Midas, Inc. (NYSE: MDS) reported a net loss of $0.4 million—or
$0.03 per diluted share—for the fourth quarter ended Dec, 31, 2011,
compared to a net loss of $15.7 million—or $1.14 per diluted
share—for the fourth quarter of 2010.
Fourth quarter 2011 operating income was $1.4 million, compared
to an operating loss of $20.4 million in the prior year.
Fourth quarter 2011 operating income was negatively affected by
$2.6 million for legal and investment banking expenses related to
the company’s ongoing review of strategic alternatives which began
in the third quarter, and by a $0.5 million write-down of certain
real estate assets resulting from property appraisals that were
conducted in connection with the strategic review process.
Excluding these items, operating income was $4.5 million for the
quarter.
These items had a combined negative impact on net income of
$0.12 per diluted share in the quarter.
Fourth quarter 2010 operating income was negatively impacted by
the $25.5 million arbitration award accrued in connection with the
contractual dispute with the company’s master licensee in Europe,
and was favorably impacted by the $2.5 million fee recovery awarded
to Midas by the arbitral tribunal. Excluding these items, fourth
quarter 2010 operating income was $2.6 million.
Fiscal 2011 full-year earnings were $4.0 million—or $0.28 per
diluted share—compared to a net loss of $13.4 million—or $0.97 per
diluted share—the prior year. Full-year 2011 operating income of
$16.7 million was negatively affected by $3.2 million in costs
related to the strategic review process, $0.5 million of asset
impairment charges as a result of the appraisal of the company’s
real estate portfolio and $1.1 million in losses on the sale of
company-operated shops to franchisees. Full-year warranty
adjustments positively affected the 2011 full-year results by $1.2
million. Excluding these four items, 2011 full-year operating
income was $20.3 million.
The full-year 2010 operating loss of $9.0 million was negatively
affected by the $25.5 million European arbitration award and was
positively impacted by a $0.3 million warranty reserve adjustment.
Excluding these two items, 2010 full-year operating income was
$16.2 million.
Retail sales
“The positive trends we have been seeing in retail sales
continued throughout 2011, marking nine consecutive quarters of
positive comparable shop sales in U.S. Midas shops,” said Alan D.
Feldman, Midas’ chairman and chief executive officer.
“We continue to promote value-priced oil changes, from which
Midas shops build trusting relationships with customers for our
entire range of repairs and maintenance,” he said.
Overall comparable shop retail sales per selling day at U.S.
Midas shops increased by 1.1 percent in the fourth quarter and by
2.3 percent for the year. Feldman said that oil changes were up
slightly in the quarter, exhaust increased by 6.1 percent and
suspension was up by 4.9 percent, while tires were down by 2.4
percent and brakes declined by 1.9 percent.
“The mild winter has softened some of our cold weather services,
such as batteries, tires, starters and alternators,” Feldman said.
“That said, our sales in the Northeast region were strong in the
quarter—up by 4.5 percent.”
In Canada, fourth quarter comparable shop sales increased by 1.3
percent, with increases in oil changes of 8.1 percent, brakes of
6.2 percent and suspension of 6.1 percent. Comparable shop sales of
tires in Canada were down by 5.8 percent, as a result of the milder
winter.
Fourth quarter comparable shop sales at SpeeDee shops in the
U.S. were up by less than one percent.
In the fourth quarter, comparable shop sales at Midas
company-operated shops in the U.S. increased by 4.4 percent.
There were 78 company-operated Midas shops and six
company-operated SpeeDee shops at the end of the fourth quarter,
compared to a combined 107 at the end of 2010. During 2011, the
company re-franchised 26 company-operated shops, closed one
company-operated shop, re-opened two closed shops and acquired two
shops.
Results for the Fourth Quarter, Full Year
Total sales and revenues for the quarter were $43.5 million,
compared to $46.6 million in the fourth quarter of the prior. Sales
for full-year 2011 were $183.6 million, down from $192.4 million in
full-year 2010. This expected decline in revenues was due to having
23 fewer company-operated Midas shops compared to 2010, as a result
of the company’s successful re-franchising efforts.
Midas’ franchising revenues were $12.5 million for the quarter
and $54.2 million for the full year, up from $12.3 million and
$53.0 million for the respective periods in 2010.
The increase in franchising revenues was primarily the result of
the improved comparable shop sales in Midas shops in the U.S. and
Canada. Additional franchising revenue growth came from higher
franchise fees, as well as the royalties from former
company-operated shops that were re-franchised in the last 12
months.
Real estate revenues were $8.3 million for the fourth quarter
and $32.5 million for the year, compared to $8.0 million in the
fourth quarter and $31.8 million in full-year 2010. Real estate
revenues benefited from higher rents and an increase in the number
of rent-producing shops.
Revenues from retail sales at company-operated shops were $14.4
million during the quarter and $67.2 million for the year, down
from $17.6 million in the fourth quarter and $77.6 million for all
of 2010.
The ongoing re-franchising of company-operated shops resulted in
having 23 fewer company-operated Midas shops this year compared to
2010, which was offset partially by the 4.4 percent increase in
comparable shop sales at U.S. company-operated Midas shops in the
fourth quarter and a 4.8 percent increase for the full year.
Replacement part sales and product royalties were $6.1 million
in the quarter and $21.3 million for the year, compared to $6.9
million and $22.9 million, respectively, in 2010.
Revenues from the company’s R.O. Writer software business were
$1.7 million in the fourth quarter and $6.5 million for the year,
up from $1.5 million in the quarter and $5.9 million for the prior
year.
Selling, general and administrative (SG&A) expenses were
$12.3 million during the quarter and $50.8 million for the year,
compared to $10.2 million and $50.5 million for the same periods a
year ago. Fourth quarter SG&A in 2010 was positively impacted
by a $2.5 million reimbursement in arbitration-related legal fees
from the company’s master licensee in Europe.
Interest expense was $2.1 million for the quarter and $8.2
million for the year, compared to $2.0 million and $9.3 million,
respectively, in 2010.
The company’s bank debt was $72.6 million at the end of the
fourth quarter, compared to $75.8 million at the end of the third
quarter of 2011 and $62.7 million at the end of 2010. The increase
from last year is the result of paying the $22.4 million net
settlement in the European arbitration in April 2011.
Midas recorded an income tax benefit of $0.3 million during the
fourth quarter and an income tax expense of $3.4 million for the
year. The company does not pay a significant amount of income taxes
because of net operating loss carry forwards of approximately $81.6
million.
SpeeDee Co-Brand Update
During the quarter, the company continued to co-brand Midas and
SpeeDee shops, a strategy that is expected to grow revenues and
profitability across the network. Eleven additional shops were
co-branded in the fourth quarter bringing the total to 75.
Of the 75 co-branded shops, 56 were Midas shops and 19 were
SpeeDee shops. Thirty-four of the Midas shops are company-operated
locations and 22 are operated by Midas franchisees. Franchisee
interest in co-branding continues to expand, with the co-branded
shops operated by Midas franchisees reporting a 12 percent increase
in comparable shop sales in the fourth quarter.
The company expects to co-brand an additional 100 shops in
2012.
Growth Opportunities and Strategic Review
“We continue to execute on our growth strategy of building
retail sales at existing shops through value-priced oil changes and
by co-branding, of transitioning under-performing shops and
available closed shops through re-franchising and through improving
profitability at company-operated shops,” Feldman said. “We are
optimistic that the positive trends in retail sales will continue
in 2012, while remaining aware of the potential negative effect of
higher fuel prices on driving patterns and consumer spending.”
He said that Midas expects 2012 operating income, excluding the
impact of gains or losses on the sale of assets and strategic
review expenses of between $22.0 million and $24.0 million.
Feldman said that the review of strategic alternatives is
progressing and that the company will provide additional comments
on the process when the board of directors has approved a specific
course of action.
Midas is one of the world’s largest providers of automotive
service, offering brake, maintenance, tires, exhaust, steering and
suspension services at more than 2,250 franchised, licensed and
company-owned Midas shops 14 countries, including nearly 1,500 in
the United States and Canada. Midas also owns the SpeeDee Oil
Change business, with 161 auto service centers in the United States
and Mexico.
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 2010 annual report on Form 10-K and
subsequent filings
MIDAS, INC. CONDENSED STATEMENTS OF INCOME
(Unaudited) (In millions, except for earnings per share)
For the quarter For the twelve months
ended fiscal
December
ended fiscal
December
2011
(13 weeks)
2010
(13 weeks)
2011
(52 weeks)
2010
(52 weeks)
Sales and revenues: Franchise royalties and license
fees $ 12.5 $ 12.3 $ 54.2 $ 53.0 Real estate revenues from
franchised shops 8.3 8.0 32.5 31.8 Company-operated shop retail
sales 14.4 17.6 67.2 77.6 Replacement part sales and product
royalties 6.1 6.9 21.3 22.9 Warranty fee revenue 0.5 0.3 1.9 1.2
Software sales and maintenance revenue
1.7
1.5 6.5
5.9 Total sales and revenues
43.5
46.6 183.6
192.4 Operating costs and expenses: Franchised shops –
occupancy expenses 5.9 5.9 23.3 22.5 Company-operated shop parts
cost of sales 4.0 5.2 17.9 22.3 Company-operated shop payroll and
employee benefits 6.2 7.9 28.2 33.2 Company-operated shop occupancy
and other operating expenses 4.9 6.0 21.6 25.5 Replacement part
cost of sales 5.6 6.4 19.6 21.0 Warranty expense 0.1 0.0 0.7 0.9
Selling, general, and administrative expenses 12.3 10.2 50.8 50.5
European arbitration settlement 0.0 25.5 0.0 25.5 Strategic review
expenses 2.6 0.0 3.2 0.0 Asset impairment 0.5 0.0 0.5 0.0 (Gain)
loss on sale of assets, net
0.0
(0.1 )
1.1 0.0
Total operating costs and expenses
42.1
67.0 166.9
201.4 Operating income (loss) 1.4 (20.4 ) 16.7
(9.0 ) Interest expense (2.1 ) (2.0 ) (8.2 ) (9.3 ) Other
income (expense), net
0.0
0.0 (1.1 )
0.3
Income (loss) before income taxes (0.7 ) (22.4 ) 7.4 (18.0 )
Income tax expense (benefit)
(0.3 )
(6.7 )
3.4
(4.6 ) Net income (loss)
$
(0.4 )
$ (15.7 )
$ 4.0 $ (13.4 )
Earnings (loss) per share: Basic
$
(0.03 )
$ (1.14 )
$ 0.29 $ (0.97
) Diluted
$ (0.03 )
$
(1.14 )
$ 0.28
$ (0.97 )
Average number
of shares: Shares applicable to basic earnings 13.9 13.9 13.8
13.8 Equivalent shares on outstanding stock awards
0.0 0.2 0.3
0.3 Shares applicable to diluted earnings
13.9 14.1
14.1 14.1 MIDAS,
INC. CONDENSED BALANCE SHEETS (In millions, except
per share data) Fiscal Fiscal
December December
2011
2010
(Unaudited)
Assets: Current assets: Cash and cash
equivalents $ 0.2 $ 0.6 Receivables, net 22.4 29.5 Inventories 6.2
5.0 Deferred income taxes 8.1 18.0 Prepaid assets 4.2 4.1 Other
current assets
3.0 3.0
Total current assets 44.1 60.2 Property and equipment, net 74.0
81.1 Goodwill 23.2 23.4 Other intangible assets, net 16.4 17.6
Deferred income taxes 55.3 43.9 Other assets
2.8 3.5 Total assets
$ 215.8 $ 229.7
Liabilities and equity: Current liabilities: Current
portion of long-term obligations $ 1.8 $ 1.7 Current portion of
accrued warranty 1.5 1.7 Current portion of deferred warranty
obligation 2.4 2.0 Accounts payable 15.1 21.1 Accrued expenses 23.2
20.5 Accrued European arbitration settlement
0.0 25.5 Total current liabilities
44.0 72.5 Long-term debt 72.6 62.7 Obligations under capital leases
1.1 1.3 Finance lease obligation 27.6 29.1 Pension liability 33.7
22.5 Accrued warranty 6.5 9.1 Deferred warranty obligation 5.0 4.8
Other liabilities
4.7 6.7
Total liabilities
195.2
208.7 Temporary equity: Non-vested restricted
stock subject to redemption 4.4 3.8 Shareholders’ equity:
Common stock ($.001 par value, 100 million shares authorized, 17.7
million shares issued) and paid-in capital 5.7 8.9 Treasury stock,
at cost (3.3 million shares and 3.5 million shares) (66.1 ) (71.8 )
Retained income 101.6 97.6 Accumulated other comprehensive loss
(25.0 )
(17.5 ) Total
shareholders’ equity
16.2
17.2 Total liabilities and shareholders’ equity
$ 215.8 $ 229.7
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