Midas Reports First Quarter Earnings - Down 9 cents PS
ITASCA, Ill.--April 25, 2002--Midas, Inc.today announced its results for the first quarter ended March 30, 2002.
Net income in the first quarter 2002 was $1.7 million, or $0.12 per share, compared with net income of $3.2 million, or $0.21 per share, in first quarter 2001. Overall sales and revenues for the first quarter 2002 were $81.6 million, compared with $77.5 million in the year ago period.
Midas also announced that it has reached an agreement to sell approximately 80 properties located throughout the United States. These properties are currently leased to franchisees as Midas shops. The agreement is with Realty Income Corporation a public real estate investment trust (REIT), and involves approximately 25 percent of Midas' real estate portfolio. Simultaneous to the sale, Midas will lease these properties from Realty Income and the sites will continue to be leased to Midas franchisees under currently existing leases.
Midas expects to receive between $37 million to $42 million in net after-tax proceeds from the transaction. The final selling price will be determined by real estate appraisals currently under way on each of the properties.
The sale is expected to close during the second quarter. The company will use the net proceeds from the real estate sale to reduce outstanding borrowings under its revolving line of credit. Midas' debt at the end of the first quarter was $150.0 million.
Wendel Province, chairman and chief executive officer of Midas, said, ``By monetizing a portion of our valuable real estate portfolio, we are able to reduce our bank debt, a key priority for Midas in 2002. We also strengthen our capital base and create permanent financing for investments we have made to advance the New Midas strategy. The New Midas strategy calls for increasing the products, services, and value Midas offers through innovations developed and tested at an enlarged network of company operated stores and Parts Warehouse, Inc. quick delivery sites.''
First quarter results
During the first quarter, sales and revenues increased 5.3 percent, reflecting the growth in company operated shops acquired during 2001 and the expansion of the Parts Warehouse, Inc. (PWI) quick-delivery sites, offset by a sharp decline in wholesale product sales through the traditional distribution centers.
``We are particularly pleased with the turnaround at the company shops we acquired early in the fourth quarter of 2001, which reflect favorably on implementation of the New Midas strategy in the marketplace,'' Province said. ``Comparable-store sales at the 52 Florida shops, acquired in October 2001, were up seven percent in March and improved dramatically overall in the first quarter from the declines of as much as 25 percent in 2001 prior to our purchase of the shops.''
Midas currently operates 108 company shops in eight states.
Replacement part sales were $43.6 million for the quarter, down from $50.0 million last year. The expanded PWI network of 74 sites operating in the first quarter, compared with 51 in the same period a year ago, generated an 80 percent increase in revenue. This strong growth helped to offset a 30 percent decrease in replacement part sales through Midas' traditional wholesale distribution centers. Midas continues to make progress in improving just-in-time parts sales to dealers and non-Midas customers through its PWI sites.
``We are disappointed by the continuing decline in our traditional wholesale business and are taking the necessary steps to adjust our cost structure to fit our current wholesale levels,'' Province said. ``Our first quarter retail sales were down by 3.8 percent, hurt by the mild winter weather in most parts of the country.''
During the first quarter, gross margins expanded to 49.6 percent, compared with 47.5 percent a year ago due to the changing mix of sales. Both the new PWI and new company shop businesses have substantially higher margins than the traditional wholesale business. Selling, general and distribution expenses for the quarter increased to $35.1 million, compared with $29.5 million in the same period last year, reflecting the increase in the number of company operated shops and PWI sites. SG&D expenses in other parts of the business declined.
In the first quarter, Midas generated $9.6 million of EBITDA which supported capital investments of $4.6 million during the quarter.
Outlook for 2002
``We expect our network of 108 company operated shops to begin making a positive contribution to operating income in the second quarter,'' Province said. ``We also expect PWI to continue on its path towards profitability in 2002 and to generate operating profit beginning in the second quarter.
``Our priorities for 2002 are to continue to provide franchisees with resources and programs to drive sales and improve profitability. We believe we have taken an important step to reduce our bank debt levels with the announced real estate transaction and will continue to refine the New Midas strategy in 2002. We remain focused on the full integration of company operated shops and PWI sites in 2002 and are committed to future expansion,'' he said.
``We see further opportunities this year to enhance Midas operations and expect improvements in revenues, earnings and cash flow,'' Province said.
Midas is one of the world's largest providers of automotive service, offering exhaust, brake, steering and suspension services, as well as batteries, climate control and maintenance services at 2,700 franchised and licensed Midas shops in 19 countries, including nearly 2,000 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 2001 annual report on Form 10-K.
MIDAS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(In millions, except for earnings and dividends per share)
(Unaudited)
For the quarter
ended fiscal March
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2002 2001
---- ----
(13 Weeks) (13 Weeks)
Sales and revenues.........................$ 81.6 $ 77.5
Cost of sales and revenues................. 41.1 40.7
Selling, general, and distribution
expenses.................................. 35.1 29.5
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Operating income......................... 5.4 7.3
Interest expense........................... ( 2.6) ( 2.3)
Other income, net.......................... - 0.2
--------- ---------
Income before taxes...................... 2.8 5.2
Income taxes .............................. 1.1 2.0
--------- ---------
Net income...............................$ 1.7 $ 3.2
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Earnings per share:
Basic....................................$ 0.12 $ 0.21
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Diluted..................................$ 0.12 $ 0.21
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Dividends per common share.................$ .00 $ .08
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Average number of shares
Common shares outstanding................ 15.0 15.0
Equivalent shares on outstanding stock
options................................. - -
--------- ---------
Shares applicable to diluted earnings.... 15.0 15.0
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EBITDA
Operating income.........................$ 5.4 $ 7.3
Other income, net........................ 0.0 0.2
Depreciation and amortization............ 4.2 3.8
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$ 9.6 $ 11.3
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Capital expenditures.......................$ 4.6 $ 12.1
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MIDAS, INC.
RESULTS OF OPERATIONS
First Quarter 2002 Compared with First Quarter 2001 (Unaudited)
The following is a summary of the Company's sales and revenues for the
first quarter of fiscal 2002 and 2001, respectively: ($ Millions)
Percent Percent
2002 To Total 2001 To Total
---- -------- ---- --------
Replacement parts sales............$ 43.6 53.4% $ 50.0 64.5%
Company-operated shop retail sales. 13.8 16.9 1.7 2.2
Royalties and license fees......... 14.4 17.7 15.8 20.4
Real estate rental revenues........ 9.4 11.5 9.6 12.4
Other.............................. 0.4 0.5 0.4 0.5
------ ------ ------ ------
Sales and revenues.................$ 81.6 100.0% $ 77.5 100.0%
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