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 March 31, 2001
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 (I.R.S. Employer Identification No.)
Incorporation or Organization)
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 March 31, 2001 was 14,918,016.
PART I. FINANCIAL INFORMATION
Item 1: Financial Statements
MIDAS, INC.
CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
(In millions, except for earnings and dividends per share)
For the quarter
ended fiscal March
-------------------
2001 2000
---- ----
(13 Weeks) (13 Weeks)
Sales and revenues............................................................... $ 77.5 $ 78.6
Cost of sales and revenues....................................................... 40.7 41.9
Selling, general, and distribution expenses...................................... 29.5 24.2
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Operating income............................................................... 7.3 12.5
Interest expense................................................................. (2.3) (2.1)
Other income, net................................................................ 0.2 1.9
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Income before taxes............................................................ 5.2 12.3
Income taxes..................................................................... 2.0 4.8
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Net income..................................................................... $ 3.2 $ 7.5
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Earnings per share:
Basic.......................................................................... $ .21 $ .48
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Diluted........................................................................ $ .21 $ .47
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Dividends per common share....................................................... $ .08 $ .02
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Average number of shares
Common shares outstanding...................................................... 15.0 15.7
Equivalent shares on outstanding stock options................................. - .2
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Shares applicable to diluted earnings.......................................... 15.0 15.9
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See notes to condensed financial statements.
1
MIDAS, INC.
CONDENSED BALANCE SHEETS
(In millions)
Fiscal Fiscal
March December
2001 2000
------ --------
(Unaudited)
Assets:
Current assets:
Cash and cash equivalents..................................................... $ 1.4 $ 1.8
Receivables, net.............................................................. 51.4 45.6
Inventories................................................................... 90.2 76.9
Other current assets.......................................................... 16.3 24.3
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Total current assets........................................................ 159.3 148.6
Property and equipment, net..................................................... 152.3 149.9
Other assets.................................................................... 29.8 23.2
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Total assets................................................................ $341.4 $321.7
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Liabilities and Equity:
Current liabilities:
Short-term debt............................................................... $ 4.5 $ 3.2
Current portion of long-term obligations...................................... 16.6 16.6
Accounts and dividends payable................................................ 32.5 31.3
Accrued expenses.............................................................. 32.6 28.9
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Total current liabilities................................................... 86.2 80.0
Long-term debt.................................................................. 94.9 84.1
Obligations under capital leases................................................ 8.8 9.1
Deferred income taxes and other liabilities..................................... 21.5 20.1
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Total liabilities........................................................... 211.4 193.3
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Shareholders' equity:
Common stock ($.001 par value, 100 million shares authorized;
17.3 million shares issued) and paid-in capital............................. 23.8 24.6
Treasury stock, at cost (2.3 million shares and 2.3 million shares)........... (55.1) (55.6)
Notes receivable from common stock sold to officers........................... (4.9) (6.1)
Unamortized restricted stock awards........................................... (2.1) (1.8)
Retained income............................................................... 175.2 173.2
Cumulative other comprehensive income (loss).................................. (6.9) (5.9)
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Total shareholders' equity.................................................. 130.0 128.4
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Total liabilities and equity.............................................. $341.4 $321.7
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See notes to condensed financial statements.
2
MIDAS, INC.
CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
(In millions)
For the quarter
ended fiscal March
------------------
2001 2000
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Cash flows from operating activities:
Net income.......................................................... $ 3.2 $ 7.5
Adjustments reconciling net income to net cash provided by
operating activities:
Depreciation and amortization................................... 3.6 2.9
Cash outlays for business transformation costs.................. (1.6) (2.1)
Changes in assets and liabilities............................... (5.8) 3.0
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Net cash provided by (used in) operating activities................. (0.6) 11.3
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Cash flows from investing activities:
Cash paid for capital investments and acquired businesses........... (10.5) (4.7)
Proceeds from sales of property and equipment....................... - 5.6
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Net cash provided by (used in) investing activities................. (10.5) 0.9
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Cash flows from financing activities:
Net increase in short-term debt..................................... 1.3 -
Long-term debt obligations incurred................................. 10.8 -
Long-term debt repayments........................................... - (5.6)
Payment of obligations under capital leases......................... (0.3) (0.2)
Cash received for common stock...................................... - 0.9
Cash paid for treasury shares....................................... (0.8) (4.3)
Dividends paid to shareholders...................................... (0.3) (0.3)
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Net cash provided by (used in) financing activities................. 10.7 (9.5)
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Net change in cash and cash equivalents............................. (0.4) 2.7
Cash and cash equivalents at beginning of period.................... 1.8 13.1
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Cash and cash equivalents at end of period.......................... $ 1.4 $ 15.8
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See notes to condensed financial statements.
3
MIDAS, INC.
CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)
(In millions)
Common Stock
And Notes Receivable Comprehensive
Paid-in Capital Treasury Stock From Unamortized Income
--------------- --------------- Common Stock Restricted Retained --------------------
Shares Amount Shares Amount Sold to Officers Stock Award Earnings Current Cumulative
------ ------ ------ ------ ---------------- ----------- --------- ------- ----------
Fiscal year end 2000.......... 17.3 $24.6 (2.3) $(55.6) $(6.1) $(1.8) $173.2 $(5.9)
Restricted stock award........ -- (0.8) -- 1.3 -- (0.5) -- --
Purchase of treasury shares... -- -- -- (0.8) -- -- -- --
Retirement of notes receivable
from officers............... -- -- -- -- 1.2 -- -- --
Amortization of restricted
stock awards................ -- -- -- -- -- 0.2 -- --
Net income.................... -- -- -- -- -- -- 3.2 $ 3.2 --
Other comprehensive income
--foreign currency
translation adjustments... -- -- -- -- -- -- -- (1.0) (1.0)
-----
Comprehensive income.......... -- -- -- -- -- -- -- $ 2.2 --
=====
Dividends declared to
shareholders................ -- -- -- -- -- -- (1.2) --
------ ------ ------ ------ ----- ----- ------ -----
Fiscal first quarter end 2001. 17.3 $23.8 (2.3) $(55.1) $(4.9) $(2.1) $175.2 $(6.9)
====== ====== ====== ====== ===== ===== ====== =====
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
accounting principles generally accepted in the United States and reflect all
adjustments necessary for a fair statement of the results of operations and cash
flows for the interim periods ended March 31, 2001 ("first quarter fiscal 2001")
and April 1, 2000 ("first quarter fiscal 2000") and of its financial position as
of March 31, 2001. All such adjustments are of a normal recurring nature. The
results of operations for the first quarter fiscal 2001 and 2000 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 the quarters ended
March 31, 2001 and April 1, 2000 both cover 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):
For the quarter
ended fiscal March
------------------
2001 2000
----- -----
Interest paid.................................. $ 1.0 $ 0.9
Income tax refunds............................. (7.8) (0.4)
Income taxes paid.............................. 0.3 0.7
3. Inventories
Inventories, summarized by major classification, were as follows (in millions):
Fiscal Fiscal
March December
2001 2000
------ --------
(Unaudited)
Raw materials and work in process............. $ 4.6 $ 4.7
Finished goods................................ 85.6 72.2
----- -----
$90.2 $76.9
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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 decreased $0.4 million in the first
quarter of fiscal 2001.
The Company's operating activities used net cash flows of $0.6 million
during the first quarter of fiscal 2001 compared to generating $11.3 million of
cash flow for the first quarter of fiscal 2000. The year-over-year decrease was
due to changes in working capital, primarily inventory increases related to the
expansion of new Parts Warehouse, Inc. ("PWI") distribution locations, and lower
net income.
Investing activities used $10.5 million in cash during the first quarter of
fiscal 2001 compared to generating $0.9 million during the comparable quarter
one year ago. Fiscal 2001 investing activities consist of capital investments
and cash paid for acquired businesses totaling $10.5 million. Capital
investments relate to ongoing system projects, expansion of the PWI network, and
normal maintenance capital expenditures. Businesses acquired during the first
quarter of fiscal 2001 include additional company-operated shops and the
purchase of Progressive Automotive Systems of Houston, Texas, a provider of
automotive industry point-of-sale software sold under the name R.O.Writer.
Fiscal 2000 investing activities consist of capital investments and cash paid
for acquired businesses totaling $4.7 million, offset by proceeds of $5.6
million related to the sale of a former manufacturing facility. Fiscal 2000
capital expenditures were primarily related to management information system
projects, while businesses acquired consisted of 15 climate control distribution
locations purchased as part of the PWI expansion strategy.
Net cash generated by financing activities was $10.7 million in the first
quarter of fiscal 2001 compared to $9.5 million of funds used in the first
quarter of fiscal 2000. This change was the result of lower treasury stock
purchases and higher borrowings in fiscal 2001 as compared to fiscal 2000.
During fiscal 2001, the Company borrowed $12.1 million to fund capital
investments and business acquisitions and paid $0.8 million for treasury shares.
In fiscal 2000, the Company repaid $5.6 million in debt and paid $4.3 million
for treasury shares.
The Company believes that current cash balances, cash generated from
operations, and availability under its line of credit will be adequate to fund
the growth in working capital and capital expenditures necessary to support
planned increases in sales for the foreseeable future.
6
RESULTS OF OPERATIONS
First Quarter Fiscal 2001 Compared with First Quarter Fiscal 2000
The following is a summary of the Company's sales and revenues for the
first quarter of fiscal 2001 and 2000: ($ Millions)
Percent Percent
2001 to Total 2000 to Total
----- -------- ----- --------
Replacement parts sales............................ $50.0 64.5% $52.5 66.8%
Company-operated shop retail sales................. 1.7 2.2 0.4 0.5
Royalties and license fees......................... 15.8 20.4 15.5 19.7
Real estate rental revenues........................ 9.6 12.4 9.9 12.6
Other.............................................. 0.4 0.5 0.3 0.4
----- ----- ----- -----
Sales and revenues................................. $77.5 100.0% $78.6 100.0%
===== ===== ===== =====
Total sales and revenues for the first quarter of 2001 were down slightly
from $78.6 million in 2000 to $77.5 million in 2001. A decline in replacement
parts sales of $2.5 million was partially offset by increases in other revenue
categories. Sales from Company-operated shops were up $1.3 million due to an
increase in the average number of shops during the quarter as well as a double
digit increase in comparable shop sales. Royalties and license fees were up
slightly to $15.8 million from $15.5 million in 2000 due to an increase in North
American franchisee retail sales, including a 3 percent increase in comparable
shop retail sales.
Cost of sales and revenues declined $1.2 million or 2.9% compared to the
first quarter of fiscal 2000. Cost of sales and revenues as a percent to total
sales and revenues decreased from 53.3% in fiscal 2000 to 52.5% in fiscal 2001.
This improvement in gross margin is the result of an increase in high-margin
retail sales from company-operated shops and higher royalties.
Selling, general and distribution expenses increased $5.3 million from
$24.2 million in fiscal 2000 to $29.5 million in fiscal 2001. This increase was
related to costs associated with the new PWI distribution network, higher
freight costs due to a new program providing free freight to Midas dealers, and
higher depreciation and amortization. As a percentage of total sales and
revenues, selling, general and distribution expenses represented 38.1% of sales
in the first quarter of fiscal 2001 versus 30.8% in the first quarter of fiscal
2000.
As a result of the above changes, operating income decreased by $5.2
million from $12.5 million in the first quarter of fiscal 2000 to $7.3 million
in the first quarter of fiscal 2001 and the operating income margin decreased
from 15.9% in fiscal 2000 to 9.4% in fiscal 2001.
Other income declined from $1.9 million in fiscal 2000 to $0.2 million in
2001. The first quarter of 2000 amount included a non-recurring gain of $1.3
million from the sale of one of the Company's former manufacturing plants.
As a result of the above items, net income decreased $4.3 million from $7.5
million in the first quarter of fiscal 2000 to $3.2 million in the first quarter
of fiscal 2001.
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.
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, 2001 /s/William M. Guzik
-------------------
William M. Guzik
Senior Vice President and Chief
Financial Officer
9