Midas F1Q08 (Quarter End 03/29/2008) Earnings Call Transcript

| About: Midas Group (MDS)

Midas, Inc. (NYSE:MDS)

F1Q08 Earnings Call

May 1, 2008 11:00 am ET


Bob Troyer – Director, Investor Relations & Corporate Affairs

Alan D. Feldman - Chairman of the Board, President & Chief Executive Officer

William M. Guzik - Chief Financial Officer & Executive Vice President


Anthony F. Cristello- BB&T Capital Markets


Good day everyone and welcome to the Midas, Inc. first quarter 2008 earnings conference call. Today’s call is being recorded. This conference is also being webcast live by CCBN and can be accessed in the Corporate news section of the Midas’ website, www.MidasInc.com or through CCBN’s sites, www.CompanyBoardRoom.com or www.StreetEvents.com. Today’s call will be archived on these sites. At this time I would like to turn the call over to Mr. Bob Troyer, Director of Investor Relations and Corporate Affairs.

Bob Troyer

Good morning. With us today are Alan Feldman, our Chief Executive Officer and Bill Guzik, our Chief Financial Officers. Their discussions today will contain certain forward-looking statements that are based on current management beliefs and assumptions. These statements are subject to risks and uncertainty that could cause future performance and results to vary materially. Alan and Bill have opening remarks then they will come back to answer your questions.

Alan D. Feldman

Thank you all for joining us on our first quarter conference call. In the press release distributed earlier today we announced that our first quarter net income was $1.3 million or $0.09 per diluted share compared to $2.2 million or $0.14 last year. Operating income declined $1.7 million to $4.1 million in the first quarter of 2007. As we said in the press release the decline was due to the anticipated reduction in international royalty, increased spending to accelerate franchisee transitions, a shortfall in US franchising income and the timing on certain gains on real estate sales. There is no question that our results were negatively affected by lower retail sales in the US brought on by broad economic factors. However because of the strength of our Canadian business the impact on our North American operating income was limited to $300,000. Importantly because of the reduction and corporate expenses and improved profits from our RO Writer software and wholesale businesses we generated sufficient operating income to completely offset the $1.1 million reduction in the European royalties resulting from the scheduled change to a percentage of sales.

There are continuing challenges in the US retail markets caused by high fuel and food prices credit issues and the lowest consumer confidence in more than 25 years. Our overall comparable shop retail sales in US shops were down by 1.6% in the first quarter. Our retail sales were off the most in the Southeast and the West, the same regions hit hardest by real estate and credit issues. It’s important to note that our other three regions in the US all reported positive comparable sales. Additionally retail sales were positive throughout Canada. In our preliminary data for April indicates improved results over our first quarter trends. Comparable shop sales in Canada were up 7.8% in the first quarter the strongest quarterly performance in seven years. Comparable shop brake sales in Canada increased by 9.2% no doubt our Canadian sales continue to benefit from the recent bankruptcy of two of our major competitors.

So as you can see the parts of our North American business that are not as severely impacted by the current credit issues are showing solid or better performance. Additionally we continue to see strong increases in the new Midas service categories. Comparable tire sales grew by 18% in the US and 13% in Canada. Oil changes were up 10% in the US and 5% in Canada and the national fleet business increased 36% in the US and 21% in Canada. However our brake business declined by 9% in the US during the first quarter. The launch of our new Secure Stop Brake Service Positioning was too late in the quarter to significantly affect our results. On a positive note exhausts sales in both the US and Canada were strong in the first quarter. In the US comparable exhaust sales were down only 1.4% compared to the long term trend of double digit declines we have experienced in the past several years. Canadian exhaust retails rose by 10.5% in the first quarter their largest exhaust increase this decade.

We’re often asked if we have seen the bottoming out of the exhaust market. While this has proven difficult to predict I believe the strong exhaust sales in the first quarter were primarily the result of a harsh winter in certain parts of the US and Canada. Now here are several highlights of the first quarter.

As I said we increased the number of shop transitions by 505 to 38 from 25 in the first quarter last year and as Bill will discuss in a few minutes we have increased our spending to accelerate the process of transitioning shops to new owners because the energy and enthusiasm that these new owners bring to the shop lead to improved revenues and profits. As indicated shops sold to new owners in the past six months were up by 18.5% in the first quarter and by nearly 15% during the past year. In the first quarter there were four new shops added to the North American system, two each in the US and Canada. Importantly the number of closures slowed to four in the US and one in Canada resulting in a net decrease in the first quarter of only one shop. This compares to five net closures in the first quarter last year. We continue to reduce our SG&A. It was down by $400,000 for the first quarter. We are on target to meet our commitment to reduce overall SG&A by $12 million over a three year period that ends this fiscal year. We have reduced SG&A by a combined $10.3 million in 2006 and 2007.

The company’s cash flow continues strong with cash generated from operating activities more than doubling in the first quarter to $6.9 million or $0.50 per share and of course the most significant highlight which actually occurred one day after we closed the books on the first quarter was our acquisition of the assets of G.C. & K.B. Investments which franchise 181 SpeeDee quick-lube and auto services in the US and Mexico. More on our plans for SpeeDee shortly.

Now let me take a few moments on more details about these highlights. First retail sales, on our last call I discussed the new Secure Stop branding strategy for our brake business. The plan is for us to move away from national discount pricing for brakes. The Secure Stop strategy elevates and differentiates our branded brake business by focusing on the quality of the products and services offered at Midas. The plan also ensures appropriate price promotion efforts on the local level based on specific marketplace competitive dynamics. We launched Secure Stop in late February in the US and in mid-March in Canada. Supported by heavy broadcasts in cable television advertising including major [inaudible] during the NCAA men’s basketball tournament. Now we know that any branding effort takes time and while our first quarter results were disappointing we are confident that based on the initial feedback we’re getting on this campaign we are moving in the right direction.

In the last call I also talked about the pilot program under way in 21 shops to become aggressive participants in the tire business. We have gone so far as to rebadge the signs on these shops to Midas Auto Service and Tires. In each of these 21 shops we have added an inventory of at least 300 Bridgestone and Firestone branded tires, installed tire displays in the waiting areas and required shop managers to complete a comprehensive sales training course provided by Firestone and this program is working. As a group tire sales in these shops are up 130% during the fie months of the tests. Importantly brake sales have increased 9%, alignments by 14% and suspension by 12.7%.

Overall retail sales in these 21 pilot shops are up by 14.4% for the five months of the test compared to a decline for the system. So we’re adding another 11 company owned shops to the pilot in May. We’re encouraged by these results, not only the significant increase in tire sales but in the sales of other services in these shops particularly brakes. So we’ll continue to analyze the results and the various program elements to determine how best to roll the enhanced tire program out to the system.

Before leaving retail I want to take a moment to tell you about our upcoming partnership with the Make A Wish Foundation which launches next week with a national televised campaign here in the US. The Midas advertising fund will contribute $5 from every Midas Touch maintenance package sold during May and June to help fulfill the dreams of seriously ill children with a goal of contributing $400,000. Our partnership already has received a great deal of attention including mention by Ellen Degeneres last week on her popular daily talk show, Ellen, and through more than a dozen TV interviews around the country with our new consumer spokesperson Lauren Fix. Now you may know her as the Car Coach. This promises to be an outstanding partnership on both local and national levels which will take our Midas Maintenance Campaign to a new level and further elevate and differentiate the Midas brand.

Now in my remaining time I’d like to talk about our acquisition of SpeeDee Oil Change. For those of you who have been following our company for the last year or two you’re well aware that we had been evaluating acquisition opportunities. We have looked at a number of possibilities. Some may have been a good fit but the economic didn’t work. Others simply were not good fits. It has always been our intention to find a candidate that would be complementary to the current Midas business model, enable us to grow the Midas system and become accretive in the first or second year. We believe that our acquisition of the SpeeDee business fits these criteria. The Midas and SpeeDee business models are similar but very different. Let me explain.

About half of SpeeDee’s business is oil changes and other fluid replacements. For Midas that segment is only about 6% while brakes account for nearly 40% of the mix at a typical Midas shop SpeeDee shops do only about 5% in brakes. More importantly SpeeDee sees customers much earlier in the life cycle of their vehicles. Approximately one-third of the vehicles serviced by SpeeDee are less than four years old. SpeeDee literally sees three month old vehicles in need of their first oil change. Midas on the other hand doesn’t typically see vehicles until they are older as approximately 7% of the vehicles serviced by Midas are less than four years old. Our primary objective is to co-brand existing SpeeDee locations with the Midas brand where appropriate. We and the SpeeDee franchisees believe we can significantly increase SpeeDee’s general repair business and therefore increase their sales and profits accordingly.

Additionally we plan to test co-branding locations with SpeeDee oil change services. Our intent is to capture the customer with the new car and get them used to coming to our co-branded location for oil changes. Then when the car reaches an age where it needs brakes and other services the customer will continue to come to our location for Midas services. We believe that this co-branding strategy will allow us to service vehicles from cradle to grave. We’re very excited because the combination will enable both brands to benefit from the strengths of each other. While we will operate the Midas and SpeeDee franchise systems independently developing an effective co-branding operating platform for each brand is a priority.

In the weeks immediately following our April 1st acquisition announcement a team of Midas SpeeDee senior management traveled to the markets with a SpeeDee presence to meet the franchisees of both brands. I can tell you that franchises from both systems showed enthusiasm and support for the potential co-branding combination. Because of the configuration of our respective shops it will probably be easier to add Midas services to a SpeeDee shop. The typical SpeeDee shop has four drive-through express oil change bays and four general service bays which can readily accommodate the addition of Midas core services of brakes, suspension and exhaust services. We would expect to begin adding Midas services to certain SpeeDee shops in the second half of this year. As I said we will also test adding SpeeDee Oil Change service to select Midas shops. We believe the addition of the descriptive SpeeDee Oil Change name will go a long way to build recognition of Midas as a destination for oil changes and other maintenance services.

We are maintaining the SpeeDee headquarters in New Orleans with 11 employees and the entire SpeeDee field organization with six employees. Current SpeeDee management will continue to oversee day-to-day operations and they will report to Bill Guzik to ensure the separate management of the two franchise systems. The Midas franchise operations will continue to report to John Warzecha.

So as you can see there is a lot going on at Midas. Everything we are doing is aimed to position us for future growth. Our Secure Stop brake branding strategy will help differentiate Midas in a competitive marketplace. Our efforts to accelerate shop ownership transitions will result in a franchise base that is enthusiastic about moving Midas to the next level in customer service and new services. Our expanded tire program will allow us to become a destination for tires in the future and finally our recent SpeeDee acquisition will enable us to expand the Midas system and our maintenance business.

Now I’ll turn the call over to Bill Guzik for more specifics about our financial results.

William M. Guzik

Good morning everyone. As usual today I’ll be commenting on our overall financial results, our operating results by business and our operating income guidance for the balance of the year. As our press release pointed out this morning first quarter revenues were $44.8 million up 8.5% over the prior year. Of course the mix of revenues changed significantly from the year ago period. Company operated shop sales increased $5.4 million as a result of a higher shop count while replacement part sales increased $600,000 over the prior year because of the continuing growth of our retail tire program.

Offsetting this revenue growth was the anticipated $900,000 decline in product royalties due to the change in our US warranty program under which we no longer collect product royalties from US suppliers. We also experienced the expected $1.1 million decline in royalties from Europe as our contract changed from a fixed royalty to a variable royalty based on sales effective January 1st. Finally both our North American franchise royalties and real estate revenues declined $300,000 each as a result of temporarily converting 34 franchise shops to company owned over the past 12 months.

Operating income was $4.1 million for the quarter down $1.7 million from last year. Importantly the $1.1 million decline in our European royalties was not the reason for the decline in our operating income. As expected we were able to entirely offset that $1.1 million decline in our operating income through a $900,000 reduction in corporate spending and a $300,000 improvement in operating contributions from our RO Writer and wholesale businesses. The $1.7 million decline in operating income is actually attributable to conscious decisions we made to invest in the future of our business. We spent approximately $400,000 on short term costs to preserve real estate control on Midas sites that were closing or changing hands. Given the cost and effort needed to find and build new sites we think it’s prudent to carry the short term costs of a viable closed site while we locate a new franchisee. Note that this is not a new cost for us but that our Q1 spending was higher than prior years given our current emphasis on franchisee transitions. We’re actively seeking new franchisees for these shops so these leased costs will diminish over the year.

We invested $300,000 during the quarter to prepare shops for re-franchising. Some of these shops were closed and some of these shops traded hands between franchisees during the quarter. We spent money on paint repairs and other fix up needs to make them appealing to the new franchisees and consumers. Again this is not a new cost for us but it was higher than usual because of our higher level of franchisee transitions during the quarter.

As Alan mentioned there is tremendous upside to bringing new franchisees into the system to enhance the revenues of these shops. We also spent an additional $100,000 during the quarter on franchisee recruiting. Advertising, lead generation services, franchisee workshops and similar activities to reach out to additional prospects. Our goal for the year is to transition more than 125 shops to new owners and with 38 in the first quarter we’re well on our way. As I noted earlier we have 34 more company operating shops than a year ago. While most of these new shops were profitable in the first quarter there was additional overhead required to manage these additional shops which had a negative affect on our results.

In addition most recently we acquired three shops in Florida and three shops in Ottawa from two troubled franchisees. The Florida shops were acquired last November and the three Ottawa shops were acquired in February 2008. All six of these shops have been under repair and generated operating losses in the quarter. As a result this investment in overhead in new shops created $300,000 in company operated shop losses during the quarter. The decline in comparable store sales in the US also led to a $300,000 reduction in operating income compared to last year.

And finally $200,000 of the decline in operating income is due to the timing of real estate gains as we realized $200,000 in gains from the sale of real estate in the first quarter of 2007 but none in the first quarter of 2008. We do expect to make up for this decline with real estate gains later in the year.

So to recap of the $1.7 million decline in operating income for the quarter $400,000 is due to investment spending and lease costs to maintain sites. $300,000 is investment spending to repair and prepare sites for re-franchising. $100,000 is investment spending for additional franchise recruitment activities. $300,000 is investment spending on company shops to transition out underperforming dealers which led to $300,000 in operating losses associated with six new company shops and additional overhead. $300,000 is attributable to a decline in franchising income because of the decline in US comparable shop sales and $200,000 is the timing of real estate gains which will reverse later this year.

So while the operating income declined in the first quarter this was the result of planned incremental investment spending that will lead to improved profitability as the year progresses. This is due to the fact that the up front costs to maintain and prepare shops for re-franchising is more than offset by first year fees and royalties that are generated when that shop reopens. And importantly as we’ll hear in a few minutes despite this investment spending we have not lowered our 2008 guidance.

Now let’s take a quick look at revenues and results by business. First franchising and licensing, revenues in the first quarter were down $1.4 million from 2007 as a result of the $1.1 million reduction in European royalties and a $300,000 elimination of royalties from company shops that were previously franchised. Operating contributions for franchising was down the same $1.4 million as a result. As Alan mentioned while US shops experienced comparable store sales declines retail sales in Canada were quite strong. Canadian royalties also benefited from the favorable Canadian exchange rate. Please remember that operating contribution as I detail it here includes direct SG&A expenses but not unallocated corporate expenses and is a non-GAAP measure. There were 1,710 Midas shops in North America at the end of the first quarter down one from the end of 2007. This resulted from four new shop openings offset by five shop closings. Outside of North America shop count increased by one as a result of two shop openings and one closure. So on a worldwide basis shop count was constant from year end at 2,555 units.

Real estate revenues declined $300,000 in the first quarter due to the elimination of rental income from company operated shops that were previously franchised. Operating income was off $1.1 million from a year ago. As noted earlier this reduction in real estate income resulted from the $400,000 of extra spending to preserve shop sites, $300,000 of extra spending to prepare shops for re-franchising, $100,000 spent on additional franchisee recruiting and the $200,000 timing difference on real estate gains. Company shops reported retail sales of $14.9 million up $4.5 million due to the 34 unit increase in shops compared to last year. Comparable sales of company shops were flat for the quarter as a strong 19% increase in sales from the nine company shops in Chicago was offset by an approximate 3% decline in Florida, Colorado and the Northeast.

Company shops reported an operating loss of $200,000 compared to an operating profit of $200,000 in the first quarter of last year. As noted earlier this decline in profitability was driven by the six shops acquired in Florida ad Ottawa and the additional overhead required to manage a much larger company shop portfolio. We operated 95 company shops at the end of the first quarter versus 61 at the end of the first quarter of 2007. As we’ve said in prior calls we are actively re-franchising our company shop portfolio as we find qualified buyers. Replacement part sales and product royalties were $6.7 million in the first quarter down by $300,000 from the prior year. This decline consisted of a $600,000 increase in the sale of replacement parts primarily tires and batteries offset by a $900,000 decrease in product royalties. Remember that we made a significant change to the US warranty program on January 1st which has a major affect on our wholesale business.

Prior to January 1 our US vendor partners have been paying a product royalty to Midas as a small percentage on parts sold to Midas shops. Those revenues were used to offset the future estimated costs of consumer warranty claims. Under the program which began on January 1st those product royalties are now going directly to the Midas shops in the US and the consumer warranty program is now funded by dealer payments to the company as shops install Midas guaranteed parts. And because part spenders are responsible for any parts under warranty that fail during the first 12 months there are no US warranty building revenues or warranty expenses in the US during fiscal 2008. As we said previously we expect this change will reduce our 2008 product royalty revenue and warranty expense by approximately $3 million each. In the first quarter of 2008 it reduced product royalties by approximately $900,000.

The wholesale business had an operating profit of $400,000 in the first quarter up from $200,000 last year. This resulted from the $600,000 increase in replacement part sales plus the elimination of the loss associated with the old US warranty program in 2007. Finally our RO Writer software business had revenues of $1.2 million for the quarter and operating income of $200,000. Results from RO Writer benefited from increased monthly technical support fees to non-Midas customers. At the end of the quarter approximately 70% of Midas shops in the US were using RO Writer.

Turning to other numbers of interest, our business transformation charges for the first quarter were $200,000 relating to the project Beacon re-imaging program. These payments will increase slightly over the next two quarters as painting resume in the spring and summer months. We expect the total 2008 cost of this program to be approximately $1.5 million as an additional 150 to 250 shops are expected to be re-imaged in 2008 added to the 1,040 at the end of the first quarter. The unallocated portion of our SG&A for the quarter was $7.3 million down $900,000 from a year ago. These savings were generated by virtually all staff functions including finance, accounting, MIS, legal and office services. D&A for the first quarter was $3.5 million including $900,000 in stock-based compensation expense. Capital spending was $1.9 million for the quarter which included $800,000 for real estate and $500,000 for company shop equipment. Most of this equipment was from newly acquired shops and tire equipment to support our ongoing tire test.

Interest expense for the quarter was $2.2 million even with last year. Our tax rate for the quarter was 40%. Operating activities provided $6.9 million of cash flow for the quarter up from $3.3 million a year ago. Net cash from operating activities per share increased to $0.50 per diluted share from $0.22 a year ago. As previously mentioned we did not repurchase any shares during the first quarter in anticipation of the SpeeDee acquisition. We intend to being buying shares as we see opportunities in the market. There’s $34.6 million remaining in our $100 million repurchase authorization. Our immediate priority for our cash is to repay a portion of the debt related to the $20.8 million SpeeDee purchase.

Bank debt was $72.6 million at the end of the first quarter down from $76.3 million at the end of last year. Total debt at the end of the quarter including capital and finance leases was $109 million compared to $113.1 million at the end of fiscal 2007. Total debt currently stands at approximately $129.4 million as a result of the SpeeDee acquisition. When combined with outstanding letters of credit this current debt level represents a multiple of approximately 3.2 times our revised fiscal 2008 EBITDA guidance. We’d like to bring our total debt back down to a level of approximately three times EBITDA.

In our press release this morning we reviewed our 2008 guidance to reflect projected results from our SpeeDee acquisition which will be included in our second quarter results beginning on the first day of the second quarter. Full year revenues have been raised $3 million to a projected $193 million. Operating income is now expected to be $1.5 million higher than our previous range of $27 million to $29 million excluding the $1.5 million in special charges related to our Beacon re-imaging program. We are now expecting cash flow from operating activities of $32 million to $34 million after changes in working capital. Interest expense will be approximately $10 million in 2008 as a result of incremental debt from the SpeeDee acquisition. Capital spending remains at $6 million including investments of approximately $3 million to accelerate new shop openings.

As Alan said there’s a lot going on here at Midas. We completed three major initiatives in the past 90 days including the launch of our new Secure Stop brake branding platform, the acquisition of SpeeDee and the ramp up of our franchisee transition program. Add this to our ongoing efforts to build our tire and maintenance businesses and there are many things to be excited about. We’re confident that the steps we’re taking will enhance our automotive service business and the value of your investment in Midas.

Thank you. Now I’ll turn the call back to the Operator for your questions.

Question-And-Answer Session


(Operator Instructions) We’ll take our first question from Anthony F. Cristello- BB&T Capital Markets.

Anthony F. Cristello- BB&T Capital Markets

A couple questions, one I want to talk about SpeeDee and when you talk about some co-branding, how many stores do you expect to co-brand on a trial basis?

Alan D. Feldman

We’re in the middle of that analysis as we speak, Tony, but on a trial basis it will probably be five to ten at the most.

Anthony F. Cristello- BB&T Capital Markets

When you look at, and again maybe you’re not far enough along in the process, how many SpeeDee locations can you open up along a contiguous Midas location? Can that market support two or three or is it one or is it five? How should I look at that from a growth standpoint, bigger picture?

Alan D. Feldman

Assuming we can co-brand SpeeDee into Midas locations, if that’s your question?

Anthony F. Cristello- BB&T Capital Markets


Alan D. Feldman

And assuming that that works effectively as we believe it will and as do our Midas franchisees there is no reason to believe that we are limited at all in terms of density. SpeeDee has markets, New Orleans as an example where they have four locations on the main street within several miles. The oil change business probably has a smaller radius to work with. Does that help you?

Anthony F. Cristello- BB&T Capital Markets

That certainly does. Is there some level of training that, they’re two different businesses although with the four service bays at the SpeeDee locations you certainly have some complementary opportunities but I’m wondering does the existing Midas franchise operator have to understand anything different about the SpeeDee location or how that business works?

Alan D. Feldman

They have to understand how to deliver a SpeeDee oil change. Our current oil change program is more on a 30 minute to 45 minute basis and that is not what the SpeeDee customers’ expectations would be. So we have some operational issues we have to work through, we have some POS issues we need to work through. Bill is probably better qualified to talk about this than me since he’s going to lead this effort. But I’m confident that we’re going to be able to figure that out and make sure that we deliver an oil change meeting the expectations of SpeeDee customers. One of the most important things we want to do is build the power of that brand as we expand it. We don’t want to disappoint customers.

Anthony F. Cristello- BB&T Capital Markets

Will this help your franchise dealers? Is there any contractual type supply you can get into from an oil standpoint? Obviously if you’re doing a lot more oil changes does that help existing franchise dealers with their core Midas side of things? Are there opportunities there to help the dealers out as well?

Alan D. Feldman

That’s one of the first things that our supply chain group has jumped on which is requests for proposal from the oil companies to see if we can lower our cost of oil not only for Midas franchisees but for the SpeeDee franchisees as well. In fact the SpeeDee oil deal was better than the Midas deal currently is. So at a minimum Midas franchisees get the benefit of the SpeeDee price. We think we can drive that price down even further.

Anthony F. Cristello- BB&T Capital Markets

One last question on SpeeDee, I think you took on about $20 million or so in debt related to the acquisition?

Alan D. Feldman


Anthony F. Cristello- BB&T Capital Markets

And you talked about $500,000 in interest expense increase for the year. That implies a fairly low rate on that debt. Is that how I should be thinking about it?

Alan D. Feldman

It is fairly lower, we’re borrowing at LIBOR plus 125. But remember we bought SpeeDee in lieu of stock repurchases. So the incremental debt that we’re carrying is relatively short term in nature. That’s why it only has such a minimal effect.

Anthony F. Cristello- BB&T Capital Markets

One other question, the Secure Stop, when you look at April, Alan, have you seen some nice, at least some sequential improvement now that you’ve had at least a month to get some traction there? Obviously it didn’t help you very much in the quarter since it was a late start date. Can you characterize April?

Alan D. Feldman

I would say we’re optimistic based on what we’ve seen in April. Sales trends were improved over the first quarter. We don’t have a break down by product line for April yet but we do have a lot of anecdotal reports around the country of customers coming in and asking for Secure Stop service which is great. We’ve seen significant improvement in brand recognition based on the commercials and they’re airing and I would say from a month-to-month improvement basis probably the best we’ve ever seen at least in my tenure here. So I think our marketing and advertising partner at DDV have done a great job in pairing the product with the brand and having it sort of break through in the minds of consumers. Based on what we’re hearing we’re optimistic we’re moving in the right direction. It’s going to take reinforcement overall to cede this in but I’m confident we’ve made the right decision here in this marketplace. We have to differentiate Midas in the minds of consumers in the brake business and we can’t do it effectively nationally on price.

Anthony F. Cristello- BB&T Capital Markets

I guess I said that that was going to be my last question but rebate checks, if you go back a few years ago, and then I promise this will be the last question, was there anything discernible in terms of benefit from that and how should we be thinking about it as we enter the second half of the year?

Alan D. Feldman

Rebate checks, are you talking about our product royalties?

Anthony F. Cristello- BB&T Capital Markets

No, I’m sorry. I’m talking about government.

Alan D. Feldman

Tony, I don’t think we know the answer to the historical side of this. We’ll have to dig into that. Obviously we’re hopeful that consumers will invest some of that in repairing their cars because they don’t seem to be buying quite as many new cars.


It appears we have no further questions in our queue. I can turn it back over to you for any closing remarks.

Alan D. Feldman

Thanks very much. Tony you must have asked question that everybody else had on their minds. So thanks for that and thank you Operator, thank you all for joining us this morning. We apologize for the telephone difficulty we experienced in the middle of the call so we hope everybody is still with us. We appreciate your interest in our progress, in our program and we look forward to continuing to share updates with you as we continue to work on the initiatives that are going to grow and position Midas for the future and we’ll keep you updated on how we integrate SpeeDee into our business. Thanks everybody and have a great day.


This does conclude today’s teleconference. You may disconnect at any time and have a great day.

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