ITASCA, Ill. — Midas reported net earnings of $1 million — or 7 cents per diluted share — for the first quarter ended April 4, compared to $1.2 million — or 9 cents per diluted share — in the first quarter of 2008.

Daily car counts at Midas shops in the United States increased by 6 percent during the quarter and revenues from oil changes and tires were up by 23 percent and 4 percent, respectively.

“Despite the 6 percent increase in customer traffic, our customers continued to defer non-essential repairs and maintenance, which led to a 9 percent decline in the average repair order. As a result, overall comparable shop sales in U.S. Midas shops were down 3.4 percent during the quarter,” said Alan Feldman, Midas’ chairman and chief executive officer.

“Marketing efforts in the first quarter focused on building traffic at Midas shops through aggressive local promotions. Network radio commercials and direct mail print materials featured a variety of value-priced offers to attract new customers to try Midas services,” he said.

“The goal of our local value offers is to build ongoing relationships with new customers by providing exceptional service during their initial visits for routine services such as oil changes, so they will come back for all of their maintenance and repair needs,” Feldman said. “We believe that building our customer base now when repairs are being deferred will pay dividends in the future when the economic climate improves.”

Feldman said that comparable shop brake sales declined by 8 percent in Midas shops in both the U.S. and in Canada. Comparable shop exhaust sales were down by 14 percent in the U.S. and by 11 percent in Canada.

“The 6 percent increase in daily car count in the U.S. was offset by a 9 percent decline in the average ticket as a result of the shift in service mix from brakes and exhaust to oil changes,” Feldman said.

“Comparable shop sales continue to be the weakest in the southern and western areas. The South Central region declined by 4.7 percent, the Southeast region was down by 3.8 percent and the West region was down by 7.6 percent,” Feldman said. “We also experienced a 5.4 percent decline in Canada, where the economy has begun to show economic weaknesses similar to those in the U.S.”

Total sales and revenues for the first quarter were $44.3 million, compared to $44.8 million last year.

Midas’ franchising revenues were $13 million for the quarter, down from $13.3 million in 2008. The $1 million increase in royalties from the recently acquired SpeeDee Oil Change business was more than offset by the $1.3 million decline in U.S. and international Midas royalties.

Real estate revenues were $8.3 million compared to $8.7 million last year. The decline in real estate revenues was the result of fewer rent-producing shops in operation. There were 557 leased Midas shops operating in the U.S. and Canada at the end of the first quarter this year, down from 588 in 2008.

Revenues from retail sales at company shops were $15.6 million during the quarter, up from $14.9 million in 2008. The increase is the result of operating more company shops in the first quarter this year. There were 98 company-operated Midas shops in 2009, compared to 95 last year. Comparable shop sales at Midas company shops were down 1.6 percent for the quarter. There were also two company-operated SpeeDee shops in the first quarter of 2009.

Replacement part sales and product royalties were $6.1 million, down from $6.7 million a year ago due to lower tire and equipment sales to franchisees.

Revenues from the company’s R.O. Writer software business were $1.3 million in the first quarter, compared to $1.2 million last year.

First quarter operating income was $3.7 million, compared to $4 million for the same period a year ago. The decline in operating income was primarily the result of the North American comparable shop sales decline, which led to lower franchise royalties, as well as an increased operating loss at company-operated shops. This impact was partially offset by the inclusion of SpeeDee operating results in the first quarter.

Selling, general and administrative (SG&A) expenses were $13.2 million during the first quarter, compared to $13.3 million in 2008. This reduction occurred despite the fact that the fiscal 2009 SG&A includes approximately $500,000 related to the recently acquired SpeeDee business.

Interest expense for the quarter was $2 million, down from $2.2 million in 2008. The company’s bank debt was $88 million at the end of the first quarter, up from $83.6 million at the end of 2008. The increase was the result of the timing of certain advertising expenditures and other payments, which caused an $8.1 million decrease in accounts payable and accrued expenses.

Midas recorded income tax expense of $0.8 million during the first quarter, flat with the first quarter of 2008. The company does not pay a significant amount of income taxes because of net operating loss carry forwards of approximately $73 million from previous years.

Net cash flow from operating activities swung from a $6.9 million source of cash in the first quarter fiscal of 2008 to a $1.7 million use in fiscal 2009, due primarily to an expected $8.1 million decrease in accounts payable and accrued expenses in the first quarter this year.

The shift in the company’s advertising media placement and calendar resulted in approximately $2.5 million of the decrease. The seasonal reduction in tire purchases in the first quarter of 2009 versus the fourth quarter of 2008, along with the expiration of BridgestoneFirestone’s annual winter tire dating program, resulted in a $5.2 million reduction in accounts payable.

The company expects this working capital contraction to reverse over the remainder of fiscal 2009.

In the second quarter of fiscal 2008, Midas purchased the assets of the franchisor of the SpeeDee Oil Change business, with 115 shops in 13 states in the U.S. and 57 shops in Mexico.

In July 2008, Midas began the initial co-branding test of three franchised SpeeDee shops in central California by adding Midas signage and repair services to SpeeDee’s primary quick-lube business. A fourth franchised co-branded shop opened in California in the third quarter of 2008.

Comparable shop retail sales at these California co-branded locations were up 15 percent in the first quarter, following a 13 percent increase in the fourth quarter of last year.

During December 2008, the company began a test of adding SpeeDee oil change signage and services to three company-owned Midas shops in the Chicago area. Comparable shop sales at these Chicago-area co-branded Midas-SpeeDee shops were up a combined 17 percent in the quarter.

“After evaluating the findings from these co-brand test shops, we will begin a gradual roll-out of our co-branding concept to both Midas and SpeeDee shops throughout the U.S.,” Feldman said. “We are encouraged by the double-digit sales increases we are seeing in these co-branded shops and believe the co-branded concept provides significant growth potential for both the Midas and SpeeDee networks.”

The company has begun adding SpeeDee oil change services to 11 company-owned Midas shops in San Diego and expects to have 25 co-brand sites in place by the end of 2009.

“We remain optimistic about our ability to grow sales and profits in this difficult economy, and are confident that our franchise model will continue to produce strong cash flow,” Feldman said. “However, because of the many economic uncertainties in today’s challenging business environment and retail marketplace, Midas will not be providing specific sales and operating income projections for 2009 at this time.”