenues........................................................ 41.9 44.9
Selling, general, and administrative expenses..................................... 24.2 27.3
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Operating income................................................................ 12.5 12.5
Interest expense.................................................................. (2.1) (2.2)
Other income, net................................................................. 1.9 0.5
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Income before taxes............................................................ 12.3 10.8
Income taxes...................................................................... 4.8 4.3
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Net income..................................................................... $ 7.5 $ 6.5
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Earnings per share:
Basic.......................................................................... $ .48 $ .39
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Diluted........................................................................ $ .47 $ .37
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Dividends per common share........................................................ $ .02 $ .02
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Average number of shares
Common shares outstanding...................................................... 15.7 16.9
Equivalent shares on outstanding stock options................................. .2 .6
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Shares applicable to diluted earnings.......................................... 15.9 17.5
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See notes to condensed financial statements.
1
MIDAS, INC.
CONDENSED BALANCE SHEETS
(In millions)
First
Quarter Fiscal
Fiscal Year End
2000 1999
---- ----
(Unaudited)
Assets:
Current assets:
Cash and cash equivalents..................................................... $ 15.8 $ 13.1
Receivables, net.............................................................. 54.4 43.5
Inventories................................................................... 65.3 63.5
Other current assets.......................................................... 17.2 20.7
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Total current assets........................................................ 152.7 140.8
Property and equipment, net.......................................................... 142.2 140.5
Other assets......................................................................... 24.0 24.6
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Total assets................................................................ $ 318.9 $ 305.9
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Liabilities and Equity:
Current liabilities:
Short-term debt............................................................... $ 1.5 $ 1.8
Accounts and dividends payable................................................ 31.0 26.4
Income taxes payable.......................................................... 3.2 1.6
Accrued expenses.............................................................. 34.0 26.4
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Total current liabilities................................................... 69.7 56.2
Long-term debt....................................................................... 95.7 101.0
Obligations under capital leases..................................................... 9.1 9.3
Deferred income taxes and other liabilities.......................................... 23.6 24.8
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Total liabilities........................................................... 198.1 191.3
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Shareholders' equity:
Common stock ($.001 par value, 100 million shares authorized;
17.3 million shares issued) and paid-in capital.................................. 24.7 26.8
Treasury stock, at cost (1.6 million shares and 1.6 million shares)................ (43.7) (44.9)
Notes receivable from common stock sold to officers................................ (6.1) (6.1)
Retained income.................................................................... 151.2 144.0
Cumulative other comprehensive income (loss)....................................... (5.3) (5.2)
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Total shareholders' equity....................................................... 120.8 114.6
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Total liabilities and equity................................................... $ 318.9 $ 305.9
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See notes to condensed financial statements.
2
MIDAS, INC.
CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
(In millions)
First Quarter
-------------
Fiscal Fiscal
2000 1999
---- ----
Cash flows from operating activities:
Net income.......................................................... $ 7.5 $ 6.5
Adjustments reconciling net income to net cash provided by
operating activities:
Depreciation and amortization.................................. 2.9 2.9
Cash outlays for business transformation costs................. (2.1) (3.0)
Changes in assets and liabilities.............................. 3.0 (1.3)
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Net cash provided by operating activities........................... 11.3 5.1
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Cash flows from investing activities:
Capital investments................................................. (4.7) (4.3)
Proceeds from sales of property and equipment....................... 5.6 1.5
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Net cash provided by (used in) investing activities................. 0.9 (2.8)
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Cash flows from financing activities:
Long-term debt repayments........................................... (5.6) (0.4)
Payment of obligations under capital leases......................... (0.2) (0.1)
Cash received for common stock...................................... 0.9 3.9
Cash paid for treasury shares....................................... (4.3) (17.9)
Dividends to Shareholders........................................... (0.3) (0.3)
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Net cash used in financing activities............................... (9.5) (14.8)
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Net change in cash and cash equivalents............................. 2.7 (12.5)
Cash and cash equivalents at beginning of period.................... 13.1 36.9
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Cash and cash equivalents at end of period.......................... $ 15.8 $ 24.4
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See notes to condensed financial statements.
3
MIDAS, INC.
CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)
(In millions)
Notes
Receivable
Common Stock From
and Common
Paid-in Capital Treasury Stock Stock Sold Retained Comprehensive Income
Shares Amount Shares Amount to Officers Earnings Current Cumulatve
------- ------ ------ ------ ----------- -------- ------- ---------
Fiscal year-end 1999............. 17.3 $ 26.8 (1.6) $(44.9) $(6.1) $144.0 $ (5.2)
Common shares issued from
treasury........................ - ( 1.2) 0.1 3.5 - - -
Purchase of treasury shares...... - - (0.2) (4.2) - - -
Stock option transactions........ - ( 0.9) 0.1 1.9 - - -
Net income....................... - - - - - 7.5 $ 7.5 -
Other comprehensive income -
foreign currency translation
adjustments..................... - - - - - - (0.1) (0.1)
-----
Comprehensive income............. - - - - - - $ 7.4 -
=====
Dividends to shareholders........ - - - - - (0.3) -
------- ------ ----- ------- ---------- ------ ------
April 1, 2000.................... 17.3 $ 24.7 (1.6) $(43.7) $( 6.1) $151.2 $ (5.3)
======= ====== ===== ======= ========== ====== ======
See notes to condensed financial statements.
4
MIDAS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. Financial Statement Presentation
The condensed interim period financial statements presented herein do not
include all of the information and disclosures customarily provided in annual
financial statements and they have not been audited, as permitted by the rules
and regulations of the Securities and Exchange Commission. The condensed
interim period financial statements should be read in conjunction with the
annual financial statements included in the annual report on Form 10-K. In the
opinion of management, these financial statements have been prepared in
conformity with generally accepted accounting principles and reflect all
adjustments necessary for a fair statement of the results of operations and cash
flows for the interim periods ended April 1, 2000 ("first quarter fiscal 2000")
and March 27, 1999 ("first quarter fiscal 1999") and of its financial position
as of April 1, 2000. All such adjustments are of a normal recurring nature.
The results of operations for the first quarter fiscal 2000 and 1999 are not
necessarily indicative of the results of operations for the full year.
The unaudited condensed financial statements present the consolidated financial
information for Midas, Inc. and its wholly-owned subsidiaries ("Midas" or the
"Company"). The unaudited condensed financial statements for both the first
quarter ended April 1, 2000 and the first quarter ended March 27, 1999 covered a
13-week period.
2. Supplemental Cash Flow Activity
Net cash provided by operating activities reflect cash payments and receipts for
interest and taxes as follows (in millions):
First Quarter
--------------------------------------
Fiscal Fiscal
2000 1999
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Interest paid....................................................... $ 0.9 $ 0.9
Income tax (refunds)................................................ ( 0.4) ( 0.4)
Income taxes paid................................................... 0.7 3.1
3. Inventories
Inventories, summarized by major classification, were as follows (in millions):
First
Quarter Fiscal
Fiscal Year End
2000 1999
---- ----
(Unaudited)
Raw materials and work in process......................... $ 4.2 $ 4.5
Finished goods............................................ 61.1 59.0
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$65.3 $63.5
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
LIQUIDITY AND CAPITAL RESOURCES
Midas' cash and cash equivalents totaled $15.8 million at the end of first
quarter fiscal 2000 and $24.4 million at the end of first quarter fiscal 1999.
The Company generated net cash flows from operating activities of $11.3
million for the first quarter of fiscal 2000 versus $5.1 million for the first
quarter of fiscal 1999. The year-over-year increase was due to changes in
working capital, along with higher net income and lower cash outlays for
business transformation costs in fiscal 2000.
Investing activities provided $0.9 million in cash during the first quarter
of fiscal 2000 while using $2.8 million during the comparable quarter one year
ago. Fiscal 2000 includes proceeds of $5.6 million from the sale of a former
manufacturing facility, while fiscal 1999 includes proceeds of $1.5 million
primarily related to the sale, licensing and franchising of company-operated
shops. Capital investments of $4.7 million in fiscal 2000 and $4.3 million in
fiscal 1999 were primarily related to the Company's ongoing management
information systems projects.
Net cash used in financing activities was $9.5 million in the first quarter
of fiscal 2000 and $14.8 million in the first quarter of fiscal 1999. This
decrease was primarily the result of lower treasury stock repurchases in fiscal
2000, partially offset by higher repayments of long-term debt.
The Company believes that current cash balances, cash generated from
operations, and availability under its line of credit will be adequate to fund
the growth in working capital and capital expenditures necessary to support
future growth in sales for the foreseeable future, as well as the Company's
share repurchase plan.
6
RESULTS OF OPERATIONS
First Quarter Fiscal 2000 Compared with First Quarter Fiscal 1999
The following is a summary of the Company's sales and revenues for the
first quarter of fiscal 2000 and 1999: ($ Millions)
Percent Percent
2000 to Total 1999 to Total
---- -------- ---- --------
Replacement parts sales............................ $52.5 66.8% $53.6 63.3%
Company-operated shop retail sales................. 0.4 0.5 4.8 5.7
Royalties and license fees......................... 15.5 19.7 15.7 18.5
Real estate rental revenues........................ 9.9 12.6 9.9 11.7
Other.............................................. 0.3 0.4 0.7 0.8
----- ----- ----- -----
Sales and revenues................................. $78.6 100.0% $84.7 100.0%
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Approximately $4.4 million of the overall sales decline of $6.1 million was
due to the sale, licensing and franchising of company-operated shops, while the
balance was due to slightly lower replacement parts sales and other revenues.
The sale, licensing and franchising of company-operated shops was part of the
Company's strategy to dispose of all of its company-operated shops, and to
become a focused and efficient operator of a North American franchise and
wholesale parts distribution network, and a licensor of Midas trademarks outside
of North America.
The Company's replacement parts sales continue to be adversely affected by
the overall decline in market demand for exhaust products. These declines were
partially offset by the sale of newly introduced climate control products in the
first quarter of fiscal 2000, as the Company pursues its strategy of adding new
products and services at the wholesale and retail level to offset the declines
in the exhaust business.
Cost of sales and revenues declined $3.0 million or 6.7% compared to the
first quarter of fiscal 1999. Cost of sales and revenues as a percent of total
sales and revenues increased slightly from 53.0% in the first quarter of fiscal
1999 to 53.3% in the current quarter. This increase as a percent of sales was
due to the elimination of high margin retail sales at company-operated shops.
Selling, general and administrative expenses for the quarter declined $3.1
million or 11.4% from the first quarter of fiscal 1999 to $24.2 million. This
decrease in operating expenses was primarily related to the sale, licensing and
franchising of the company-operated shops and the consolidation of the Canadian
administration functions into the U.S. As a percentage of total sales and
revenues, selling, general and administrative expenses represented 30.8% of
sales in the first quarter of fiscal 2000 versus 32.2% in the year ago quarter.
Operating income was $12.5 million in the first quarter of both fiscal 2000
and 1999, while the operating income margin for the quarter increased to 15.9%
in fiscal 2000 versus 14.8% in fiscal 1999.
Other income of $1.9 million in the first quarter of 2000 included a non-
recurring gain of $1.3 million from the sale of one of the Company's
manufacturing plants.
As a result of the above items, net income increased $1.0 million or 15.4%
from $6.5 million in the first quarter of fiscal 1999 to $7.5 million in the
first quarter of fiscal 2000.
7
FORWARD LOOKING STATEMENTS
This report contains, and certain of the Company's other public documents
and statements and oral statements contain and will contain, forward-looking
statements that reflect management's current assumptions and estimates of future
performance and economic conditions using information currently available. Such
statements are made in reliance upon the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. The Company cautions investors that
any forward-looking statements are subject to risks and uncertainties that may
cause actual results and future trends to differ materially from those
projected, stated, or implied by the forward-looking statements.
The Company's results of operations and the forward-looking statements
could be affected by, among others things: general economic conditions in the
markets in which the Company operates; economic developments that have a
particularly adverse effect on one or more of the markets served by the Company;
the ability to execute management's internal operating plans; the timing and
magnitude of capital expenditures; economic and market conditions in the U.S.
and worldwide; currency exchange rates; changes in consumer spending levels and
demand for new products and services; cost and availability of raw materials;
and overall competitive activities. The Company disclaims any intention or
obligation to update or revise any forward-looking statements, whether as a
result of new information, future events, or otherwise.
8
PART II. OTHER INFORMATION
No additional information is enclosed. Exhibit 27, Financial Data Schedule, was
filed only electronically with the Securities Exchange Commission.
SIGNATURE
Pursuant to the requirements 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.
Date: May 15, 2000: /s/ William M. Guzik
-----------------------------
William M. Guzik
Vice President and Controller
(As Chief Accounting Officer and Duly
Authorized Officer of Midas, Inc.)
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