ITASCA, Ill. – Midas Inc. has reported a net loss of $0.4 million, or 3 cents 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. Midas said 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.
 
Fiscal 2011 full-year earnings were $4 million, or 28 cents per diluted share, compared to a net loss of $13.4 million, 97 cents 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.
 
“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 Feldman, Midas’ chairman and CEO. “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.”

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, the company said.
 
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 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.
 
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.
 
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 million and $24 million.
 
Feldman added 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.