Midas Reports 1998 Earnings Up 35%
12 February 1999
Midas Reports 1998 Earnings Up 35% Before One-Time Gains and Losses; Momentum Continued With Strong Fourth Quarter Results; Company Declares Dividend of $0.02 Per Share
CHICAGO--Feb. 11, 1999--Midas, Inc. , today announced its results for the fourth quarter and fiscal year ended Dec. 26, 1998.Fourth quarter earnings before business transformation costs and one-time gains were $6.4 million or $0.36 per diluted share, up from pro forma earnings of $1.9 million or $0.11 per diluted share in 1997.
The 1998 full-year earnings, excluding one-time items for both years, were $34.9 million or $2.01 per diluted share, up from pro forma earnings of $25.7 million or $1.52 per diluted share in 1997.
"Management viewed 1998 as the beginning of a transition process to reposition Midas for growth as we move towards the new century," said Wendel H. Province, Midas' chairman and chief executive officer.
"We made considerable progress in strengthening the balance sheet, reducing debt, re-deploying assets to improve returns, reducing costs, improving relationships with our franchisees, enhancing marketing and wholesale product programs, strengthening our management team and evaluating our distribution and information systems in 1998," Province said. "I believe our fourth quarter and full year results in 1998 provide clear evidence that we are on the right track.
"Midas will focus its financial and management resources on North America, where we are a market leader with nearly 2,150 Midas shops," he said. "Company management and employees are committed to implementing these improvements to strengthen our performance and to drive more business into our franchisees' shops in 1999 and beyond."
Sales and revenues for 1998 were $519.1 million, down 13 percent from $596.4 million in 1997. Province explained that the decline in sales and revenues was the result of the franchising of company-owned shops, the sale of Midas Europe, lower selling prices for wholesale products and currency fluctuations.
Net income for 1998 was $28.2 million--or $1.63 per share--compared to a pro forma loss of $23.5 million--or $1.21 per share--reported last year.
The 1998 results included a one-time pre-tax gain of $38.0 million ($28.1 million after-tax ) and one-time business transformation costs totaling $55.7 million ($34.8 million after-tax).
The one-time gain in 1998 of $38.0 million before taxes came from the sale in October of the company's interests in Europe to Magneti Marelli, a part of the Fiat Group of Italy.
Of the 1998 business transformation costs of $55.7 million before taxes, $32.2 million was for a one-time cash incentive payment to Midas franchisees in North America to encourage a rapid shop image and technology upgrade program at their shops. This program includes new signage, upgrades of the exteriors and interiors of the shops and the purchase of enhanced systems hardware and software.
The remaining $23.5 million of the 1998 business transformation costs was for planned relocation of the company headquarters from downtown Chicago to suburban Itasca, Ill.; consolidation of Midas Canada management and administrative functions into Midas headquarters in Illinois; re-configuration of the North American distribution system, and disposition of the company's operations in Australia.
In 1997, Midas recorded business transformation costs totaling $67.6 million ($46.2 million after-tax) associated with franchising of company-owned Midas shops, asset impairments, staff reductions and other company programs.
During 1998, the company retired more than $120 million of the debt associated with its spin-off from Whitman Corporation. At the time of the spin-off on Jan. 30, 1998, Midas had $235.2 million in long-term debt and a debt-to-capitalization ratio of 71 percent. By the end of the fiscal year, debt had been reduced to $114.6 million with a debt-to-capitalization ratio of 49 percent.
In 1998, selling, general and administrative expenses were reduced by 22 percent to $196.4 million from $252.1 million in 1997. Operating income before business transformation costs was $69.6 million in 1998, a 4.2 percent increase over $66.8 million the previous year.
Midas' board of directors has declared a dividend of $0.02 per share, payable April 1, 1999, to shareholders of record on March 15.
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.
MIDAS, INC.
CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
(In millions, except for earnings per share)
For the Quarter For the Twelve Months
Ended Ended
December December
-------- --------
1998 1997 1998 1997
---- ---- ---- ----
Sales and revenues $ 107.5 $ 132.4 $ 519.1 $ 596.4
Cost of goods sold 55.0 63.0 253.1 277.5
Selling, general, and
administrative expenses 40.7 60.6 196.4 252.1
Business transformation
costs 55.7 - 55.7 67.6
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Operating income
(loss) (43.9) 8.8 13.9 (0.8)
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Gain on sale of
European Operations 38.0 - 38.0 -
Whitman charges - (4.6) (1.1) (18.1)
Interest expense (2.5) (1.9) (12.7) (9.1)
Other income
(expense), net 0.5 0.2 1.9 0.9
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Income (loss)
before taxes (7.9) 2.5 40.0 (27.1)
Income tax provisions (7.6) 1.3 11.8 (3.6)
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Net income (loss)
(as reported) $ (0.3) $ 1.2 $ 28.2 $ (23.5)
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Net income, excluding
gain on sale of European
Operations and business
transformation costs $ 6.4 $ 1.2 $ 34.9 $ 22.7
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Pro forma adjustments
to net income 0.7(a) 3.0(a)
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Pro forma net income,
excluding business
transformation costs $ 1.9(a) $25.7(a)
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Earnings Per Share:
Basic $ ( .02) $ 1.67
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Diluted $ ( .02) $ 1.63
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Pro forma basic
and diluted $ .11 $ (1.21)
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Earnings Per Share, excluding gain
on the sale of European Operations
and business transformation costs:
Basic $ .38 $ 2.06
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Diluted $ .36 $ 2.01
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Pro forma basic
and diluted $ .11(a) $1.52(a)
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Average Number of Shares:
Common shares
outstanding 16.9 16.9
Equivalent shares
on outstanding
stock options .6 .4
Shares applicable to
diluted earnings 17.5 17.3
Pro forma common
shares outstanding 17.0(a) 17.0(a)
(a) 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 YEAR ENDED DECEMBER 1998
COMPARED WITH THE SAME PERIOD OF 1997
(In millions)
(Unaudited)
For the Quarter For the Twelve Months
Ended December Ended December
Sales and revenues: 1998 1997 1998 1997
---- ---- ---- ----
U.S. Operations:
Franchise activities $ 70.3 $ 72.0 $ 313.8 $ 326.9
Company-operated stores 6.5 19.8 46.2 90.2
------- ------- ------- ------
Total U.S 76.8 91.8 360.0 417.1
------- ------- ------- ------
Non-U.S. Operations:
Europe 19.7 25.6 104.2 111.9
Canada 9.3 12.7 47.9 57.3
Other 1.7 2.3 7.0 10.1
------- ------- ------- ------
Total Non-U.S. 30.7 40.6 159.1 179.3
------- ------- ------- ------
Total $ 107.5 $ 132.4 $ 519.1 $ 596.4
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For the Quarter For the Twelve Months
Ended December Ended December
Operating Income: 1998 1997 1998 1997
---- ---- ---- ----
U.S. Operations
Franchise activities $ 12.7 $ 10.4 $ 70.5 $ 66.3
Company-operated stores (0.7) ( 0.7) (1.7) ( 0.5)
------- ------- ------- ------
Total U.S 12.0 9.7 68.8 65.8
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Non-U.S. Operations:
Europe 1.7 0.4 5.8 4.9
Canada (0.3) 0.3 2.2 3.0
Other (0.2) (0.4) (0.6) (1.1)
------- ------- ------- ------
Total Non-U.S 1.2 0.3 7.4 6.8
------- ------- ------- ------
Total segment
operating income 13.2 10.0 76.2 72.6
Corporate administrative
expenses (1.4) ( 1.2) (6.6) (5.8)
------- ------- ------- ------
Operating income before
business transformation
costs 11.8 8.8 69.6 66.8
Business transformation
costs ( 55.7) - (55.7) (67.6)
------- ------- ------- ------
Operating income after
business transformation
costs $ ( 43.9) $ 8.8 $ 13.9 $ (0.8)
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MIDAS, INC.
CONDENSED BALANCE SHEETS
(In millions)
December December
1998 1997
ASSETS: (Unaudited)
Current assets:
Cash and cash equivalents $ 36.9 $ 12.5
Receivables, net 39.4 65.7
Inventories 63.2 79.8
Other current assets 24.8 30.8
------- -------
Total current assets 164.3 188.8
Property and equipment, net 142.8 198.2
Intangible assets, net 2.1 29.3
Other assets 16.1 26.8
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Total assets $ 325.3 $ 443.1
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LIABILITIES AND EQUITY:
Current liabilities:
Short-term debt.............. $ 0.9 $ 1.0
Short-term obligations under
capital leases 0.7 0.8
Accounts and dividends payable 19.5 40.3
Other current liabilities 42.2 64.9
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Total current liabilities 63.3 107.0
Loans and advances from Whitman - 55.5
Long-term debt 102.2 3.5
Obligations under capital leases 10.8 14.6
Deferred income taxes and other
liabilities 25.6 28.4
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Total liabilities 201.9 209.0
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Shareholders' equity:
Common stock and capital in
excess of par value ($.001
par value, 100 million
shares authorized, 17.0
million shares issued and
16.8 million shares
outstanding December 1998) 27.1 -
Treasury stock, at cost, .2
million shares ( 4.2) -
Combined capital accounts - 26.6
Retained income 106.9 217.3
Accumulated other
comprehensive income (loss) ( 6.4) ( 9.8)
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123.4 234.1
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Total liabilities and equity $ 325.3 $ 443.1
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