Exhibit 99.1
Midas Reports Third Quarter Income of $0.13
Per Diluted Share; U.S. Comparable Shop Sales Increase for Sixth
Consecutive Quarter; Plans to Exit Exhaust Manufacturing Business
ITASCA, Ill.--(BUSINESS WIRE)--Oct. 28, 2004--Midas, Inc.
(NYSE:MDS) reported net income of $2.1 million--or $0.13 per diluted
share--for the third quarter ended Oct. 2, 2004, the company's second
consecutive quarter of positive net results.
In 2003, Midas reported a net loss of $11.8 million--or $0.76 per
share--for the third quarter, after business transformation charges of
$15.9 million for costs associated with outsourcing the company's
distribution business in Canada and ongoing restructuring charges in
the United States.
"Despite disappointing results in our wholesale and company shop
operations, we continue to be encouraged by the progress Midas has
made as we transform the company into a profitable franchise retail
business," said Alan D. Feldman, Midas' president and chief executive
officer.
Midas reported comparable shop retail sales growth of 1.6 percent
in the third quarter in North American shops, as the U. S. shops
reported their sixth consecutive quarter of increases. Each of the
company's four geographic regions in the U. S. experienced positive
comparable sales.
"These increases in comparable retail sales are the direct result
of our continued focus on the brake business, as well as continuing to
feature a brake offer in national television advertising throughout
the summer months," Feldman said. "Customer response to our 'Trust the
Midas Touch' marketing campaign has been excellent."
Feldman said that the program launched last May to add tires
supplied by Bridgestone/Firestone also had a positive effect on third
quarter retail sales.
"Midas dealers have responded very positively to the new tire
program, with approximately 900 shops now selling tires from
Bridgestone/Firestone," he said. "Retail tire sales continue to
accelerate and are currently running up about 30 percent over a year
ago when we did not have a comprehensive system-wide tire program."
Feldman said that during the quarter, development work continued
to add system-wide maintenance services and a commercial fleet program
to Midas shops in early 2005. Those programs will be introduced at the
Midas dealers convention in early December.
Feldman said that Midas is in advanced discussions to sell its IPC
exhaust business and exit exhaust manufacturing.
The proposed deal includes an assured source of supply of
competitively priced, high-quality exhaust products to Midas shops and
IPC customers in North America, and a continuation of Midas' famous
lifetime muffler warranty. Once an agreement is reached, Midas will
eventually close its exhaust manufacturing plant in Hartford, Wisc.,
and an exhaust warehouse in Chicago.
Midas is not identifying the potential acquirer or a timeline for
reaching an agreement.
"The exhaust manufacturing and distribution business is no longer
a strategic fit for our retail-focused business model." Feldman said.
"Additionally, given rising steel prices and declining exhaust demand,
this is the right time for Midas to exit this business and sharpen our
focus on our retail and franchise businesses."
Unfavorable variances at Midas' exhaust manufacturing plant had an
approximate $0.03 per share negative impact on Midas' third quarter
results.
2004 Third Quarter and Nine-Month Results
Royalties and license fees were $16.6 million in the third quarter
and $47.9 million for the first nine months, up from $16.3 million and
$46.6 million, respectively, last year. Real estate revenues were $9.2
million for the quarter and $27.3 million for the first nine months,
up from $9.1 million and $27.0 million, respectively, last year.
Retail sales in Midas' 73 company-operated shops were $9.2 million
for the quarter and $27.1 million for the first nine months. In 2003,
company-operated shops generated $9.6 million in third quarter
revenues and $32.5 million for the first nine months.
Midas operated an average of 73 company-operated shops in 2004
versus an average of 92 in the first nine months of 2003. Comparable
sales in company-operated shops increased by 1.8 percent in the third
quarter this year, despite business disruptions caused by the
hurricanes in Florida, where 45 of the 73 company-operated shops are
located.
Replacement parts sales and product royalties were $15.7 million
in the quarter and $46.0 million for the first nine months, compared
to $41.6 million and $122.0 million last year. Overall sales and
revenues were $51.3 million for the quarter and $150.2 million for the
first nine months, compared to $77.0 million and $229.4 million,
respectively, last year. Year-over year revenue comparisons are not
meaningful for the replacement parts business or in total, due to
Midas' exit from the distribution business in 2003.
Selling, general and administrative (SG & A) expenses were $22.8
million for the third quarter and $68.2 million for the first nine
months, down from $31.7 million and $105.5 million for the same
periods last year. The declines are primarily the result of exiting
the parts distribution business.
Third quarter operating income was $5.9 million. For the first
nine months, operating income was $17.7 million. In 2003, Midas
reported operating losses of $13.2 million for the third quarter and
$65.1 million for the first nine months, after business transformation
charges of $15.9 million for the quarter and $70.4 million for the
first nine months related to closure of the distribution business and
other corporate restructuring.
Interest expense for the third quarter was $2.6 million, down from
$6.8 million last year. The company is benefiting from the $15.1
million year-to-date reduction in its bank debt level and the
refinancing of debt in March 2004 at favorable interest rates.
"We continue to be encouraged by the progress we are making in our
profitable franchise operations and we will improve future results in
our wholesale business by exiting the unprofitable exhaust
manufacturing business," Feldman said.
Midas will be participating in the upcoming Gabelli Automotive
Aftermarket Symposium in Las Vegas. The presentation by Feldman and
William Guzik, Midas' senior vice president and chief financial
officer, will be Wednesday, Nov. 3, from 11:30 a.m. to 12:15 p.m. PST
(2:30 p.m. to 3:15 p.m. EST).
A live broadcast will be available online in the corporate news
section of www.midasinc.com. A replay will be available for two weeks.
Midas is one of the world's largest providers of automotive
service, offering exhaust, brake, steering and suspension services, as
well as maintenance services, tires and batteries at more than 2,600
franchised, licensed and company-owned Midas shops in 19 countries,
including nearly 1,900 in the United States and Canada.
NOTE: This news release contains certain forward-looking
statements that are based on management's beliefs as well as
assumptions made by and information currently available to management.
Such statements are subject to risks and uncertainties, both known and
unknown, that could cause actual results, performance or achievement
to vary materially from those expressed or implied in the
forward-looking statements. The company may experience significant
fluctuations in future results, performance or achievements due to a
number of economic, competitive, governmental, technological or other
factors. Additional information with respect to these and other
factors, which could materially affect the company and its operations,
is included in the company's filings with the Securities and Exchange
Commission, including the company's 2003 annual report on Form 10-K
and subsequent filings.
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
--------------------- ---------------------
2004 2003 2004 2003
---------- ---------- ---------- ----------
(13 weeks) (13 weeks) (39 Weeks) (39 Weeks)
Sales and revenues:
Franchise royalties and
license fees $16.6 $16.3 $47.9 $46.6
Real estate revenues 9.2 9.1 27.3 27.0
Company-operated shop
retail sales 9.2 9.6 27.1 32.5
Replacement part sales
and product royalties 15.7 41.6 46.0 122.0
Other 0.6 0.4 1.9 1.3
---------- ---------- ---------- ----------
Total sales and
revenues 51.3 77.0 150.2 229.4
---------- ---------- ---------- ----------
Cost of sales and revenues:
Real estate cost of
revenues 5.5 5.5 16.5 15.8
Company-operated shop
cost of sales 2.0 2.2 5.3 7.2
Replacement part cost of
sales 12.5 32.2 35.4 86.7
Warranty expense 2.6 2.7 7.1 8.9
Business transformation
charges (warranty reserve) -- 5.2 -- 38.5
Business transformation
charges (inventory
write-down) -- 3.9 -- 12.5
---------- ---------- ---------- ----------
Total cost of sales
and revenues 22.6 51.7 64.3 169.6
---------- ---------- ---------- ----------
Gross profit 28.7 25.3 85.9 59.8
Selling, general, and
administrative expenses 22.8 31.7 68.2 105.5
Business transformation
charges -- 6.8 -- 19.4
---------- ---------- ---------- ----------
Operating income
(loss) 5.9 ( 13.2) 17.7 ( 65.1)
Interest expense ( 2.6) ( 6.8) ( 10.2) ( 18.4)
Loss on early
extinguishment of debt -- -- ( 4.7) ( 1.4)
Other income (expense), net ( 0.1) 0.7 0.4 1.6
---------- ---------- ---------- ----------
Income (loss) before
income tax expense
(benefit) 3.2 ( 19.3) 3.2 ( 83.3)
Income tax expense
(benefit) 1.1 ( 7.5) 1.1 ( 32.4)
---------- ---------- ---------- ----------
Net income (loss) $2.1 $( 11.8) $2.1 $( 50.9)
========== ========== ========== ==========
Earnings (loss) per share:
Basic $0.14 $( 0.76) $0.14 $( 3.31)
========== ========== ========== ==========
Diluted $0.13 $( 0.76) $0.13 $( 3.31)
========== ========== ========== ==========
Average number of shares:
Common shares outstanding 15.5 15.1 15.3 15.1
Common stock warrants 0.2 0.5 0.3 0.3
---------- ---------- ---------- ----------
Shares applicable to
basic earnings 15.7 15.6 15.6 15.4
Equivalent shares on
outstanding stock
options 0.5 -- 0.5 --
---------- ---------- ---------- ----------
Shares applicable to
diluted earnings 16.2 15.6 16.1 15.4
========== ========== ========== ==========
Capital expenditures $0.4 $0.2 $0.8 $1.6
========== ========== ========== ==========
MIDAS, INC.
CONDENSED BALANCE SHEETS
(In millions)
Fiscal Fiscal
September December
2004 2003
----------- -----------
(Unaudited)
Assets:
Current assets:
Cash and cash equivalents $0.6 $7.4
Receivables, net 37.2 38.0
Inventories, net 13.3 15.1
Deferred income taxes 9.3 13.9
Other current assets 6.1 9.3
----------- -----------
Total current assets 66.5 83.7
Property and equipment, net 122.3 131.7
Intangible assets 0.3 0.3
Deferred income taxes 60.9 56.1
Other assets 9.7 11.6
----------- -----------
Total assets $259.7 $283.4
=========== ===========
Liabilities and equity:
Current liabilities:
Current portion of long-term obligations $11.8 $8.0
Accounts payable 15.3 13.7
Accrued expenses 35.0 47.5
----------- -----------
Total current liabilities 62.1 69.2
Long-term debt 66.3 85.2
Obligations under capital leases 5.4 6.5
Finance lease obligation 37.0 37.5
Accrued warranty 33.8 33.8
Other liabilities 12.3 15.1
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Total liabilities 216.9 247.3
----------- -----------
Shareholders' equity:
Common stock ($.001 par value, 100 million
shares authorized, 17.6 million and 17.5
million shares issued) and paid-in capital 21.7 23.8
Treasury stock, at cost (1.8 million
shares and 2.2 million shares) (42.1) (49.6)
Unamortized restricted stock awards (2.3) (1.3)
Retained income 76.9 74.8
Cumulative other comprehensive loss (11.4) (11.6)
----------- -----------
Total shareholders' equity 42.8 36.1
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Total liabilities and equity $259.7 $283.4
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CONTACT: Midas, Inc.
Bob Troyer, 630-438-3016