ITASCA, IL — Midas reported net earnings of $2.2 million — or 14 cents per diluted share — for the first quarter ended March 31. First quarter results include business transformation charges of 2 cents per diluted share related to the continuing shop re-imaging program and the upcoming termination of the AutoZone supply agreement.

In the first quarter of 2006, Midas reported net income of $3.8 million — or 24 cents per diluted share — which included after-tax gains of 13 cents per share related to the sale of exhaust-related real estate and equipment, as well as after-tax operating losses of 4 cents per share related to the company’s 2006 exit from the exhaust distribution business.

“For the first time this decade, every component of our business produced a positive operating contribution for the quarter, including franchising, real estate, company shops, wholesale and our R.O. Writer software business,” said Alan Feldman, Midas’ chairman and chief executive officer.

“We are particularly pleased with the progress we have made over the past four years in our company shop operations with gains in retail sales and expense reductions,” he said.

Citing continued improvement in the performance of company shops, Feldman said that the 2007 operating contribution of $0.2 million for company shops compares to first quarter losses of $1 million in 2003, $0.7 million in both 2004 and 2005, and $0.2 million last year.

“We expect company shops to show continued operating improvement,” Feldman said.

Midas ended the first quarter with 61 company-owned shops, having acquired two in New Jersey and selling six in Florida and one in Arizona. Midas now operates 29 shops in Florida, down from 45 at the end of 2005.

“Retail sales in January and February were a challenge, but we saw significant improvement in March after launching the $89.95 national brake promotion in the U.S. in late February” Feldman said.

Comparable shop retail sales in the U.S. were virtually flat for the quarter, but were up just over three percent in March. Comparable shop sales in Canada were down about one-half of one-percent in the first quarter, after having posted comparable shop sales gains for seven consecutive quarters

Net cash provided by operating activities before cash outlays for business transformation costs and total changes in assets and liabilities grew 44 percent to $7.8 million in the first quarter, compared to $5.4 million last year. Cash outlays for business transformation charges decreased, as the company paid $1 million to AutoZone during the first quarter of 2007 as part of the early contract termination, and $0.5 million for the retail store image upgrade program. Changes in assets and liabilities used $3 million of cash in the first quarter of fiscal 2007, due to the timing of advertising and other payments. The company expects most of this to reverse during the balance of 2007. The final liquidation of exhaust inventories was the primary reason for the $6 million of cash generated from changes in assets and liabilities in fiscal 2006.

Sales and revenues for the quarter were $41.7 million, down from $42.6 million last year, due primarily to the final closure of the exhaust distribution business in the first quarter of 2006 and lower franchise royalties.

Franchise royalties and license fees were $14.7 million in the first quarter, down from $15.2 million in 2006, as a result of a slight reduction in the European royalties and fewer shops in North America during the quarter. Real estate revenues were $9 million, down slightly from $9.1 million in 2006.

Retail sales at company shops in the first quarter were $9.5 million, flat with the same period last year when there were nine additional shops in operation. Comparable shop sales increased by 2.7 percent in the first quarter this year, the 12th consecutive quarter of positive comparable shop retail sales at company shops. The Florida shops reported a 3.4 percent comparable shop increase.

Replacement part sales and product royalties were $7.4 million in the first quarter, down $400,000 from the same period last year when the company recorded $1.4 million in final sales of exhaust products.

Gross margin for the first quarter was 63.8 percent of sales, compared to 63.4 percent last year.

Selling, general and administrative expenses for the first quarter were $20.3 million, down from $22.2 million a year ago, due to the elimination of costs related to the former exhaust distribution business, fewer company shops and lower real estate operating expenses.

Operating income for the first quarter of $5.8 million was down from $8.1 million last year, when the company recorded a pre-tax gain of $3.4 million on asset sales.

Interest expense for the quarter was $2.2 million, even with last year. Bank debt at the end of the quarter was $67 million, compared to $61.1 million at the end of 2006. The increase in bank debt is due to aggressive share repurchases, and the $1 million payment to AutoZone for termination of the supply agreement.

Midas spent $7 million during the first quarter to purchase 328,300 shares of its common shares in a $50 million repurchase program that began in February 2005. Through the end of the first quarter, the company has acquired 2.1 million shares at a total cost of $43.4 million.

The company re-affirmed its previous guidance of 2007 full-year revenues of approximately $180 million and operating income of between $29.5 and $31.5 million, excluding the effects of continuing shop upgrade payments and the AutoZone contract amendment payment. This projected operating income includes $2.2 million in SFAS 123R stock option expenses.

The company expects full-year interest expense of approximately $9 million and capital spending of approximately $4 million.

Midas expects cash flow from operating activities of between $30 and $32 million in 2007 — more than $2 per share –after providing for changes in working capital and outlays for business transformation costs. Midas intends to use this cash flow to continue to repurchase shares and to fund acquisition opportunities and shop growth.

For more information about Midas, go to: http://www.midasinc.com.