Exhibit 99.1
Midas Reports 24 Percent Increase in Second Quarter Earnings Per Share
to $0.21 after Special Charges of $0.04 Per Share
ITASCA, Ill.--(BUSINESS WIRE)--Aug. 2, 2007--Midas, Inc. (NYSE:
MDS) reported net earnings of $3.0 million--or $0.21 per diluted
share--for the second quarter ended June 30, 2007. Second quarter
results included business transformation charges of $0.04 per share
primarily related to the fee paid to AutoZone for the early
termination of its supply agreement and the continuing shop re-imaging
program.
In the second quarter of 2006, Midas' net earnings were $2.6
million--or $0.17 per diluted share. In last year's second quarter,
business transformation charges were $0.01 per share for shop
re-imaging.
For the six months of 2007, Midas reported net income of $5.2
million--or $0.35 per diluted share, compared to $6.4 million and
$0.41 per diluted share a year ago. The 2006 net income included a
$3.4 million gain on asset sales that added $0.13 to earnings per
share.
"For the second consecutive quarter, each component of our
business produced a positive operating contribution, including
franchising, real estate, company shops, wholesale and the R.O. Writer
software business," said Alan D. Feldman, Midas' chairman and chief
executive officer.
"We continue to see improvement in our company shop operation,
which produced an operating profit of $0.3 million in the second
quarter this year and $0.5 million for the first half, compared to an
operating loss of $0.2 million in the first six months of 2006,"
Feldman said. "Our company shops reported an increase of 2.2 percent
in comparable shop sales during the second quarter."
Midas ended the second quarter with 76 company shops, an increase
of 15 during the quarter. The company acquired 11 shops in San Diego,
Calif., six in Vancouver, B.C., one in Flemington, N.J., and one in
Mt. Pocono, Pa., and re-franchised four shops in Florida.
"The strong management team and profitable operating platform we
have developed for our company shops enable us to acquire shops from
franchisees who need to leave the system and to transition the shops
to our new full-service operating model before refranchising," Feldman
said. "The number of company shops we operate will fluctuate as we
continually seek to ensure we have the right operating entity for each
location."
U. S. retail sales remain a challenge
"We were disappointed in our retail sales in the second quarter,
as comparable franchised shop sales in the United States declined by
2.3 percent," Feldman said. "Comparable shop sales gains in the U.S.
of approximately seven percent in tires and nearly six percent in oil
changes could not offset comparable shop sales declines of 4.5 percent
in brakes and nearly 10 percent in exhaust."
Company operated shops' comparable sales increased by 2.2 percent,
the 11th consecutive quarter company shops have outpaced franchised
shops.
In Canada, comparable franchised shop sales increased by 3.1
percent in the second quarter, led by a 1.5 percent increase in brake
sales.
"Our franchise retail sales in the U.S. followed the trends of
many other retail businesses in the quarter, starting with a weak
April, improving to flat in May, but down by more than three percent
in June," Feldman said.
Feldman said that Midas has adjusted its marketing message in the
U.S. for the third quarter to promote maintenance services in an
effort to drive additional traffic.
"In response to the challenging marketplace, we have moved to a
message featuring a lower price point value that reinforces the
momentum for our newest services of tires and maintenance," he said.
Midas said that the new $29.95 Midas Touch Maintenance Package
includes oil and filter replacement, tire inspection and rotation and
a multi-point vehicle inspection, and is being supported by a new
television commercial airing in a heavy schedule through mid-November.
"With the expected moderation of gasoline prices during the third
quarter, we believe consumer confidence will improve and lead to a
return of retail customers to Midas who may have been delaying repair
and maintenance purchases over the past several months," he said.
Strong operating cash flow continues
Selected Cash Flow Information ($ in millions YTD YTD
Except per share) 2007 2006
Cash provided by operating activities before cash
outlays for business transformation costs and net
changes in assets and liabilities $16.9 $13.0
Cash outlays for business transformation costs (1.8) (3.5)
Net changes in assets and liabilities (5.1) 2.3
-------------------
Net cash provided by operating activities $10.0 $11.8
-------------------
Net cash provided by operating activities
per diluted share $0.68 $0.75
Capital investments $(1.6) $(1.5)
Net borrowings (retirements) of long-term debt and
leases 10.4 (5.3)
Cash paid for treasury shares (13.7) (7.6)
Net cash provided by operating activities before cash outlays for
business transformation costs and net changes in assets and
liabilities grew to $16.9 million in the first half, up from $13.0
million last year. Cash outlays for business transformation charges
were $1.8 million in the first half, primarily for the early
termination of the AutoZone agreement and for the retail store image
upgrade program. Changes in assets and liabilities used $5.1 million
of cash in the first half of 2007, due to the timing of payments. The
company expects most of this $5.1 million to reverse in the second
half of 2007.
Results for second quarter, first half
Sales and revenues for the second quarter and first half were
$45.3 million and $87.0 million, respectively, compared to $45.1
million and $87.7 million, respectively, in 2006.
Franchise royalties and license fees were $15.9 million in the
second quarter and $30.6 in the first six months, down from $16.9
million and $32.1 million for the same periods a year ago. The
declines are a result of lower U.S. comparable shop retail sales, shop
closures and lower fees from international franchising activities.
Real estate revenues were $8.9 million in the second quarter and $17.9
million in the first half, down slightly from $9.1 million and $18.2,
respectively, in 2006.
Retail sales at company-owned shops were $10.5 million for the
quarter and $20.0 million for the first six months, even with the same
periods last year.
Replacement part sales and product royalties were $8.9 million in
the second quarter and $16.3 million in the first half, up from $7.7
million and $15.5 million, respectively, last year. The increase in
revenues is the result of the company's purchase of certain
Midas-branded parts inventories from AutoZone and simultaneous resale
of these parts to NAPA as part of the transition to NAPA as the
primary U.S. supply chain partner. That transaction had no impact on
operating income.
Gross profit margin was 62.9 percent for the quarter and 63.3
percent for the first half, compared to 64.1 percent in the second
quarter and 63.7 percent in the first half last year. Gross profit
margin excluding the AutoZone-NAPA parts transaction was 65.5 percent
for the quarter and 64.7 percent for the first half.
Selling, general and administrative expenses were $20.3 million in
the second quarter, down from $22.2 million last year. The decline was
the result of a $1.5 million reduction in expenses related to hosting
the annual dealers' convention and lower legal expenses, due to the
expected recovery of legal fees from the company's insurers. Feldman
said that the company continues to tightly control expenses in the
face of the challenging retail environment.
Operating income was $7.2 million for the second quarter and $13.0
million for the first half, compared to $6.3 million and $14.4 million
in the same periods a year ago. The 2006 first half amount included a
$3.4 million gain from the sale of the company's remaining exhaust
assets in the first quarter of 2006.
Interest expense for the second quarter was $2.3 million and was
$4.5 million for the first half, even with 2006.
Bank debt was $72.5 million at the end of the second quarter, up
from $67.0 million at the end of the first quarter. The increase in
bank debt was the result of the share repurchase program.
Midas spent $6.7 million during the second quarter to purchase
296,625 shares of its common stock in a share repurchase program that
began in February 2005. In May 2007, Midas' board of directors
increased the repurchase plan authorization to $100 million from $50
million. For the period from inception through the end of the second
quarter, Midas has acquired 2.4 million shares at a total cost of
approximately $50.0 million.
2007 Outlook
The company re-affirmed its previous guidance of 2007 full-year
revenues of approximately $180 million, but said that operating income
will likely be in the lower half of the previously communicated range
of $29.5 to $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 $31 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.
Feldman said the company is preparing its response to a suit filed
in late June by two Canadian dealers seeking monetary damages for
claims that Midas breached its franchise agreement when the company
closed its manufacturing and distribution operations.
"We believe that this case is without merit and, therefore, will
be seeking a dismissal of the claims," Feldman said. "We do not expect
this matter will have a material negative impact on the company's
financial position, cash flow or future results of operations."
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.
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 (Unaudited)
(In millions, except for earnings per share)
For the quarter For the six months
ended fiscal June ended fiscal June
--------------------- ---------------------
2007 2006 2007 2006
---------- ---------- ---------- ----------
(13 weeks) (13 weeks) (26 weeks) (26 weeks)
Sales and revenues:
Franchise royalties and
license fees $15.9 $16.9 $30.6 $32.1
Real estate revenues 8.9 9.1 17.9 18.2
Company-operated shop
retail sales 10.5 10.5 20.0 20.0
Replacement part sales
and product royalties 8.9 7.7 16.3 15.5
Other 1.1 0.9 2.2 1.9
---------- ---------- ---------- ----------
Total sales and
revenues 45.3 45.1 87.0 87.7
---------- ---------- ---------- ----------
Cost of sales and revenues:
Real estate cost of
revenues 5.4 5.7 10.9 11.3
Company-operated shop
cost of sales 2.5 2.5 4.8 4.7
Replacement part cost of
sales 7.3 6.1 13.2 12.4
Warranty expense 1.3 1.6 2.4 2.9
Other cost of sales 0.3 0.3 0.6 0.5
---------- ---------- ---------- ----------
Total cost of sales
and revenues 16.8 16.2 31.9 31.8
---------- ---------- ---------- ----------
Gross profit 28.5 28.9 55.1 55.9
Selling, general, and
administrative expenses 20.3 22.2 40.6 44.4
Gain on sale of assets -- -- -- ( 3.4)
Business transformation
charges 1.0 0.4 1.5 0.5
---------- ---------- ---------- ----------
Operating income 7.2 6.3 13.0 14.4
Interest expense ( 2.3) ( 2.3) ( 4.5) ( 4.5)
Other income, net 0.2 0.2 0.3 0.5
---------- ---------- ---------- ----------
Income before income
taxes 5.1 4.2 8.8 10.4
Income tax expense 2.1 1.6 3.6 4.0
---------- ---------- ---------- ----------
Net income $3.0 $2.6 $5.2 $6.4
========== ========== ========== ==========
Earnings per share:
Basic $0.22 $0.17 $0.37 $0.42
========== ========== ========== ==========
Diluted $0.21 $0.17 $0.35 $0.41
========== ========== ========== ==========
Average number of shares:
Common shares outstanding 14.1 15.2 14.2 15.2
Common stock warrants 0.1 0.1 0.1 0.1
---------- ---------- ---------- ----------
Shares applicable to
basic earnings 14.2 15.3 14.3 15.3
Equivalent shares on
outstanding stock awards 0.6 0.4 0.5 0.4
---------- ---------- ---------- ----------
Shares applicable to
diluted earnings 14.8 15.7 14.8 15.7
========== ========== ========== ==========
Capital expenditures $1.2 $0.8 $1.6 $1.5
========== ========== ========== ==========
MIDAS, INC.
CONDENSED BALANCE SHEETS
(In millions)
Fiscal Fiscal
June December
2007 2006
----------- ----------
(Unaudited)
Assets:
Current assets:
Cash and cash equivalents $1.9 $2.4
Receivables, net 30.0 28.7
Inventories 2.4 3.1
Deferred income taxes 6.7 7.6
Prepaid assets 4.3 3.3
Other current assets 3.1 4.3
----------- ----------
Total current assets 48.4 49.4
Property and equipment, net 95.7 99.4
Goodwill and other intangibles, net 9.8 1.5
Deferred income taxes 53.9 57.2
Other assets 8.7 8.9
----------- ----------
Total assets $216.5 $216.4
=========== ==========
Liabilities and equity:
Current liabilities:
Current portion of long-term obligations $1.9 $2.0
Accounts payable 14.7 15.9
Current portion of accrued warranty 4.6 4.6
Accrued expenses 18.7 21.5
----------- ----------
Total current liabilities 39.9 44.0
Long-term debt 72.5 61.1
Obligations under capital leases 2.5 3.0
Finance lease obligation 33.4 33.9
Accrued warranty 29.0 28.8
Other liabilities 5.0 8.3
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Total liabilities 182.3 179.1
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Temporary equity:
Non-vested restricted stock subject to
redemption 3.4 2.3
Shareholders' equity:
Common stock ($.001 par value, 100 million
shares authorized, 17.7 million
shares issued) and paid-in capital 8.2 10.3
Treasury stock, at cost (3.1 million shares
and 2.7 million shares) (66.5) (57.8)
Retained income 94.3 89.1
Accumulated other comprehensive loss (5.2) (6.6)
----------- ----------
Total shareholders' equity 30.8 35.0
----------- ----------
Total liabilities and shareholders'
equity $216.5 $216.4
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CONTACT: Midas, Inc.
Bob Troyer (630) 438-3016