ITASCA, IL — Midas has reported net earnings of $3 million, or 21 cents per diluted share, for the third quarter ended Sept. 29, compared to net earnings of $2.4 million, or 16 cents per diluted share, in the prior year. Third quarter results in both years included special items of 2 cents per share, primarily consisting of business transformation charges related to the continuing shop re-imaging program.

For the first nine months of 2007, Midas reported net income of $8.2 million, or 56 cents per diluted share, compared to $8.8 million—or 56 cents per diluted share—a year ago. The 2006 nine-month net income included a $3.4 million gain on asset sales that added 13 cents to earnings per share.

“Operating income was virtually flat for the quarter, despite a challenging retail environment that saw a 3.2 percent comparable shop sales decline in the U.S.,” said Alan Feldman, Midas’ chairman and chief executive officer.

“Third quarter retail sales trends for the Midas system were similar to many retailers in North America,” Feldman said. “Also, our September results were comparing to a very strong month last year when U.S. comparable shops sales were up five percent, led by an eight percent increase in brakes.

“Importantly, profit improvements and expense reductions in other parts of our business offset the decline of $1 million in worldwide franchise royalties,” Feldman said. “This, combined with a more normalized tax rate in 2007 and a reduced share count due to our ongoing share buyback, enabled the company to post a 31 percent increase in earnings per share.”

Feldman said the comparable sales decline in U.S. shops occurred despite continuing gains of nearly nine percent in tires and nearly 11 percent in oil changes.

“These increases could not offset comparable sales declines of seven percent in brakes and 11 percent in exhaust,” he said.

In Canada, comparable shop sales declined by 1.5 percent in the third quarter, including declines of five percent in brakes and nine percent in exhaust.

“Comparable retail sales at company shops declined 2.4 percent, the first comparable shop sales decline in 14 quarters,” he said. “Comparable shop sales were up 7.4 percent in our Chicago company shops. However, we experienced significant weakness in our Florida markets.”

Midas ended the third quarter with 80 company shops, an increase of four during the quarter.

The company’s third quarter marketing message focused on maintenance services.

“In July, we began a heavy schedule of advertising, which runs through mid-November for the $29.95 Midas Touch Maintenance Package including oil and filter replacement, tire inspection and rotation and a multi-point vehicle inspection,” Feldman said. “The promotion helped drive an increase in oil changes of more than 10 percent.”

Net cash provided by operating activities grew to $24.4 million in the first nine months, up from $20.3 million for the same period last year. On a per share basis, net cash provided by operating activities grew 27 percent to $1.65 per share from $1.30 per share.

Sales and revenues for the third quarter and first nine months were $46.1 million and $133.1 million, respectively, compared to $45.3 million and $133 million, respectively, in 2006.

Franchise royalties and license fees were $15.6 million in the third quarter and $46.2 million in the first nine months, down from $16.6 million and $48.7 million for the same periods a year ago. The declines are a result of the U.S. comparable shop retail sales decline and lower fees from International franchising. Real estate revenues were $9.1 million in the third quarter and $27 million in the first nine months, flat for the quarter and down slightly from $27.3 million for the first nine months in 2006.

Retail sales at company-owned shops were $12.9 million for the quarter and $32.9 million for the first nine months, up from $10.8 million and $30.8 million for the same periods last year. The increase in sales is a result of the higher shop count.

Replacement part sales and product royalties were $7.4 million in the third quarter and $23.7 million in the first nine months, compared to $7.8 million and $23.3 million, respectively, last year.

Gross profit margin was 64.6 percent for the quarter and 63.8 percent for the first nine months of 2007, compared to 64.9 percent in the third quarter and 64.1 percent in the first nine months last year. The decline in gross profit margin in the third quarter was the result of the replacement of high-margin franchise royalties with lower margin company shop sales.

Selling, general and administrative expenses were $21.9 million in the third quarter and $62.5 million in the first nine months, compared to $21.4 million and $65.8 million, respectively, last year. The increase in the third quarter was the result of operating five additional company shops than in the same period a year ago, partially offset by a $0.7 million reduction in expenses in other parts of the company’s business. The decline in the first nine months was primarily a result of a significant reduction in dealer convention expenses, the closing of the company’s last remaining distribution center in the first quarter of 2006, and the recovery of legal fees from one of the company’s insurers in 2007.

Operating income was $7.5 million for the third quarter and $20.5 million for the first nine months, compared to $7.6 million and $22 million in the same periods a year ago. The 2006 first nine-month amount included a $3.4 million gain from the sale of the company’s Chicago distribution center in the first quarter of 2006.

Interest expense for the third quarter was $2.3 million and was $6.8 million for the first nine months, both flat with 2006.

Midas spent $7.4 million during the third quarter to purchase 382,800 shares of its common stock in a share repurchase program that began in February 2005. Through the end of the third quarter, Midas has acquired approximately 2.8 million shares at a total cost of approximately $57.4 million — with $42.6 million remaining in the $100 million authorization.

Bank debt was $70 million at the end of the third quarter, compared to $72.5 million at the end of the second quarter. Bank debt declined during the quarter, despite $7.4 million in share repurchases, $1.8 million in capital expenditures and $3.4 million in cash paid to acquire shops during the quarter.

As a result of the continuing softness in retail sales, Midas is revising its full-year guidance. The company now expects 2007 full-year revenues of approximately $178 million, down from previous guidance of $180 million. Operating income will likely be in a range of $28.5 to $29.5 million, excluding the effects of continuing shop upgrade payments and the AutoZone contract amendment payment. The company previously had projected operating income in a range of $29.5 to $30.5 million.

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

Midas continues to expect cash flow from operating activities of between $30 and $32 million in 2007, after providing for changes in working capital and outlays for business transformation costs.

Midas intends to continue to use this cash flow to repurchase shares and to fund acquisition opportunities and shop growth.

“It is important to note that because of the strength of our franchise model, even with a 3.2 percent comparable shop sales decline during the third quarter and early indications of continued sales weakness in the fourth quarter, we have only reduced our operating income guidance by $1 million or approximately three percent,” Feldman said.