ITASCA, Ill. (Aug. 11, 2003) — Costs related to exiting its wholesale distribution business helped push Midas Inc.'s net income to a loss of $32.7 million for its second quarter.
For the same period in 2002, the chain reported net income of $4.1 million.
Sales for the second quarter of 2003 were $77.9 million, down from $90.4 million last year. For the first half of the year, sales were $152.4 million vs. $171.8 million in 2002. Midas said the declines were the result of lower wholesale sales attributed to the phase-out of its network of 77 Parts Warehouse Inc. quick-delivery sites.
Retail sales at company-owned stores were down to $11.2 million for the quarter and $22.9 million for the half, compared to $14.0 million and $27.8 million, respectively, in 2002. Midas said fewer company-owned shops in operation led to the declines.
In the quarter, the Itasca-based company recorded pre-tax charges of $50.8 million, including $33.3 million to establish an accrual for future warranty obligations in the U.S. and $17.5 million for asset write-downs and severance costs associated with the closure of the wholesale business. Further charges for closing centers in Canada will be posted in the third quarter, though they are not expected to be as large, the company said.
Midas plans to close 11 of its 12 distribution centers by the end of 2003. Its remaining warehouse in Chicago will distribute products from the company's exhaust manufacturing plant in Hartford, Wisc.
“Midas is making significant progress on the major restructuring, which will enable the company to focus on the profitable franchise retail business,” said Alan Feldman, president and CEO. “While we are beginning to see positive signs in our business, 2003 will continue to be a transition year.”
After announcing the restructuring in April, Midas set up agreements with AutoZone in the U.S. and Uni-Select in Canada to distribute parts to about 1,900 Midas shops in North America. The transition started in June, and so far 263 Midas shops in the Southeast have switched, Midas said.