Midas' Third Quarter Net Income Results
15 October 1998
Midas' Third Quarter Net Income Up 24% Over Pro Forma 1997 Results Excluding 1997 Non-Recurring Charges; Diluted EPS Up 21% to $0.76 Excluding Non-Recurring Charges From 1997
CHICAGO--Oct. 14, 1998--Midas, Inc. , today announced its results for the third quarter ended Sept. 26, 1998. Net income for the quarter was $13.1 million, a 24% increase from the pro forma net income (excluding non-recurring charges) of $10.6 million reported last year. Diluted earnings per share were $0.76 for the quarter, up from $0.63 (excluding non-recurring charges of $2.73 per share) last year.Operating income was $24.4 million for the third quarter or 2% above the $24.0 million (excluding $67.6 million of non-recurring charges) reported a year ago. Sales and revenues were $138.6 million, down 14% from a year earlier.
More than 80% of the decline in third quarter sales and revenues was due to lower retail sales from company-owned stores worldwide, as the number of company-owned stores in operation declined by 100 from one year ago, primarily due to franchising of the units. The remainder of the decrease was attributable to the elimination of unprofitable distribution programs; lower wholesale product selling prices, and effects of foreign exchange.
"During the third quarter, we continued enhancing our management team and made substantial improvement in reducing operating expenses, which improved our operating margin by 280 basis points to 17.6%," said Wendel H. Province, Midas' chairman and chief executive officer.
"The company's continued focus on improving cash flow enabled us to reduce long-term debt by $17.8 million during the third quarter to $154 million," he said.
"Also during the third quarter, we took a major step towards improving our returns from our International operations with the announcement of the formation of a strategic alliance with Magneti Marelli of the Fiat Group to accelerate the development of the Midas program in Europe and South America," Province said.
"We continue to believe that the major changes we are making in our marketing approach will re-establish Midas' growth in the service industry. These enhancements in Midas' product offering and marketing for the remainder of 1998 and 1999 are tangible reasons for optimism about the company's future," Province said.
Midas' net income for the first three quarters was $28.5 million or $1.65 per diluted share, an increase of 20% from $23.8 million or $1.41 per diluted share, excluding non-recurring charges, on a pro forma basis in 1997.
Operating income for the first nine months of 1998 was $57.8 million, virtually even with the $58.0 million, excluding non-recurring charges, for the same period a year ago. Sales and revenues for the first three quarters were $411.6 million, compared to $464.0 million during the same period of 1997.
Midas is one of the world's largest providers of automotive service, including exhaust, brakes, steering and suspension, as well as batteries and maintenance services. There are more than 2,700 Midas locations in 19 countries, including nearly 2,150 in North America.
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 are included in the company's filings with the Securities and Exchange Commission, including the company's 1997 annual report on Form 10-K.
-- Financial Tables Follow --
MIDAS, INC.
CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
(In millions, except for earnings per share)
For the Quarter For the Nine Months
Ended September Ended September
1998 1997 1998 1997
Sales and revenues $ 138.6 $ 161.7 $ 411.6 $ 464.0
Cost of goods sold 68.0 73.9 198.1 214.5
Selling, general, and
administrative expenses 46.2 63.8 155.7 191.5
Disposition of U.S.
company-operated stores -- 35.5 -- 35.5
Non-recurring charges -- 32.1 -- 32.1
------ ------ ------ ------
Operating income (loss) 24.4 (43.6) 57.8 (9.6)
------ ------ ------ ------
Whitman charges -- (4.5) (1.1) (13.5)
------ ------ ------ ------
Whitman -- (1.6) (0.5) (5.5)
Other (3.0) (0.6) (9.7) (1.7)
------ ------ ------ ------
Total interest expense (3.0) (2.2) (10.2) (7.2)
Other income (expense), net 0.6 0.2 1.4 0.7
------ ------ ------ ------
Income (loss) before taxes 22.0 (50.1) 47.9 (29.6)
Income tax provisions 8.9 (13.7) 19.4 (4.9)
------ ------ ------ ------
Net income (loss)
(as reported) $ 13.1 (36.4) $ 28.5 (24.7)
====== ====== ====== ======
Pro forma adjustments to
net income 0.8(1) 2.3(1)
------ ------
Pro forma net income $ (35.6)(1) $ (22.4)(1)
------ --------
EARNINGS PER SHARE:
Basic $ .77 $ 1.68
======== ========
Diluted $ .76 $ 1.65
======== ========
Pro forma basic
and diluted $ (2.10) $ (1.32)
======== ========
Pro forma basic and
diluted before
special charges $ .63(1) $ 1.41(1)
======== ========
AVERAGE NUMBER OF SHARES (Millions):
Common shares outstanding 16.9 16.9
Equivalent shares on
outstanding stock options .4 .4
Shares applicable to
diluted earnings 17.3 17.3
Pro forma common shares
outstanding 17.0(1) 17.0(1)
(1)Midas, Inc., was spun off from Whitman Corporation on Jan. 30, 1998.
Pro forma adjustments have been made to 1997 results to give effect to
increases and decreases in costs that would have been incurred by
Midas as an independent, publicly held company, rather than a
subsidiary of Whitman. The pro forma adjustments (a) cover incremental
interest and administrative costs of an independent company, (b)
eliminate interest and corporate charges paid to Whitman; (c) cover
incremental income tax expense. The number of shares was assumed to be
the number of shares distributed in the spin-off from Whitman.
MIDAS, INC.
SUMMARY OF SALES AND OPERATING INCOME
FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER, 1998
COMPARED WITH THE SAME PERIOD OF 1997
(In millions)
(Unaudited)
For the Quarter For the Nine Months
Ended September Ended September
1998 1997 1998 1997
Sales and revenues:
U.S. Operations:
Franchise activities $ 83.2 $ 86.5 $ 243.5 $ 254.9
Company-operated stores 9.7 25.4 39.7 70.4
-------- -------- -------- --------
Total U.S 92.9 111.9 283.2 325.3
-------- -------- -------- --------
Non-U.S. Operations
Europe 31.6 31.5 84.5 86.3
Canada 12.5 15.8 38.6 44.6
Other 1.6 2.5 5.3 7.8
-------- -------- -------- --------
Total Non-U.S 45.7 49.8 128.4 138.7
-------- -------- -------- --------
Total $ 138.6 $ 161.7 $ 411.6 $ 464.0
======== ======== ======== ========
For the Quarter For the Nine Months
Ended September Ended September
1998 1997 1998 1997
Operating Income: ---- ---- ---- ----
U.S. Operations:
Franchise activities $ 21.1 $ 19.8 $ 57.8 $ 55.9
Company-operated stores (0.1) 1.3 (1.0) 0.2
-------- -------- -------- --------
Total U.S 21.0 21.1 56.8 56.1
-------- -------- -------- --------
Non-U.S. Operations
Europe 3.9 3.5 4.1 4.5
Canada 1.5 1.5 2.5 2.7
Other (0.3) (0.3) (0.4) (0.7)
-------- -------- -------- --------
Total Non-U.S 5.1 4.7 6.2 6.5
-------- -------- -------- --------
Total segment operating
income before special
charges 26.1 25.8 63.0 62.6
Corporate administrative
expenses (1.7) (1.8) (5.2) (4.6)
-------- -------- -------- --------
Operating income before
special charges 24.4 24.0 57.8 58.0
Disposition of U. S.
company-operated stores -- (35.5)(2) -- (35.5)(2)
Non-recurring charges -- (32.1)(2) -- (32.1)(2)
-------- -------- -------- --------
Operating income after
special charges $24. 4 $(43.6) $57.8 $(9.6)
======== ======== ======== ========
(2)In the third quarter of 1977, Midas recorded charges of $35.5 million ($23.7 million on an after-tax basis) related to the disposition of its U. S. company-operated stores and non-recurring charges of $32.1 million ($22.5 million on an after-tax basis). These charges were recorded in the following segments: U. S. franchise activities--$25.4 million; U. S. company-operated stores--$35.5 million; Europe--$5.3 million, and other non-U.S. operations--$1.4 million.