Exhibit 99.1
Midas Reports First Quarter Earnings of $0.14;
All Business Components Contribute to Operating Income
ITASCA, Ill.--(BUSINESS WIRE)--May 3, 2007--Midas, Inc. (NYSE:
MDS) reported net earnings of $2.2 million--or $0.14 per diluted
share--for the first quarter ended March 31, 2007. First quarter
results include business transformation charges of $0.02 per diluted
share related to the continuing shop re-imaging program and the
upcoming termination of the AutoZone supply agreement.
In the first quarter of 2006, Midas reported net income of $3.8
million--or $0.24 per diluted share--which included after-tax gains of
$0.13 per share related to the sale of exhaust-related real estate and
equipment, as well as after-tax operating losses of $0.04 per share
related to the company's 2006 exit from the exhaust distribution
business.
"For the first time this decade, every component of our business
produced a positive operating contribution for the quarter, including
franchising, real estate, company shops, wholesale and our R.O. Writer
software business" said Alan D. Feldman, Midas' chairman and chief
executive officer.
"We are particularly pleased with the progress we have made over
the past four years in our company shop operations with gains in
retail sales and expense reductions," he said.
Citing continued improvement in the performance of company shops,
Feldman said that the 2007 operating contribution of $0.2 million for
company shops compares to first quarter losses of $1.0 million in
2003, $0.7 million in both 2004 and 2005, and $0.2 million last year.
"We expect company shops to show continued operating improvement,"
Feldman said.
Midas ended the first quarter with 61 company-owned shops, having
acquired two in New Jersey and selling six in Florida and one in
Arizona. Midas now operates 29 shops in Florida, down from 45 at the
end of 2005.
Adjusted first quarter 2007 and 2006 results were as follows:
Q1 2007 Q1 2006
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Oper. Net Per Oper. Net Per
($ in millions, except EPS) Income Income Share Income Income Share
GAAP Earnings Measures $5.8 $2.2 $0.14 $8.1 $3.8 $0.24
Adjustments (reflects non-
GAAP measures):
Business transformation
charges 0.5 0.3 0.02 0.1 0.1 -
Gains on asset sales - - - (3.4) (2.1) (0.13)
Losses from Exhaust
business - - - 1.1 0.7 0.04
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Non-GAAP Earnings Measures $6.3 $2.5 $0.16 $5.9 $2.5 $0.15
-----------------------------------------
Retail sales flat for quarter
"Retail sales in January and February were a challenge, but we saw
significant improvement in March after launching the $89.95 national
brake promotion in the U.S. in late February" Feldman said.
Comparable shop retail sales in the U.S. were virtually flat for
the quarter, but were up just over three percent in March. Comparable
shop sales in Canada were down about one-half of one-percent in the
first quarter, after having posted comparable shop sales gains for
seven consecutive quarters
Strong operating cash flow continues
Selected Cash Flow Information ($ in millions except Q1 Q1
per share) 2007 2006
Cash provided by operating activities before cash
outlays for business transformation costs and total
changes in assets and liabilities $7.8 $5.4
Cash outlays for business transformation costs (1.5) (1.9)
Total changes in assets and liabilities (3.0) 6.0
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Net cash provided by operating activities $3.3 $9.5
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Net cash provided by operating activities per
diluted share $0.22 $0.60
Capital investments $(0.4) $(0.7)
Net borrowings (retirements) of long-term debt and
leases 5.4 (5.2)
Cash paid for treasury shares (7.0) (4.0)
Net cash provided by operating activities before cash outlays for
business transformation costs and total changes in assets and
liabilities grew 44 percent to $7.8 million in the first quarter,
compared to $5.4 million last year. Cash outlays for business
transformation charges decreased, as the company paid $1 million to
AutoZone during the first quarter of 2007 as part of the early
contract termination, and $0.5 million for the retail store image
upgrade program. Changes in assets and liabilities used $3.0 million
of cash in the first quarter of fiscal 2007, due to the timing of
advertising and other payments. The company expects most of this to
reverse during the balance of 2007. The final liquidation of exhaust
inventories was the primary reason for the $6.0 million of cash
generated from changes in assets and liabilities in fiscal 2006.
First quarter results
Sales and revenues for the quarter were $41.7 million, down from
$42.6 million last year, due primarily to the final closure of the
exhaust distribution business in the first quarter of 2006 and lower
franchise royalties.
Franchise royalties and license fees were $14.7 million in the
first quarter, down from $15.2 million in 2006, as a result of a
slight reduction in the European royalties and fewer shops in North
America during the quarter. Real estate revenues were $9.0 million,
down slightly from $9.1 million in 2006.
Retail sales at company shops in the first quarter were $9.5
million, flat with the same period last year when there were nine
additional shops in operation. Comparable shop sales increased by 2.7
percent in the first quarter this year, the 12th consecutive quarter
of positive comparable shop retail sales at company shops. The Florida
shops reported a 3.4 percent comparable shop increase.
Replacement part sales and product royalties were $7.4 million in
the first quarter, down $400,000 from the same period last year when
the company recorded $1.4 million in final sales of exhaust products.
Gross margin for the first quarter was 63.8 percent of sales,
compared to 63.4 percent last year.
Selling, general and administrative expenses for the first quarter
were $20.3 million, down from $22.2 million a year ago, due to the
elimination of costs related to the former exhaust distribution
business, fewer company shops and lower real estate operating
expenses.
Operating income for the first quarter of $5.8 million was down
from $8.1 million last year, when the company recorded a pre-tax gain
of $3.4 million on asset sales.
Interest expense for the quarter was $2.2 million, even with last
year. Bank debt at the end of the quarter was $67.0 million, compared
to $61.1 million at the end of 2006. The increase in bank debt is due
to aggressive share repurchases, and the $1 million payment to
AutoZone for termination of the supply agreement.
Midas spent $7.0 million during the first quarter to purchase
328,300 shares of its common shares in a $50 million repurchase
program that began in February 2005. Through the end of the first
quarter, the company has acquired 2.1 million shares at a total cost
of $43.4 million.
2007 Outlook
The company re-affirmed its previous guidance of 2007 full-year
revenues of approximately $180 million and operating income of between
$29.5 and $31.5 million, excluding the effects of continuing shop
upgrade payments and the AutoZone contract amendment payment. This
projected operating income includes $2.2 million in SFAS 123R stock
option expenses.
The company expects full-year interest expense of approximately
$9.0 million and capital spending of approximately $4.0 million.
Midas expects cash flow from operating activities of between $30
and $32 million in 2007--more than $2.00 per share--after providing
for changes in working capital and outlays for business transformation
costs. Midas intends to use this cash flow to continue to repurchase
shares and to fund acquisition opportunities and shop growth.
Midas is one of the world's larger providers of automotive
service, offering brake, exhaust, maintenance, tires, steering and
suspension services at nearly 2,600 franchised, licensed and
company-owned Midas shops in 18 countries, including more than 1,700
in the United States and Canada.
RECONCILIATION OF GAAP TO NON-GAAP EARNINGS MEASURES
The company presents the above reconciliation of GAAP to non-GAAP
earnings measures primarily to reflect the results for the first
quarters of fiscal 2007 and 2006 in a manner that may provide for more
meaningful year-on-year comparisons of the company's core operating
performance, including the financial impact of decisions made for the
long-term benefit of the company. Adjustments similar to the ones
reflected above have been recorded in earlier periods, and similar
types of adjustments can reasonably be expected to be recorded in
future periods.
The company has been undergoing a multi-year business
transformation process which has led to the closing or divestiture of
unprofitable businesses. This included the 2002 decision to dispose of
Parts Warehouse, Inc. ("PWI") locations, the 2003 decision to
outsource the distribution of Midas-brand products and close all but
one of the company's regional distribution centers, and the 2004
decision to exit exhaust manufacturing and distribution. The company
has also agreed to contribute to a system-wide image upgrade program
that will change the interior and exterior of Midas shops in North
America. Each of these actions was a distinct and separate
non-recurring transaction, and their magnitude required that they be
done sequentially rather than simultaneously. In addition, the
relevant accounting literature during this period, including EITF 94-3
and SFAS No. 146, required that certain of the costs be accrued over
time rather than taken up-front. This led to restructuring charges in
fiscal 2002 through fiscal 2007.
Because the amount of these restructuring charges has varied
significantly from quarter to quarter, the company believes it is
important for the financial statement reader to understand the
operating performance of the company without these items. This allows
for more meaningful year-on-year comparisons of the core business that
remains at the conclusion of these restructuring activities.
The company believes investors may find the non-GAAP information
helpful in understanding the ongoing performance of operations
separate from items that may have a disproportionate positive or
negative impact on the company's financial results in any particular
period. This is further supported by the following facts:
-- Published third party analyst estimates of earnings exclude
certain of these items;
-- Financial covenants under the company's bank agreements have
been and continue to be measured based upon operating
performance without certain of these items; and
-- Awards under the company's incentive compensation plans are
calculated based on targets and actual earnings that exclude
certain of these items.
The company's reference to these non-GAAP results should be
considered in addition to results that are prepared under current
accounting standards but should not be considered a substitute for
results that are presented as consistent with GAAP.
FORWARD-LOOKING STATEMENTS AND RISK FACTORS
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
2006 annual report on Form 10-K and subsequent filings.
MIDAS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(In millions, except for earnings per share)
(Unaudited)
For the quarter
ended fiscal March
---------------------
2007 2006
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(13 Weeks) (13 Weeks)
Sales and revenues:
Franchise royalties and license fees $14.7 $15.2
Real estate revenues 9.0 9.1
Company-operated shop retail sales 9.5 9.5
Replacement part sales and product royalties 7.4 7.8
Other 1.1 1.0
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Total sales and revenues 41.7 42.6
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Cost of sales and revenues:
Real estate cost of revenues 5.5 5.6
Company-operated shop cost of sales 2.3 2.2
Replacement part cost of sales 5.9 6.2
Warranty expense 1.1 1.3
Other cost of sales 0.3 0.3
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Total cost of sales and revenues 15.1 15.6
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Gross profit 26.6 27.0
Selling, general, and administrative expenses 20.3 22.2
Gain on sale of assets 0.0 ( 3.4)
Business transformation charges 0.5 0.1
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Operating income 5.8 8.1
Interest expense ( 2.2) ( 2.2)
Other income, net 0.1 0.3
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Income before income taxes 3.7 6.2
Income tax expense 1.5 2.4
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Net income $2.2 $3.8
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Earnings per share:
Basic $0.15 $0.25
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Diluted $0.14 $0.24
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Average number of shares:
Common shares outstanding 14.4 15.3
Common stock warrants 0.1 0.1
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Shares applicable to basic earnings 14.5 15.4
Equivalent shares on outstanding stock awards 0.5 0.4
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Shares applicable to diluted earnings 15.0 15.8
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Capital expenditures $ 0.4 $ 0.7
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MIDAS, INC.
CONDENSED BALANCE SHEETS
(In millions)
Fiscal Fiscal
March December
2007 2006
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(Unaudited)
Assets:
Current assets:
Cash and cash equivalents $1.6 $2.4
Receivables, net 28.7 28.7
Inventories 2.8 3.1
Deferred income taxes 7.0 7.6
Prepaid assets 4.5 3.3
Other current assets 2.8 4.3
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Total current assets 47.4 49.4
Property and equipment, net 96.8 99.4
Goodwill and other intangibles, net 1.9 1.5
Deferred income taxes 55.0 57.2
Other assets 9.5 8.9
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Total assets $210.6 $216.4
=========== ===========
Liabilities and equity:
Current liabilities:
Current portion of long-term obligations $2.0 $2.0
Accounts payable 10.1 15.9
Current portion of accrued warranty 4.6 4.6
Accrued expenses 21.8 21.5
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Total current liabilities 38.5 44.0
Long-term debt 67.0 61.1
Obligations under capital leases 2.7 3.0
Finance lease obligation 33.7 33.9
Accrued warranty 28.7 28.8
Other liabilities 5.5 8.3
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Total liabilities 176.1 179.1
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Temporary equity:
Non-vested restricted stock subject to
redemption 3.0 2.3
Shareholders' equity:
Common stock ($.001 par value, 100 million
shares authorized, 17.7 million shares
issued) and paid-in capital 10.6 10.3
Treasury stock, at cost (3.0 million
shares and 2.7 million shares) (63.9) (57.8)
Retained income 91.3 89.1
Accumulated other comprehensive loss (6.5) (6.6)
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Total shareholders' equity 31.5 35.0
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Total liabilities and shareholders'
equity $210.6 $216.4
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CONTACT: Midas, Inc.
Bob Troyer, (630) 438-3016
www.midasinc.com