SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 30, 1998
Midas, Inc.
(Exact name of registrant as specified in its charter)
Delaware 1-13409 36-4180556
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
225 North Michigan Avenue, Chicago, Illinois 60601
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (312) 565-7500
N/A
(Former name or former address, if changed since last report.)
ITEM 2. DISPOSITION OF ASSETS
Midas, Inc. and Magneti Marelli, S.p.A., a member of the Fiat Group, formed a
strategic alliance to develop the Midas program in the business of fast auto
service repair in Europe and South America.
As part of the alliance, Midas sold its interests in its European operations to
Magneti Marelli on October 30, 1998 and entered into a long-term license
agreement. The aggregate consideration received by Midas for its interest in
its European operations was $100 million. Midas will also receive on-going
royalties throughout the term of the license agreement, as the 437 automotive
service stores in Europe will continue to operate using the Midas name and Midas
will continue to provide assistance to Magneti Marelli.
Subject to a final sale price adjustment based on the October 30, 1998 financial
statements of the European operations, management anticipates an after tax gain
on the sale of approximately $27 million. The after tax proceeds are expected
be used to pay down the company's debt obligations by approximately $54 million
with the balance to be used for general corporate purposes.
The foregoing description of this transaction is qualified in its entirety by
reference to the Agreement For Strategic Alliance and the License Agreement
dated October 30, 1998, previously filed with the Securities and Exchange
Commission as an exhibit to Midas' Quarterly Report on Form 10-Q for the quarter
ended September 26, 1998, and incorporated by reference herein.
ITEM 7. HISTORICAL AND PRO FORMA FINANCIAL STATEMENTS AND EXHIBITS
(b) Historical And Pro Forma Financial Statements
Condensed Statement Of Operations for the Fiscal Year Ended December 1997
Condensed Statement Of Operations for the Nine Months Ended September 1998
Condensed Balance Sheet as of September 1998
Notes to Condensed Financial Information
(c) Exhibits
Agreement for Strategic Alliance dated October 30, 1998
(incorporated by reference to Exhibit 2.1 of Midas' Quarterly Report on
Form 10Q For the quarter ended September 26, 1998, Commission File No.
1-13409)
License Agreement dated October 30, 1998
(incorporated by reference to Exhibit 2.2 of Midas' Quarterly Report on
Form 10Q For the quarter ended September 26, 1998, Commission File No.
1-13409)
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MIDAS, INC. CONDENSED FINANCIAL INFORMATION
The following unaudited condensed balance sheet presents the financial position
of Midas, Inc. as of September 26, 1998 assuming the sale transaction with
Magneti Marelli had occurred on that date. The unaudited condensed statements
of operations present the results of operations of Midas, Inc. for the fiscal
year ended December 20, 1997 and the nine months ended September 26, 1998 after
giving pro forma effect to the divestiture of the Midas European Operations as
if it had occurred at the beginning of fiscal 1997.
The following financial information should be read in conjunction with the
consolidated financial statements and related notes contained in the Company's
1997 Form 10-K and September 1998 Form 10-Q.
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 consolidated results and the forward-looking statements could
be affected by, among other 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.
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MIDAS, INC.
HISTORICAL AND PRO FORMA
COMBINED CONDENSED STATEMENT OF OPERATIONS
FISCAL YEAR ENDED DECEMBER 1997
(In millions, except for earnings per share)
Pro Forma Adjustments
---------------------
(Unaudited)
-----------
Divestiture of
European Other
Operations Notes (B.2) Pro Forma
Historical Note (B.1) and (B.3) (Unaudited)
---------- ---------- --------- -----------
Sales and revenues.............................................. $596.4 $(111.9) $ 5.6 $490.1
Cost of goods sold.............................................. 277.5 (33.4) - 244.1
Selling, general, and administrative expenses................... 252.1 (73.6) - 178.5
Non-recurring charges........................................... 67.6 (5.3) - 62.3
------ ------- ----- ------
Operating income (loss)...................................... (0.8) 0.4 5.6 5.2
------ ------- ----- ------
Whitman charges................................................. (18.1) - - (18.1)
------ ------- ----- ------
Interest expense:
Whitman...................................................... (6.8) - 5.0 (1.8)
Other........................................................ (2.3) 1.1 - (1.2)
------ ------- ----- ------
Total interest expense....................................... (9.1) 1.1 5.0 (3.0)
------ ------- ----- ------
Other income (expense), net..................................... 0.9 0.1 - 1.0
------ ------- ----- ------
Income (loss) before taxes................................... (27.1) 1.6 10.6 (14.9)
Income tax provisions........................................... (3.6) (2.5) 4.1 (2.0)
------ ------- ----- ------
Net income (loss)............................................ $(23.5) $ 4.1 $ 6.5 $(12.9)
====== ======= ===== ======
Earnings (Loss) Per Share:
Pro forma basic and diluted earnings (loss) per share
after giving effect to 1997 pro forma adjustments (Note A)... $(1.21)
======
Pro forma basic and diluted earnings (loss) per share
after giving effect to 1997 pro forma adjustments and
to the divestiture and other pro forma adjustments........... $ (.76)
======
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MIDAS, INC.
HISTORICAL AND PRO FORMA
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 1998 (Unaudited)
(In millions, except for earnings per share)
Pro Forma Adjustments
---------------------
Divestiture of
European Other
Operations Notes (B.2)
Historical Note (B.1) and (B.3) Pro Forma
---------- ---------- --------- ---------
Sales and revenues.............................................. $411.6 $(84.5) $4.4 $331.5
Cost of goods sold.............................................. 198.1 (24.8) - 173.3
Selling, general, and administrative expenses................... 155.7 (55.6) - 100.1
------ ------ ---- ------
Operating income (loss)..................................... 57.8 (4.1) 4.4 58.1
------ ------ ---- ------
Whitman charges................................................. (1.1) - - (1.1)
------ ------ ---- ------
Interest expense:
Whitman..................................................... (0.5) - - (0.5)
Other....................................................... (9.7) 0.9 2.6 (6.2)
------ ------ ---- ------
Total interest expense...................................... (10.2) 0.9 2.6 (6.7)
------ ------ ---- ------
Other income (expense), net..................................... 1.4 (0.1) - 1.3
------ ------ ---- ------
Income (loss) before taxes.................................... 47.9 (3.3) 7.0 51.6
Income tax provisions........................................... 19.4 (1.8) 2.7 20.3
------ ------ ---- ------
Net income (loss)............................................. $ 28.5 $ (1.5) $4.3 $ 31.3
====== ====== ==== ======
Earnings Per Share:
Historical:
Basic....................................................... $ 1.68
=======
Diluted..................................................... $ 1.65
=======
Pro forma:
Basic....................................................... $ 1.85
======
Diluted..................................................... $ 1.81
======
Average Number of Shares:
Common shares outstanding................................... 16.9 16.9
Equivalent shares on outstanding stock options.............. .4 .4
------- ------
Shares applicable to diluted earnings....................... 17.3 17.3
======= ======
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MIDAS, INC.
HISTORICAL AND PRO FORMA
CONSOLIDATED CONDENSED BALANCE SHEET (Unaudited)
SEPTEMBER 1998
(In millions)
Pro Forma Adjustments
---------------------
Divestiture of
European
Operations Other
Historical Note (B.4) Note (B.4) Pro Forma
---------- ---------- ---------- ---------
ASSETS:
Current assets:
Cash and cash equivalents................................ $ 17.3 $(11.2) $ 44.4 $ 50.5
Receivables, net......................................... 71.3 (22.1) - 49.2
Inventories.............................................. 74.5 (12.0) - 62.5
Other current assets..................................... 20.2 (3.3) - 16.9
------ ------ ------ ------
Total current assets................................... 183.3 (48.6) 44.4 179.1
Property and equipment, net................................ 179.8 (24.3) - 155.5
Intangible assets, net..................................... 21.8 (14.0) - 7.8
Other assets............................................... 22.8 (4.1) - 18.7
Assets being divested...................................... - 59.0 (59.0) -
------ ------ ------ ------
Total assets........................................... $407.7 $(32.0) $(14.6) $361.1
====== ====== ====== ======
LIABILITIES AND EQUITY:
Current liabilities:
Short-term debt.......................................... $ 5.4 $ (0.2) $ - $ 5.2
Short-term obligations under capital leases.............. 0.8 (0.3) - 0.5
Accounts and dividends payable........................... 45.1 (21.3) - 23.8
Other current liabilities................................ 63.7 (15.0) 12.2 60.9
------ ------ ------ ------
Total current liabilities.............................. 115.0 (36.8) 12.2 90.4
Long-term debt............................................. 137.0 - (54.0) 83.0
Obligations under capital leases........................... 11.2 (0.1) - 11.1
Deferred income taxes and other liabilities................ 23.9 0.8 - 24.7
------ ------ ------ ------
Total liabilities...................................... 287.1 (36.1) (41.8) 209.2
Shareholders' equity:
Common stock and capital in excess of par value
($.001 par value, 100 million shares authorized,
17.0 million shares issued September 1998)............. 27.3 - - 27.3
Treasury stock, at cost, .1 million shares............... (2.2) - - (2.2)
Retained income.......................................... 107.6 - 27.2 134.8
Accumulated other comprehensive income (loss)............ (12.1) 4.1 - (8.0)
------ ------ ------ ------
120.6 4.1 27.2 151.9
------ ------ ------ ------
Total liabilities and equity........................... $407.7 $(32.0) $(14.6) $361.1
====== ====== ====== ======
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MIDAS, INC.
NOTES TO CONDENSED FINANCIAL INFORMATION
A. 1997 Pro Forma Earnings (Loss) Per Share
Pro forma basic and diluted earnings (loss) per share for the fiscal year
ended December, 1997 have been calculated on the assumption that the 17.0
million shares of common stock that were distributed on January 30, 1998
had been outstanding since the beginning of 1997. Pro forma adjustments
have been made to give effect to decreases in costs of $3 million that
would not have been incurred by Midas as an independent, publicly held
company, rather than a subsidiary of Whitman.
B. Divestiture-Related Pro Forma Adjustments
(1) To eliminate the results of operations of the European Operations purchased
by Magneti Marelli on October 30, 1998.
(2) To record the royalties that would have been received from Magneti Marelli
and the reduced interest expense associated with lower debt levels. The
interest rates used for 1997 were based on the rates charged by Whitman.
For 1998, it is assumed the indebtedness had the average borrowing rate of
Midas' revolving credit facility. No earnings were assumed on the sale
proceeds retained as cash or cash equivalents.
(3) To record the income tax provisions on the other adjustments in note (2),
calculated using a combined Federal and state tax rate of 38.9%.
(4) To record (a) the divestiture of the assets and liabilities being purchased
by Magneti Marelli, (b) the application of $54 million of the proceeds to
reduce indebtedness, (c) the applicable income tax liabilities on the
transaction less taxes withheld at the source, (d) the retention of the
remaining proceeds as cash and cash equivalents, and (e) the gain on the
transaction as an increase in retained income and shareholders' equity.
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.
MIDAS, INC.
Date: November 12, 1998 By: /s/ EDWIN A. GRELL
----------------------------------
Edwin A. Grell
Vice President and Controller
(As Chief Accounting Officer and Duly
Authorized Officer of Midas, Inc.)
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