Exhibit 99.1
Midas Reports Second Quarter Loss of $0.16
Per Share after Restructuring and Other Items to Exit Exhaust
Manufacturing
ITASCA, Ill.--(BUSINESS WIRE)--Aug. 4, 2005--Midas, Inc.
(NYSE:MDS) reported a net loss of $2.5 million--or $0.16 per diluted
share--for the second quarter ended July 2, 2005, after the effects of
special items related to the company's exit from exhaust
manufacturing.
During the second quarter, Midas recorded restructuring charges of
$9.5 million--or $0.36 per diluted share--for exhaust manufacturing
and distribution employee severance costs and the write-down of
exhaust inventories and other assets. Also included in the results are
operating losses of approximately $0.8 million--or $0.03 per diluted
share--related to the operation of the exhaust manufacturing and
distribution business, and gains of $1.1 million--or $0.04 per diluted
share--resulting from continued amortization of the gain from the sale
of the Chicago exhaust warehouse during the first quarter. Excluding
these exhaust manufacturing and distribution items, the company earned
$0.19 per diluted share, which represents a non-GAAP earnings per
diluted share measure.
"Second quarter results are on target with our plan," said Alan D.
Feldman, Midas' president and chief executive officer.
"We are generally pleased with the performance of our core
franchising and real estate business and the continuing momentum in
retail sales, as comparable shop retail sales in U. S. shops were up
by 2.5 percent in the quarter, the ninth consecutive quarter of
increases. North American comparable shop sales also were up 2.5
percent," Feldman said. "April and June were in line with comparable
increases in earlier quarters, but May results, as for others in the
retail sector, were flat compared to a year ago."
In May, Midas announced an agreement calling for AutoZone
(NYSE:AZO) to be the exclusively endorsed supplier of Arvin brand
exhaust products to more than 1,600 Midas shops in the United States.
The exhaust products will be supplied by ArvinMeritor (NYSE:ARM) and
will replace Midas-brand products currently manufactured by Midas at
its plant in Hartford, Wisc., and sold to Midas shops by AutoZone.
Retail sales of exhaust parts and services will continue at Midas
shops.
A region-by-region transition process began in late June to start
shipping Arvin products to Midas shops, allowing Midas to phase down
production at its Hartford plant. Over the remainder of this year,
Midas will close the Hartford plant and an exhaust warehouse in
Chicago. In late July, production at Hartford was reduced by
approximately 80 percent and the company expects to close the plant by
the end of the third quarter. The Chicago warehouse, which distributes
exhaust products manufactured at Hartford, is expected to close by the
end of the year. Those closures will ultimately result in the
termination of a total of 195 employees at the Hartford plant, in the
Chicago warehouse and at Midas headquarters in Itasca.
Midas began its exit from parts distribution in 2003, when it
reached agreements with AutoZone in the U.S. and Uni-Select in Canada
to distribute parts to Midas shops. Midas closed 11 of its 12
distribution centers at that time, but continued to operate the
Hartford exhaust plant and the Chicago exhaust warehouse.
2005 Second Quarter and First Half Results
Sales and revenues for the second quarter were $50.3 million, down
slightly from $52.0 million last year as a result of lower wholesale
sales of exhaust parts associated with the plant closure. For the
first six months, sales and revenues were $99.8 million, up from $98.9
million in 2004.
Royalties and license fees were $17.3 million for the second
quarter and $32.8 million for the first half, compared to $16.8
million and $31.3 million, respectively, last year. Real estate
revenues were $8.9 million for the quarter and $17.9 million for the
first six months, compared to $9.0 million and $18.1 million for the
same periods a year ago.
Retail sales at Midas' 70 company-owned shops in the United States
were $9.6 million for the second quarter and $18.7 million for the
first half, up from $9.3 million and $17.9 million, respectively, in
2004.
Replacement part sales and product royalties were $13.6 million
for the quarter and $28.8 million for the first half, down from $16.2
million and $30.3 million for the same periods last year. Increased
sales of Bridgestone/Firestone tires to franchisees were more than
offset by significant reductions in sales of exhaust products as Midas
began to phase out its exhaust manufacturing business.
Selling, general and administrative (SG & A) expenses were $23.0
million for the quarter and $45.5 million for the first six months,
compared to $23.4 million and $45.4 million last year.
Due to the effects of one-time charges, the company reported an
operating loss of $3.1 million for the second quarter and operating
income of $2.6 million for the first half, compared to operating
income of $6.5 million and $11.8 million in the same periods a year
ago.
The 2005 operating results include exhaust-related special charges
of $9.5 million in the second quarter and $9.6 million in the first
half.
Interest expense for the second quarter was $2.5 million and $5.0
million for the first six months, compared to $2.5 million for the
second quarter and $7.6 million for the first six months in 2004. The
company's bank debt was $65.5 million at the end of the second
quarter.
Midas recorded an income tax benefit of $1.7 million for the
quarter. The company does not expect to pay a significant amount of
income tax until the end of the decade because of net operating loss
carry forwards of approximately $110.0 million generated in prior
years.
Midas purchased 144,726 shares of its common stock during the
second quarter, primarily as part of a $25 million share repurchase
plan announced in November 2004.
2005 Outlook
"The special charge we recorded in the second quarter is the
latest step in the transformation we began in 2003 to exit from the
parts distribution business," Feldman said.
"Although exhaust manufacturing was the foundation of Midas in
1956, advancing technology and dramatic changes in the marketplace
have made it impractical and unprofitable for the company to continue
manufacturing and distributing exhaust products," he said.
Midas has said it will lose approximately $4.0 million operating
the exhaust manufacturing and distribution business in 2005.
"With the exhaust transition behind us later this year, the
company's single focus will be on the profitable growth of the Midas
franchise system," Feldman said. "Customers continue to respond
positively as we ramp up maintenance services and tire sales in Midas
shops across North America.
"The company has regained its financial strength and we will build
on this momentum as we continue to grow retail sales in existing Midas
shops, as well as prepare to add new franchised shops to the North
American system in the future," Feldman said.
Feldman reaffirmed the company's previous 2005 guidance of
operating income of $24 to $26 million, excluding losses related to
manufacturing and special charges.
Midas is one of the world's largest providers of automotive
service, offering brake, exhaust, maintenance, tires, steering and
suspension services at more than 2,600 franchised, licensed and
company-owned Midas shops in 19 countries, including 1,800 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 2004 annual report of Form 10-K.
MIDAS, INC.
CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
(In millions, except for earnings per share)
For the quarter For the six months
ended fiscal June ended fiscal June
--------------------- ---------------------
2005 2004 2005 2004
---------- ---------- ---------- ----------
(13 weeks) (13 weeks) (26 weeks) (26 weeks)
Sales and revenues:
Franchise royalties and
license fees $17.3 $16.8 $32.8 $31.3
Real estate revenues 8.9 9.0 17.9 18.1
Company-operated shop
retail sales 9.6 9.3 18.7 17.9
Replacement part sales
and product royalties 13.6 16.2 28.8 30.3
Other 0.9 0.7 1.6 1.3
---------- ---------- ---------- ----------
Total sales and
revenues 50.3 52.0 99.8 98.9
---------- ---------- ---------- ----------
Cost of sales and revenues:
Real estate cost of
revenues 5.6 5.5 11.2 11.0
Company-operated shop
cost of sales 2.3 1.8 4.4 3.3
Replacement part cost of
sales 11.1 12.4 22.8 22.9
Warranty expense 1.9 2.4 3.7 4.5
Business transformation
charges (inventory
write-down) 4.1 -- 4.1 --
---------- ---------- ---------- ----------
Total cost of sales
and revenues 25.0 22.1 46.2 41.7
---------- ---------- ---------- ----------
Gross profit 25.3 29.9 53.6 57.2
Selling, general, and
administrative expenses 23.0 23.4 45.5 45.4
Business transformation
charges 5.4 -- 5.5 --
---------- ---------- ---------- ----------
Operating income
(loss) ( 3.1) 6.5 2.6 11.8
Interest expense ( 2.5) ( 2.5) ( 5.0) ( 7.6)
Loss on early
extinguishment of debt -- -- -- ( 4.7)
Gain on sale of assets 1.1 -- 1.9 --
Other income, net 0.3 0.2 0.6 0.5
---------- ---------- ---------- ----------
Income (loss) before
income taxes ( 4.2) 4.2 0.1 --
Income tax expense
(benefit) ( 1.7) 1.6 -- --
---------- ---------- ---------- ----------
Net income (loss) $( 2.5) $2.6 $0.1 $--
========== ========== ========== ==========
Earnings (loss) per share:
Basic $( 0.16) $0.16 $0.00 $0.00
========== ========== ========== ==========
Diluted $( 0.16) $0.16 $0.00 $0.00
========== ========== ========== ==========
Average number of shares:
Common shares outstanding 15.8 15.3 15.8 15.2
Common stock warrants 0.1 0.3 0.1 0.3
---------- ---------- ---------- ----------
Shares applicable to
basic earnings 15.9 15.6 15.9 15.5
Equivalent shares on
outstanding stock awards -- 0.6 0.7 0.6
---------- ---------- ---------- ----------
Shares applicable to
diluted earnings 15.9 16.2 16.6 16.1
========== ========== ========== ==========
Capital expenditures $0.4 $0.1 $1.0 $0.4
========== ========== ========== ==========
MIDAS, INC.
CONDENSED BALANCE SHEETS
(In millions)
Fiscal Fiscal
June December
2005 2004
----------- -----------
(Unaudited)
Assets:
Current assets:
Cash and cash equivalents $1.1 $0.9
Receivables, net 35.5 33.4
Inventories, net 9.6 12.2
Deferred income taxes 11.4 9.0
Other current assets 5.7 6.8
------- -------
Total current assets 63.3 62.3
Property and equipment, net 112.1 117.4
Deferred income taxes 61.6 62.2
Other assets 12.5 10.1
------- -------
Total assets $249.5 $252.0
======= =======
Liabilities and equity:
Current liabilities:
Current portion of long-term obligations $7.9 $7.9
Accounts payable 14.6 16.1
Accrued expenses 37.2 32.5
------- -------
Total current liabilities 59.7 56.5
Long-term debt 59.5 63.0
Obligations under capital leases 4.6 5.1
Finance lease obligation 36.3 36.7
Accrued warranty 31.6 32.1
Other liabilities 7.7 9.7
------- -------
Total liabilities 199.4 203.1
------- -------
Shareholders' equity:
Common stock ($.001 par value, 100 million
shares authorized, 17.7 million shares
and 17.6 million shares issued) and paid-in
capital 20.2 21.4
Treasury stock, at cost (1.6 million
shares and 1.8 million shares) (36.0) (41.2)
Unamortized restricted stock awards (4.8) (2.2)
Retained income 79.0 78.9
Cumulative other comprehensive loss (8.3) (8.0)
------- -------
Total shareholders' equity 50.1 48.9
------- -------
Total liabilities and shareholders'
equity $249.5 $252.0
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CONTACT: Midas, Inc.
Bob Troyer, 630-438-3016
www.midasinc.com