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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-K

(Mark One)



|  |  |                                                                                         
|- |  | ----------------------------------------------------------------------------------------
|x |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
|  | 
|  |  | For the fiscal year ended January 3, 2009                                               
|  | 
|  |  | OR                                                                                      
|  | 
| ̈ |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|  | 
|  |  | For the transition period from  to                                                      
|  |  | Commission File Number: 01-13409                                                        

Midas, Inc.

(Exact Name of Registrant as Specified in its Charter)



|                                                               |  |                              
|-------------------------------------------------------------- |  | -----------------------------
|Delaware                                                       |  | 36-4180556                   
|(State or Other Jurisdiction of Incorporation or Organization) |  | (Employer Identification No.)
|                                                               | 
|1300 Arlington Heights Road, Itasca, Illinois                  |  | 60143                        
|(Address of Principal Executive Offices)                       |  | (Zip Code)                   

(630) 438-3000

(Registrants telephone number, including area code)

Securities registered pursuant to
Section 12(b) of the Act:



|                                                              |  |                                                
|------------------------------------------------------------- |  | -----------------------------------------------
|Title of Each Class                                           |  | Name of Each Exchange on Which Registered      
|Common Stock, par value $.001 Preferred Stock Purchase Rights |  | New York Stock Exchange New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act    YES   ̈    NO  x

Indicate by check mark if the Registrant is not required to file reports pursuant to section 13 or section 15(d) of the Act    YES   ̈    NO  x

Indicate by check mark whether the
Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.    YES  x    NO   ̈

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of the Registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     ̈

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer or a
non-accelerated filer, as defined in Rule 12b-2 of the Exchange Act.    Large Accelerated Filer   ̈    Accelerated Filer  x    Non-Accelerated Filer   ̈    Smaller Reporting Company   ̈

Indicate by check mark whether the Registrant is a shell company (as defined by Rule 12b-2 of the Exchange
Act)    YES   ̈    NO  x

The aggregate market value of the outstanding common stock, other than shares held by persons who may be deemed affiliates of the Registrant, as of the last business day of the Registrants most recently
completed second fiscal quarter was approximately $176.8 million.

The number of shares of the Registrants Common Stock, $.001 par
value per share, outstanding as of February 10, 2009 was 14,022,552.

Documents incorporated by reference: Portions of the definitive
Proxy Statement for the 2009 Annual Meeting of Shareholders of the Registrant (the 2009 Proxy Statement) are incorporated by reference into Part III.









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TABLE OF CONTENTS



|           |  |                                                                                                              |  |     
|---------- |  | ------------------------------------------------------------------------------------------------------------ |  | ----
|PART I     |  |                                                                                                              |  | Page
|           |  |                                                                                                             
|1.         |  | Business                                                                                                     |  | 1   
|1A.        |  | Risk Factors                                                                                                 |  | 14  
|1B.        |  | Unresolved Staff Comments                                                                                    |  | 19  
|2.         |  | Properties                                                                                                   |  | 19  
|3.         |  | Legal Proceedings                                                                                            |  | 20  
|4.         |  | Submission of Matters to a Vote of Security Holders                                                          |  | 20  
|           |  |                                                                                                             
|PART II    |  |                                                                                                              |  |     
|           |  |                                                                                                             
|5.         |  | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 20  
|6.         |  | Selected Financial Data                                                                                      |  | 22  
|7.         |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                        |  | 23  
|7A.        |  | Quantitative and Qualitative Disclosures About Market Risk                                                   |  | 39  
|8.         |  | Financial Statements and Supplementary Data                                                                  |  | 40  
|9.         |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                         |  | 40  
|9A.        |  | Controls and Procedures                                                                                      |  | 40  
|9B.        |  | Other Information                                                                                            |  | 43  
|           |  |                                                                                                             
|PART III   |  |                                                                                                              |  |     
|           |  |                                                                                                             
|10.        |  | Directors, Executive Officers and Corporate Governance of the Registrant                                     |  | 43  
|11.        |  | Executive Compensation                                                                                       |  | 45  
|12.        |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               |  | 45  
|13.        |  | Certain Relationships and Related Transactions and Director Independence                                     |  | 46  
|14.        |  | Principal Accountant Fees and Services                                                                       |  | 46  
|           |  |                                                                                                             
|PART IV    |  |                                                                                                              |  |     
|           |  |                                                                                                             
|15.        |  | Exhibits and Financial Statement Schedules                                                                   |  | 46  
|Signatures |  | 50                                                                                                          



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PART I



|Item 1. | Business
|------- | --------

As used herein, and
except where the context otherwise requires, the terms MDS and the Company refer to Midas, Inc. and its consolidated subsidiaries. The term Midas refers to the Midas retail system only. The term
SpeeDee refers to the SpeeDee retail system. References to fiscal years are to years ended January 3, 2009 (fiscal 2008), December 29, 2007 (fiscal 2007), and December 30, 2006 (fiscal
2006).

Background

MDS has
been in the business of selling automotive repair franchises since 1956. Through March of 2008, the Companys sole franchise concept was Midas auto repair centers. In April of 2008, MDS acquired the SpeeDee Oil Change and Tune-up franchise
system and now sells Midas and SpeeDee and Midas-SpeeDee co-branded franchises.

The Midas network of franchised and company-operated shops
is one of the largest and most recognized providers of automotive repair and maintenance services in North America with 1,674 shops located in all 50 U.S. states and nine Canadian provinces as of January 3, 2009. The SpeeDee network of
franchised and company-operated shops consists of 116 shops located in 13 U.S. states. In addition, both Midas and SpeeDee license their brands outside of North America. There are 835 Midas shops licensed in 14 other countries, and 57 licensed
SpeeDee shops in Mexico. On a worldwide basis, there were 2,682 Midas and SpeeDee shops as of January 3, 2009.

From 1972 to 1998, the
MDS business was owned by Whitman Corporation (Whitman). MDS became an independent public company on January 30, 1998 in a spin-off transaction whereby Whitman distributed all issued and outstanding shares of MDS to shareholders of
record of Whitman stock.

MDSs principal executive offices are located at 1300 Arlington Heights Road, Itasca, Illinois 60143, and
its telephone number is (630) 438-3000. The Companys Internet address is www.Midas.com. MDS makes available, free of charge on or through its website, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form
8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after the Company electronically files such material with, or furnishes it to,
the Securities and Exchange Commission.

Franchise Industry Overview

According to a recent national study, franchised businesses in the U.S. produced goods and services worth approximately $880 billion across more than 900,000 franchised establishments in 2005. There are two main types
of franchises: product distribution franchises and business format franchises. In product distribution franchising, the franchisor licenses its trademark and logo to its franchisee, and allows the franchisee to sell its products; however, the
product distribution franchisor typically does not provide the franchisee with a system for running the business. Examples of such franchises are automotive dealerships, soft drink bottlers, and gas stations. A business format franchise not only
allows the franchisee to use the franchisors trademark, but also provides the franchisee with a system to conduct operations. Business format franchises are the most common type of franchise, encompassing businesses such as fast food, retail,
lodging, personal services, and automotive repair. Besides Midas, some of the larger automotive service franchisors include Jiffy Lube, AAMCO, Meineke, and MAACO.

Business format franchising is a synergistic way of doing business. The franchisor provides the franchisee with an established and proven business system. For the new franchisee, the franchisor provides initial
training, an operations manual, and an established brand name. Thus, the franchisee is more likely to be initially



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successful than if he tried to start a new business on his own. The franchisee owns his own business, but has access to support from the franchisor and his
fellow franchisees. On an ongoing basis, the franchisor develops various programs to support the franchisee and the brand. Such programs include advertising, marketing, training, and development of supply chain relationships.

For the franchisor, the benefits of the relationship go well beyond the royalties and fees. Franchisees have invested their own capital in their
businesses, and thus have greater motivation to succeed than the average company employee. Strong motivation is especially important in a service business such as auto repair. The Company believes that franchisees can also deliver superior results
due to their knowledge of local markets, their involvement in local communities, and their potential for innovation.

The Company believes
Midas and SpeeDee franchises are an attractive proposition for a wide variety of people. Some franchisees have prior experience in the automotive aftermarket. They want to be their own boss, but find comfort in being associated with a larger
organization and a leading brand. Some franchisees were successful businesspersons in other fields, but are looking for a new career for themselves and/or their families. The training and support available from MDS is attractive to them, as are the
relative prospects for the automotive service business.

Economists forecast that the unemployment rate will continue to rise in North
America in 2009. As companies lay off workers, many people will be searching for new ways to earn money. For those who are not laid off, the fear of future layoffs may also motivate them to search for alternatives in which they can be their own
boss, and have greater control over their own financial well being. While this economic environment will likely stimulate increased interest in becoming a franchisee, most candidates rely at least in part on financing in order to buy a franchise.
However, because the credit markets have been tight, MDS anticipates availability of financing will constrain the growth in the number of people who become franchisees in the near term.

Automotive Aftermarket Industry Overview

Midas and SpeeDee compete in the approximately $168 billion
U.S. automotive aftermarket industry, which includes replacement parts (excluding collision parts and parts for heavy duty trucks), accessories, maintenance items, batteries and automotive fluids for cars and light trucks. Approximately 87% of this
amount is from the sale of installed parts and labor (the Do-It-For-Me or DIFM segment of the market) and 13% is from the Do-It-Yourself (DIY) market. Midas and SpeeDee participate in the DIFM segment of the market, but do
not participate in the DIY market.

Historically, the DIFM market has been growing because of the increasing size and age of the
countrys automotive fleet, the increased technological complexity of vehicles leading to higher cost repairs and maintenance, and the generally increasing number of miles driven annually. In addition, recent industry statistics indicate that
there is more than $55 billion in neglected vehicle maintenance every year.

According to published industry information, the number of
vehicles in use in the U.S. has grown every year since 1992, primarily as a result of steady annual increases in new light truck sales. In addition, the median age of vehicles in use continues to increase. From 1990 to 2008, the median age of cars
in use grew from 6.5 years to 9.4 years. While the number of vehicles in use may fall in the near term, the slowdown in new car sales should cause a further aging of the vehicle population. This trend should continue to benefit the DIFM industry
because older vehicles tend to require more maintenance and repair services.

The increased technological sophistication of modern
automobiles has also had a positive effect on the DIFM industry. Although vehicle parts have become more durable, many parts are now more technologically advanced. As a result, the cost to diagnose and repair todays high-technology vehicles
has increased. Most automotive service providers have attempted to offset the decline in revenue resulting from the improved durability of automotive parts by expanding their service menus and adding higher cost services.



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Vehicle usage influences the demand for automotive repair and maintenance. Vehicle usage causes wear and
tear, leading to the need for vehicle repair. Vehicle usage also influences vehicle maintenance, as maintenance schedules are based upon odometer readings. Miles driven is a key indicator of vehicle usage. Between the end of World War II and 2007,
total miles driven in the United States declined in only 3 years  1974, 1979, and 1980. The largest of those declines was 1.4% in 1974, the year of the first oil embargo. In the 12 months ending December 2008, total miles driven declined 3.6%,
by far the largest annual decline since World War II. The dramatic increase in gasoline prices over the past few years appears to have influenced driving habits, as has the weakness in economic conditions.

One additional industry trend of note has been the steady decline in the number of service outlets in the U.S. over the past 10 years. The decrease is
largely attributable to a reduction in the number of local service stations offering automotive repair. More recently, however, automobile dealerships have been closing in record numbers, causing consumers to seek out alternatives. Offsetting this
decline has been an increase in the number of independent maintenance and repair shops and large automotive repair chains. It is expected that the current economic environment will lead to an accelerated level of closures across all automotive
service providers, resulting in opportunities for the remaining outlets.

Company Overview

MDS operates in a single business segment with retail, real estate, supply chain and point-of-sale technology operations in support of the franchising of
Midas and SpeeDee automotive service shops in North America. Retail operations consist of company-operated Midas and SpeeDee shops. Real estate activities include the development, ownership and leasing of Midas and SpeeDee shops in the U.S. and
Canada. Supply chain activities include providing value-added merchandising services to franchisees in which the Company establishes relationships with vendors who distribute products and equipment directly to Midas and SpeeDee shops. Point-of-sale
technology operations consist of the ownership, development, sale and leasing of automotive shop management software to Midas franchisees and other third-party automotive service providers. Outside of North America the Company operates on a
master-franchise basis whereby the Midas and SpeeDee trademarks are licensed to master franchisees that sub-franchise Midas and SpeeDee shops in their respective territories.

The following table sets forth the number of North American franchised shops, company-operated shops, and shops outside of North America for each of the
Midas and SpeeDee brands, as of the end of each of the fiscal periods indicated (note that the SpeeDee brand was acquired by MDS in fiscal 2008):



|                                      |  |       |  |       |  |       |  |       |  |      
|------------------------------------- |  | ----- |  | ----- |  | ----- |  | ----- |  | -----
|Fiscal Year End                       |  | 2008  |  | 2007  |  | 2006  |  | 2005  |  | 2004 
|Midas                                 |  |       |  |       |  |       |  |       |  |      
|North American franchised             |  | 1,576 |  | 1,620 |  | 1,685 |  | 1,730 |  | 1,761
|North American company-operated       |  | 98    |  | 91    |  | 66    |  | 69    |  | 73   
|International franchised and licensed |  | 835   |  | 844   |  | 819   |  | 811   |  | 801  
|                                      |  |       |  |       |  |       |  |       |  |      
|Total                                 |  | 2,509 |  | 2,555 |  | 2,570 |  | 2,610 |  | 2,635
|                                      |  |       |  |       |  |       |  |       |  |      
|                                      |  |       |  |       | 
|SpeeDee                               |  |       |  |       |  |       |  |       |  |      
|North American franchised             |  | 114   |  |       |  |       |  |       |  |      
|North American company-operated       |  | 2     |  |       |  |       |  |       |  |      
|International franchised and licensed |  | 57    |  |       |  |       |  |       |  |      
|                                      |  |       |  |       |  |       |  |       |  |      
|Total                                 |  | 173   |  |       |  |       |  |       |  |      
|                                      |  |       |  |       |  |       |  |       |  |      
|Total All Brands                      |  | 2,682 |  |       |  |       |  |       |  |      
|                                      |  |       |  |       |  |       |  |       |  |      



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A further discussion of the Companys business activities follows.

Franchises and the North American Midas and SpeeDee Systems

MDS is the franchisor of the Midas franchise system throughout North America and the SpeeDee franchise system in the U.S. Both Midas and SpeeDee have developed methodologies and systems for the establishment and operation of franchised auto
service shops. These systems include site selection, shop construction and layout, equipment selection and installation, purchasing and inventory control methods, accounting methods, merchandising, advertising, sales and promotional techniques,
installation techniques, personnel training and other matters relating to the efficient and successful operation of auto service shops and the maintenance of high standards of quality.

Midas and SpeeDee identify and qualify franchisees through a well-organized recruitment program. Franchisees are qualified based primarily upon a
candidates financial suitability and operational experience, among other criteria. MDS also considers a franchisees ability to work within the franchise system. Each franchisee enters into a standard franchise and trademark agreement
with the Company. The franchise and trademark agreements vary by country, but these variances do not substantially alter the franchise arrangement. The franchise agreements cover all aspects of the contractual relationship between the franchisor and
franchisee, including: terms and fees of the franchise agreement, royalty payments, advertising, real estate control, site selection, training, equipment and inventory requirements for the proper operation of a shop, warranty programs and shop
management software requirements. All franchise agreements prevent ownership of a competing auto service business.

Summarized below are
key aspects of the various franchise agreements offered by MDS as franchisor for both the Midas and SpeeDee franchise systems:

Midas
Franchise Agreement: The initial term of the franchise agreement is 20 years. The initial franchise fee is $30,000 for the first shop, and is due at the time the franchise and trademark agreement is signed. This agreement is generally not signed
until the franchisee has a shop that is ready to open. Prior to opening a Midas shop, franchisees are required to complete a training program. In opening a Midas shop, a franchisee typically makes additional expenditures relating to fixtures,
machinery and equipment and initial product inventory. The Midas franchise agreement may be terminated by the franchisee upon thirty days written notice.

Midas franchisees pay the Company monthly royalties based on a percentage of sales. Monthly payments must be made via automated clearing house (ACH) debit. The royalty on most service categories is 10% of
sales. The Company is obligated to spend an amount equal to one-half of the royalty payments it receives from Midas franchisees for advertising placed during the calendar year the royalties are received or during the following calendar year. The
Company, as franchisor, administers the use of franchise advertising funds. MDS incurs additional advertising costs that are included in its selling, general and administrative expenses.

An important feature of the Midas system is the requirement that the retail customer be provided a written warranty from the Company on certain Midas
products that will be honored at all Midas shops. Each Midas shop is required to honor such warranties in accordance with their terms and with policies issued from time to time by the Company.

In most instances, MDS retains, through real estate agreements between franchisees and Midas Realty (described below), the ability to occupy a site in
the event of a termination of the applicable franchise agreement in order to ensure that the site may continue to be operated as a Midas shop.

SpeeDee Franchise Agreement:The initial term of the SpeeDee franchise agreement is 15 years. The initial franchise fee is $30,000 for the first shop, and is due at the time the franchise and trademark agreement is signed. Unlike the
Midas system, the SpeeDee franchise and trademark agreement is signed when the franchisee is



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approved and before a site is located. Prior to opening a SpeeDee shop, franchisees are required to complete a training program. In opening a SpeeDee shop, a
franchisee typically makes additional expenditures relating to fixtures, machinery and equipment and initial product inventory. The SpeeDee franchise and trademark agreement cannot be terminated by the franchisee.

SpeeDee franchisees pay the Company weekly royalties based on a percentage of sales. Weekly payments must be made via ACH debit. The royalty on most
service categories is 6% of sales (5% for brakes). In addition, franchisees pay up to 8% of sales each week to support advertising and promotions, primarily within a shops Designated Marketing Area (DMA). The Company, as franchisor,
administers the use of franchise advertising funds.

The SpeeDee franchise agreement provides for real estate control of the location by
the franchisor. However, SpeeDee has not historically mandated compliance with this aspect of the franchise agreement, but expects to on a go-forward basis.

The Midas-SpeeDee Co-Brand Franchise Agreement: The Midas-SpeeDee Co-Brand concept is still being tested and no Co-Brand franchises have yet been sold. However, the Company has developed a Co-Brand franchise
agreement that will be used if and when the Co-Brand concept is eventually rolled-out. The initial term is 15 years. The initial fee is $40,000 for single shop owners. Existing Midas and SpeeDee franchisees who convert to the Co-Brand concept will
be charged an initial fee of $10,000.

Co-Brand franchisees will pay the Company weekly royalties based on a percentage of sales. Weekly
payments will be made via ACH debit. The royalty will be either 5% or 6% of sales depending on the service category. An equal amount will also be collected for advertising and promotions. The Company, as franchisor, will administer the use of
franchise advertising funds.

Real estate control will be required of all Co-Brand shops. The Midas lifetime warranty program will be
honored at all Co-Brand locations and, as with the Midas franchise agreement, the franchisee will be required to maintain inventory of Midas approved parts sufficient to satisfy the needs of warranty customers. Use of the R.O. Writer shop management
software system will be required for all Co-Brand locations.

The North American Midas System

The North American Midas system consists of 1,674 shops operated by the Company and its franchisees under the Midas brand. Midas shops provide a
comprehensive array of automotive repair and maintenance services and are located in all 50 states and nine Canadian provinces. The Companys geographic breadth results in substantial market coverage throughout North America and strong
credibility for Midas North American lifetime warranty program.

Midas benefits from leading market positions in core retail service
offerings and strong brand equity. Midas believes it is among the leaders in terms of market share in the North American automotive service industry (excluding tires, collision parts and parts for heavy duty trucks). In 2008, approximately 57% of
North American retail system sales were in categories where the Company believes Midas has the number one or number two market position as shown by its internal estimates of market share.

The Midas retail system enjoys very strong brand recognition, demonstrated by a consumer awareness rate of over 90%, and high levels of customer loyalty
through its lifetime warranty program. According to MDS tracking studies, Midas is among the leading brands mentioned by consumers when considering an automotive repair provider.

Midas shops historically operated as under car specialists. From its inception in 1956 through 1959, the Midas retail system focused exclusively on
replacement of exhaust systems. On a national basis, Midas added shock replacement in 1960, brake repair in 1979 and alignment in 1988. MDS estimates that the potential market for these core offerings is only 12% of the approximately $168 billion
U.S. automotive aftermarket parts and services industry.



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Despite the addition of other under car services, exhaust replacement remained a vital part of the Midas
service mix. As recently as 1997, exhaust replacement services constituted 35% of Midas retail shop revenues in the North American market. But as automobile manufacturers began to employ non-corrosive stainless steel exhaust systems in the mid
1980s, the average life of an original equipment exhaust system began to increase from three years to over 10 years. As a result, beginning in the mid 1990s, the core exhaust replacement business of Midas shops began to experience
sustained revenue declines. This trend, combined with the increased technological complexity and durability of newer vehicles, put significant pressure on the historical Midas shop business model.

In response to these trends, the Midas retail system began to broaden its service menu in 1999, with the purpose of transforming itself from an under car
specialist to a full-service automotive repair and maintenance provider, leveraging the strong brand name and nationwide presence of the Midas system. Beginning in 2000, Midas implemented a New Midas strategy, which included the rollout of new
service categories and a renewed focus on customer service. Under the New Midas program, the Midas system expanded its retail offerings to include general repair, heat exchange products and climate control services. These New Midas categories more
than doubled the size of Midas addressable market. Today, most Midas shops offer exhaust, brake, suspension, air conditioning, tires, batteries and a wide variety of other routine maintenance services. Since 1997, U.S. exhaust sales at Midas
retail shops have declined at an annual rate of 9.5% on a same store basis, but this deterioration has been offset by the expansion of Midas service offerings into the New Midas categories. Currently, New Midas services account for
approximately 43% of system-wide retail sales. The Company continues to expand Midas shop service offerings as it repositions the Midas brand as a source for total car care.

The following table compares the current U.S. Midas retail service mix with last year, five years ago and 20 years ago.

Changes in U.S. Midas Retail Service Mix



|                              |  |      |   |  |      |   |  |      |   |  |      |  
|----------------------------- |  | ---- | - |  | ---- | - |  | ---- | - |  | ---- | -
|                              |  | 2008 |   |  | 2007 |   |  | 2003 |   |  | 1988 |  
|Exhaust                       |  | 12   | % |  | 12   | % |  | 19   | % |  | 47   | %
|Brakes                        |  | 36   | % |  | 38   | % |  | 42   | % |  | 37   | %
|Suspension, shocks and struts |  | 9    | % |  | 9    | % |  | 8    | % |  | 14   | %
|New Midas categories          |  | 43   | % |  | 41   | % |  | 31   | % |  | 2    | %

The broadening of Midas system retail service offerings has more than offset the continuing
deterioration in the exhaust replacement market. As a result, the average sales of a Midas shop have increased over the past five years. The average U.S shop sales were approximately $624,000 in 2008 and $594,000 in 2003. The Company believes that
the Midas system has the potential for substantial growth in retail sales.

Midas shops are generally located in free-standing buildings in
high traffic areas with good visibility and easy access to major roadways. The Company believes that its portfolio of Midas real estate locations built over the past 50 years could not be easily replicated. Given the limited number of desirable
repair shop locations and impediments to opening repair shops resulting from zoning and building code restrictions, as well as landlord and developer requirements, entry into the automobile repair market on a large-scale basis is difficult.

The Company supports the Midas retail network with an annual advertising program that is one of the largest in the automotive aftermarket
repair business. North American franchisees pay the Company monthly royalties of approximately 10% of retail sales. MDS is obligated to spend an amount equal to one-half of the royalty payments received from Midas franchisees for advertising placed
during the calendar year in which the royalties are received or during the following calendar year. In addition, the Company incurs supplemental advertising costs, primarily related to its company-operated shops, which are included in selling,
general and administrative expenses. In fiscal 2008, total Midas advertising spending in North America was approximately $54 million.



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An important feature of the Midas system is the requirement that the retail customer be provided a
written lifetime warranty from Midas on certain products (namely brake friction, mufflers, shocks and struts) that will be honored at any Midas shop throughout North America. Each Midas shop is required to honor such warranties in accordance with
their terms and with policies as issued from time to time by the Company, which ensures consistency throughout the Midas system.

The
Company believes that its Midas lifetime warranty program provides a competitive advantage over other automotive repair companies and independent service shops, and the breadth of its geographic coverage makes it difficult to duplicate the Midas
program. This program generates recurring business from existing customers and promotes customer loyalty. The Company believes that many of its first-time customers choose Midas based upon the lifetime warranty program. In addition, significant
portions of exhaust, brake, shock and strut jobs performed at retail involve customers returning for warranty service. Importantly, most warranty replacement work is profitable at the shop level as, in accordance with the terms of the warranty,
customers are charged for labor plus other non-warranted parts necessary for the warranty replacement. Additionally, many Midas customers returning for warranty service choose to spend substantial incremental dollars on additional services. The
Company believes that its presence in all 50 states and nine Canadian provinces, coupled with the repeat business generated by its North American lifetime warranty program, can be leveraged to capture a larger percentage of automotive repair and
maintenance services in segments other than exhaust, brakes and suspension/steering.

Franchised Midas Shops

As of January 3, 2009, there were 1,576 North American franchised shops, which were located in all 50 U.S. states and nine Canadian provinces.
Approximately 650 franchisees operate these shops, with only one franchisee having more than 32 shops. Over 63% of the franchised shops are owned and operated by franchisees with five or fewer shop locations. Approximately 27% of Midas franchise
locations are owned by single shop operators.

Midas franchisees are all subject to the Midas Franchise and Trademark Agreement and are
obligated to operate their shops in accordance with Midas standards and policies. In North America, franchisees are required to maintain a sufficient quantity of approved Midas warranted productsprincipally mufflers, shock absorbers,
struts and brake pads and shoesadequate to meet the public demand for these products and to promptly fill customers requests for replacement under the terms of various Midas warranties. The Company makes Midas warranted products and
other automotive parts available to its Midas franchisees through distribution agreements with certain automotive parts suppliers in the U.S. and Canada.

Midas supports the franchisee network with 29 district managers and six regional managers. Each district manager covers approximately 54 shops and assists franchisees with operations execution, coordinates
implementation of key retail initiatives, monitors compliance with franchise agreement parameters, and manages Midas training efforts.

A typical franchised Midas shop is approximately 4,000 square feet and has six service bays. In 2008, the average U.S. franchised shop had sales of $623,000 while the average Canadian franchised shop had sales of C$849,000.

The International Midas Dealers Association (the IMDA) is an independent association of Midas franchisees. Approximately 52% of the Midas
franchised locations in North America have membership in the IMDA. Midas management communicates on a regular basis with IMDA representatives and various IMDA committees to solicit franchisee input on various matters affecting the Midas
system.

Company-Operated Midas Shops

The Company believes that owning and operating some Midas shops is an important element of a successful franchise system. Such ownership allows for the orderly transition of franchises, provides a valuable
test-marketing



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platform for the rollout of new products and services, enables the Company to upgrade underperforming locations and helps to accelerate the successful
transition of the entire Midas system to the new business model. Upon acquisition of a shop, the Company typically upgrades shop equipment, expands the services offered, installs new point-of-sale software, updates the shop to the new Midas image,
upgrades the quality of technicians, and enhances local marketing efforts.

During fiscal 2008, the Company acquired or opened 16 Midas
company-operated shops, re-franchised seven shops and closed two shops. As of January 3, 2009, the Company owned and operated 98 Midas shops in nine states and Canada, with the largest concentrations in Florida (23 shops), Colorado (13 shops),
California (12 shops) and Pennsylvania (11 shops). Going forward, the Company intends to reduce the number of company-operated Midas shop locations through re-franchising. However, from time-to-time, on an opportunistic basis, Midas may acquire
additional North American Midas shops.

The typical company-operated Midas shop is staffed with a manager, an assistant manager or shop
foreman, and three to four automotive service technicians. The Midas company-operated shop business is managed by a Vice President/General Manager, two regional operations managers and 13 district managers.

The typical U.S. company-operated shop is approximately 4,000 square feet, has six service bays and generated annual revenues of approximately $641,000
in 2008.

Midas International Operations

As of January 3, 2009, there were approximately 835 Midas shops located in Europe, Australia, the Middle East, Latin America and the Caribbean. In each of these areas of the world, a master-franchisee licenses
the Midas trademark and know-how from the Company (each a licensee), and sub-franchises the Midas brand to local franchisees. These licensees may also operate Midas shops on a company-operated basis.

In exchange for the use of the Midas trademarks, licensees are required to pay a license fee to the Company. This license fee varies by region, but is
generally calculated as a percentage of Midas system-wide sales in the region. During fiscal 2008, the Company collected approximately $4.5 million from international Midas licensees.

The Company meets periodically with its international licensees to ensure compliance with licensing agreements, communicate operating and marketing best
practices and share the Companys vision for future growth and development.

In February 2008, the Company added a new Midas licensee
in Costa Rica, which was the first new international license agreement for the Midas system since 2000. MDS expects the first shops in Costa Rica will open during fiscal 2009. Under this arrangement the Company will receive a percentage royalty from
the licensee based on sales. The Company continues to seek ways to leverage the value of the global Midas brand through development of additional licensee relationships throughout the world.

For financial information about the principal geographic areas in which the Company operates, see Note 14 of Notes to Financial Statements included
elsewhere in this Annual Report.

The SpeeDee System

On March 30, 2008 Midas acquired the assets of G.C. & K.B. Investments, Inc. and its affiliated entities that franchise or sub-franchise SpeeDee quick-lube and automotive maintenance shops. The purchase
price was $21.0 million. As of January 3, 2009, SpeeDee had 116 shop locations in the U.S. in 13 states, and 57 shops in Mexico. Of the U.S. shop locations, two were company-operated and 19 shops were sub-franchised to a licensee who controls
the franchise rights to SpeeDee locations in the New England region. Most SpeeDee shops are owned by single location franchisees that both own and operate their shops.



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This strategic acquisition expands the Companys retail network in North America, leverages the
Companys supply chain relationships and enhances the Companys operational capabilities within the quick-lube and maintenance categories.

The typical SpeeDee shop derives more than 50% of its sales from quick lube and fluid exchange services compared to less than 7% at Midas shops in the U.S. This service mix results in a much higher car count at the
typical SpeeDee shop when compared to the typical Midas shop. An average SpeeDee shop services more than 30 cars per day as opposed to Midas shops, which serve 11 to 12 cars per day. In addition, SpeeDee services cars much earlier in their lifecycle
as approximately 34% of the vehicles serviced by SpeeDee are less than four years old compared to only 7% of the vehicles serviced at the typical Midas shop.

A typical SpeeDee shop is approximately 3,000 square feet, has eight service bays and generated annual revenues of approximately $725,000 in 2008.

The SpeeDee business is currently operated on a stand-alone basis with respect to store operations and marketing. The SpeeDee system is managed by a Vice
President of Operations, a Vice President of Finance, a Director of Marketing, two regional managers and four district managers. In addition, Speedee maintains regional offices with a small administrative staff in Louisiana and California. Most
accounting, administrative and legal functions were consolidated into the MDS corporate office upon acquisition. The two SpeeDee company-operated shops are managed by the district managers who also manage the franchise businesses in the region.

The Midas-SpeeDee Co-Brand Opportunity

The Company believes the acquisition of SpeeDee provides both franchise systems with a unique opportunity for growth in the future. By combining into one location Midas expertise in general repairs and strong brand awareness with
SpeeDees strength in executing quick-lube and fluid exchanges, the Company believes it can create a powerful new format focused on satisfying the needs of time-pressed consumers seeking value, excellence and a long-term auto service
relationship. The Company expects that the Midas-SpeeDee Co-Brand format would see customers much earlier in the lifecycle of their vehicle (relative to the typical Midas shop) and will be more able to convert these vehicles into general repair
customers (relative to the typical SpeeDee shop) as the vehicles age. The resulting higher unit sales volume may produce a higher return on investment for the franchisee by better leveraging shop overhead expenses.

The Company launched its first test of the SpeeDee-Midas Co-Brand concept with three shops during the third quarter of fiscal 2008. All three were
existing SpeeDee locations in California that added the Midas brand to their shop. A fourth Co-Branded unit, also in California, opened on a de novo basis in October 2008. The initial results have been encouraging as the three test units saw
comparable shop sales increases of 7.8% in the third quarter (after the shops were co-branded) and 12.7% in the fourth quarter of fiscal 2008. The Company expects to test Co-Branding at additional SpeeDee locations during the first half of 2009.

During December of 2008, the Company began a test of the Co-Brand concept within existing Midas shops. Three Midas company-operated shops
in suburban Chicago were remodeled to accommodate the operating requirements of the SpeeDee concept, which generate much higher car throughput than the typical Midas shop. These three test locations officially launched with grand opening promotions
during the first quarter of fiscal 2009. The results of this test will be critical in determining the issues involved with integrating the SpeeDee model into selected Midas locations across the U.S. and Canada.

Testing of the Midas-SpeeDee Co-Brand concept across numerous shop formats will be completed during 2009. If successful, the new co-brand format could
provide a platform for accelerating Company growth by providing Co-Brand opportunities to existing Midas and SpeeDee franchisees, as well as a superior format for de novo shop growth in the future.



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Real Estate

Midas Realty Corporation (Midas Realty), a wholly-owned subsidiary of MDS, leases real estate that is subleased to Midas franchisees and owns real estate in the U.S. and Canada that is leased to Midas
franchisees. In circumstances where the Company does not own or lease real estate for Midas shops, Midas Realty enters into contingent operating lease agreements or other forms of real estate control in order to ensure its ability to take possession
of the real estate used by Midas shops in the event of a franchisee termination. This allows the Company to maintain control of a Midas shop location in the event of a franchisee termination and prevents re-branding of a location to a competitive
branded repair facility or an independent repair facility.

The agreements with Midas Realty remain in effect throughout the term of the
related Franchise Agreement. In the instance when Midas Realty owns the real estate or has the primary lease on a Midas shop, the franchisee is required to lease or sublease the Midas shop from Midas Realty. If the franchisee owns the real estate,
the franchisee is required to provide Midas Realty with real estate control through one of two alternative means. The first alternative provides for the lease of the premises from the franchisee to Midas Realty, and Midas Realty in turn leases the
premises back to the franchisee. So long as the franchisee continues to be both the landowner and the franchisee of that shop, no rent is exchanged between the franchisee and Midas Realty. If the real estate is sold to a third party or if the
franchised Midas shop is sold to a new franchisee to whom the sublease is assigned, Midas Realty will then collect rent from the franchisee and pay rent to the landowner. Under the second alternative, the franchisee enters into a conditional option
to lease with Midas Realty that grants Midas Realty the option to lease the premises in the event that the related Franchise Agreement is terminated. If the franchisee leases the real estate upon which the Midas shop is located from a third party,
MDS requires that the franchisee grant to Midas Realty a conditional assignment of the lease to take effect upon the termination of the related Franchise Agreement.

As of January 3, 2009, Midas Realty owned 220 retail Midas locations, leased 510 Midas locations and used other forms of real estate control over an additional 690 Midas locations. This approach provides
effective control over 1,420 of the 1,674 Midas shops in North America, or approximately 85%. See Note 8 of Notes to Financial Statements.

SpeeDee Realty Corporation (SpeeDee Realty), also a wholly-owned subsidiary of MDS, leases real estate that is subleased to SpeeDee franchisees. SpeeDee Realty does not own any real estate. On a go-forward basis, SpeeDee Realty
intends to use the same forms of real estate control documents as are used by Midas Realty in order to ensure its ability to take possession of the real estate used by SpeeDee shops in the event of a franchisee termination. As of January 3,
2009, SpeeDee Realty leased three SpeeDee locations.

The Company believes that its portfolio of real estate locations built over the past
50 years could not be easily replicated. Given the limited number of desirable repair shop locations and impediments to opening repair shops resulting from zoning and building code restrictions, as well as landlord and developer requirements, entry
into the automobile repair market on a large-scale basis is difficult.

Supply Chain Activities

The Midas and SpeeDee systems in North America are supported by the Companys supply chain activities. MDS provides value-added merchandising
services to franchisees by establishing relationships with vendors who distribute products and equipment directly to Midas and SpeeDee shops. The Company establishes and actively manages these relationships with parts vendors on behalf of Midas and
SpeeDee franchisees in order to provide them with ready access to high quality parts at favorable pricing.

Historically, the Company was
much more directly involved in the supplying of automotive parts and equipment to Midas franchisees. For most of its history through late 2003, the Company supplied a broad range of automotive parts to Midas franchisees in North America through its
network of regional parts distribution



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centers and Parts Warehouse Inc. (PWI) quick delivery sites. In addition, the Company manufactured exhaust products and equipment, which were
distributed to Midas franchisees and other non-Midas customers. During 2003, the Company outsourced the wholesale distribution of Midas brand products and other replacement parts, closed all but one of the Companys regional distribution
centers and disposed of its PWI quick-delivery distribution locations. Subsequently, in fiscal 2005, the Company entered into new exhaust supply arrangements with its vendors, which allowed the Company to exit its unprofitable exhaust manufacturing
and distribution business. As a result of these agreements, MDS ceased production at its Hartford, Wisconsin exhaust manufacturing plant during the third quarter of fiscal 2005. The Company continued to operate its exhaust distribution warehouse in
Chicago, Illinois during the first quarter of 2006 in order to provide Midas brand exhaust products to certain Midas franchisees prior to their final conversion to the new exhaust supply program. During the first quarter of fiscal 2006, all
remaining exhaust inventory and equipment was sold and liquidated and the Chicago exhaust distribution warehouse was closed. As a result of the above transformation of the Companys supply chain activities, the Company is no longer engaged in
the manufacturing or distribution of parts to Midas franchisees.

Under the current supply chain business model, the Company establishes
relationships with large vendors of automotive replacement parts and arranges for the distribution of these products directly to Midas and SpeeDee shops. Most franchisees parts sourcing needs are addressed through the Companys
relationships with major full-line automotive replacement parts suppliers such as the National Automotive Parts Association (NAPA), Uni-Select Inc., and CarQuest Corporation. These vendors provide franchisees with weekly delivery of
replacement parts to retail shops, as well as access to just-in-time parts delivery through a broad network of quick-delivery parts distribution sites across North America. The Company believes its supply agreements with these suppliers enable Midas
and SpeeDee franchisees to purchase high quality replacement auto parts at favorable pricing.

For most supply chain relationships, the
vendor bills the Midas or SpeeDee franchisee directly for his purchases. The Companys involvement is limited to negotiating preferred pricing and terms on behalf of franchisees by leveraging the buying power of the Companys nationwide
retail network.

From 2003 through 2007, MDS received product royalties from these vendors based on Midas shop purchases. These product
royalties were recorded as revenue and were used to offset the future cost of redemptions under the Midas lifetime warranty program. Effective as of the beginning of 2008, the Company significantly expanded the number of approved U.S. suppliers and
modified its contracts with existing U.S. suppliers. Under the new arrangement, MDS no longer receives product royalties from U.S. vendors. These royalties are instead paid to franchisee shops in the form of rebates, which lower the shops cost
of goods. At the same time, the Company instituted a new fee to its Midas shops that will cover the future cost of warranty redemptions. This fee will be adjusted annually so that the Company has no net cost or profit from the U.S. Midas lifetime
warranty program. See Note 1 of Notes to Financial Statements.

In Canada, the Company continues to collect product royalties from vendors
and these royalties are used to offset the future cost of warranty redemptions under the Midas lifetime warranty program.

In addition to
the above described full-line parts supply arrangements, MDS has established relationships with certain suppliers to support the more specialized sourcing needs of franchisees. Currently, these include the Companys agreements with
Bridgestone-Firestone and Interstate Battery for the distribution of tires and batteries, respectively. The Company also maintains relationships with key equipment vendors to provide franchisees with cost-competitive access to shop equipment. Under
most of these arrangements, the Company bills the franchise for the product purchased from the vendor, and then the Company, in turn, pays the vendor for the product. The Company records the sale of the product and holds the related accounts
receivable. The Companys gross margins on these purchasing arrangements are very low, and the gross profit is primarily intended to cover administrative costs and potential bad debts that might arise from the sale of these products. MDS also
receives royalties on the ultimate sale of these products to consumers at retail in the Midas and SpeeDee systems.



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Progressive Automotive Systems and the R.O. Writer Software System

In January 2001, the Company acquired the assets of Progressive Automotive Systems, a provider of automotive industry shop management software sold under
the name R.O. Writer. The software is specifically designed to meet the needs of the auto repair industry, and MDS continues to develop and enhance the system. The Company believes this software helps to promote operational consistency and
excellence throughout the Midas system. As of January 3, 2009, the R.O. Writer system was installed in more than 1,000 Midas shops, comprising approximately 61% of Midas system locations throughout North America. Additionally, the system has
been installed in several thousand non-Midas auto service shops in the United States. The Company is currently developing a version of the R.O. Writer software that would support operations in both the SpeeDee and the Midas-SpeeDee Co-Brand format.

Proprietary Information

MDS holds
various patents, trademarks, trade names and copyrights, none of which, other than the Midas and SpeeDee names, is considered by MDS to be material to its financial condition and results of operations. MDS vigorously defends the Midas name
throughout the world, and the name is registered as a trademark in approximately 96 countries in addition to the U.S. The SpeeDee name is registered in the U.S. and Mexico. The Company also owns certain trade secrets including product catalogs,
price lists, training manuals and inventory systems.

Competition

The franchising industry is highly competitive and fragmented, and the number, size and strength of competitors varies from format to format. Both Midas and SpeeDees competitors include franchisors of
restaurants, services and lodging as well as direct competitors within the franchised auto service industry (such as Jiffy Lube, MAACO, Meineke and AAMCO). Certain of these competitors are well-capitalized. MDS believes that competition in the
franchising industry is primarily based on the brand name, historical success of franchisees, strength of franchisor support for franchisees, size of initial investment, franchise fee and royalty rate. MDS believes that Midas and SpeeDee generally
have a favorable competitive position with respect to each of these variables.

The automotive repair industry is highly competitive and
fragmented, and the number, size and strength of competitors vary from region to region. Both Midas and SpeeDees primary competitors include national, regional and local specialty chains, both franchised and company-operated, car
dealerships, independent repair shops and service bays operated by mass merchandisers. Certain of these competitors are well-capitalized, and a number of them have instituted expansion plans. MDS believes that competition in the automotive repair
industry is primarily based on customer service and reputation, shop location, name awareness and price. MDS believes that Midas and SpeeDee generally have a favorable competitive position with respect to each of these variables.

Customers

No customer accounted for more than 10%
of the Companys total sales and revenues in fiscal 2008 or 2007.

Seasonality

As a result of changes in the Companys business model over the past five years, including the exit from exhaust manufacturing and distribution, the
outsourcing of parts distribution and the expansion into a broader retail service menu, the seasonality of the Companys sales has been reduced. In fiscal 2008, fiscal 2007 and fiscal 2006 revenues in the first and fourth quarters were not
significantly different than revenues in the second and third quarters.



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Regulatory Compliance

Franchising Matters.The Company is subject to a variety of federal and state laws governing franchise sales and marketing and franchise trade practices. Applicable laws and regulations generally require
disclosure of business information in connection with the sale of franchises. Certain state regulations also affect the ability of the franchisor to revoke or refuse to renew a franchise. The Company deals with franchisees in good faith and strives
to comply with regulatory requirements. From time to time the Company and one or more franchisees may become involved in a dispute regarding certain aspects of the franchise relationship, including, among other things, payment of royalties, location
of shops, advertising, purchase of certain products by franchisees, compliance with franchise system standards and franchise renewal criteria. There can be no assurance that compliance problems will not be encountered from time to time, or that
material disputes with one or more franchisees will not arise.

Consumer Protection Matters. National automotive repair chains have
been the subject of investigations and reports by consumer protection agencies and the Attorneys General of various states. Publicity in connection with such investigations can have an adverse effect on the financial condition and results of
operations of a company. In addition to such investigations, state and local governments have enacted numerous consumer protection laws. MDS has instituted procedures, including uniform standards of service to be followed by all Midas and SpeeDee
shops, to improve customer satisfaction, which also aids in regulatory compliance.

Environmental and Occupational Safety Matters.The Companys shops handle used automotive oils and certain solvents that are disposed of by licensed third-party contractors. As a result, the Company is subject to a number of federal, state and local laws designed to protect the
environment. MDS, through its company-operated shops, is also subject to regulation regarding the installation of catalytic converters and certain other emissions-related parts. In addition to environmental laws, the Company is subject to the
Federal Occupational Safety and Health Act and other laws regulating safety and health. The Company maintains programs to facilitate compliance with these laws, the costs of which are not material to its financial condition and results of
operations.

Employees

As of
January 3, 2009, MDS had approximately 800 employees. None of the employees is covered by collective bargaining agreements. MDS considers its relationships with employees to be good. Midas and SpeeDee franchisees hire and are responsible for
their own employees.

Cautionary Statements under the Private Securities Litigation Reform Act of 1995

Forward-Looking Statements

This report
contains (and oral communications made by MDS may contain) forward-looking statements that may be identified by their use of words like plans, expects, anticipates, intends, estimates,
forecasts, will, outlook should or other words of similar meaning. All statements that address the Companys expectations or projections about the future, including statements about MDSs
strategy for growth, cost reduction goals, expenditures and financial results, are forward-looking statements. Forward-looking statements are based on the Companys estimates, assumptions and expectations of future events and are subject to a
number of risks and uncertainties. MDS cannot guarantee that these estimates, assumptions and expectations are accurate or will be realized. MDS disclaims any intention or obligation (other than as required by law) to update or revise any
forward-looking statements.



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|Item 1A. | Risk Factors
|-------- | ------------

In addition to
the factors discussed elsewhere in this annual report, the following are some of the important factors that could cause the Companys actual results to differ materially from those projected in any forward-looking statements:

We are a leveraged company that utilizes debt to fund our business.

We currently have substantial debt on our balance sheet. The financing provided to us is subject to covenants that require us to maintain a certain net worth and maintain compliance with certain leverage ratios. If we
do not perform in accordance with these covenants, the financial institutions providing the funds have the option to withdraw their funding support. We cannot assure shareholders that we will remain in compliance with our debt covenants in the
future. In addition, our current financing agreement expires on October 27, 2010. While we believe we have excellent relations with our lenders, we cannot assure shareholders that we will be able to refinance our existing credit facility when
it expires in fiscal 2010, nor can we give any assurances to shareholders that the terms of any new financing arrangement will be favorable to the Company. Based on current financing market conditions, it is very likely that the terms and pricing of
a new financing arrangement will be less favorable than the current agreement.

We rely on franchising for a substantial portion of our
operating revenues. The failure of our franchisees to successfully operate stores consistent with our standards would have a material adverse effect on our profitability.

We rely on franchising for a substantial portion of our operating revenues. Therefore, our business is dependent on the ability of our franchisees to
deliver high quality services. Our franchisees are independent contractors and are not our employees. We provide training and support to franchisees, but the quality of franchised store operations may be diminished by any number of factors beyond
our control. We have been modifying the business models of our franchise systems. These changes generally require franchisees to perform more technologically complex repairs and maintenance than historically has been the case, and which requires
greater investment in personnel and equipment. Consequently, not all franchisees may successfully operate stores in a manner consistent with our standards and requirements or hire and train qualified managers, technicians and other store personnel.
If they do not, our image and reputation may suffer, and system-wide sales and profitability could decline. A reduction in system-wide sales and profitability could negatively impact the collectibility of receivables owed by franchisees to the
Company.

The failure to successfully implement our new business models could have a material adverse effect on our financial condition
and results of operations.

We are in the process of repositioning the Midas retail system in North America from a business model
focused on the servicing and replacement of mufflers, brakes, shock absorbers and struts to a model that encompasses a complete line of services. While we have made substantial progress in broadening our services, we have not yet been widely
successful in developing such ongoing relationships with our customers. As a result of the change in business model, our Midas company-operated and franchised shops have had to make, and will have to continue to make, investments in training, new
personnel and equipment. As a result of the inability of certain Midas franchisees to adapt to the changing environment and successfully adopt the new business model, we have in some cases reacquired franchises to prevent the closing of these shops.
While we believe that the selective acquisition of certain franchises is consistent with the implementation of our business model, our long term success depends upon the ability of our franchisees to profitably implement the new business model.
While comparable shop sales have been maintained or improved at Midas shops that have made the transition to the new business model, we cannot assure shareholders that the change in the long run will be successfully marketed, that consumers will
accept the new model or that the remaining shops will be willing to or can successfully make the transition to the new format.



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In addition, we are in the process of testing a new Midas-SpeeDee Co-Brand business model. The new
venture combines the Midas and SpeeDee franchise operations into one location. We believe that, if successful, this business model could provide us with a platform for growth of sales at existing Midas and SpeeDee locations as well as future unit
growth in North America. While the initial results have been encouraging, this venture remains only a test of the concept at this time. We cannot assure shareholders that the Co-Brand business model will succeed at driving sales or profitability for
the Company or its franchisees. Furthermore, we cannot assure shareholders, even if the testing of the concept proves successful, that franchisees would be willing or able to make a transition to the new concept on a broad scale. Finally, due to
issues related to location overlap, certain SpeeDee and Midas shop locations would not be allowed to make the transition even if the franchisees wanted and were able to do so.

A reduction in the availability of consumer credit may reduce consumer purchases of our products and services, which would adversely affect our
revenues.

Credit card purchases account for a significant portion of the revenue of the Midas and SpeeDee systems in North America. A
reduction in credit available to customers in general, and Midas credit card holders in particular, would have an adverse impact on MDS revenues.

A reduction in the availability of business credit could adversely affect our ability to sell franchises, lower our revenues or lead to slower payment of franchisee obligations due to MDS as franchisor.

Most new franchisees finance a substantial portion of their shop investment with debt. A reduction in the availability of business credit may hinder our
ability to sell new franchises, as well the ability of our selling franchisees to find capable buyers. In addition, our franchise systems are comprised of franchisees who are small business operators that rely upon credit to fund their operations.
When the availability of credit is reduced, it can harm the ability of our franchisees to fund their operations. As a consequence, franchisees can fail and go out of business or become delinquent in making payments, including payments due to the
franchisor.

A continuing downturn in the economy may delay or reduce consumer purchases of our products and services, which would
adversely affect our revenues.

Many factors affect the level of consumer spending on automotive services, including, among others,
general business conditions, interest rates, gasoline prices, the availability of consumer credit and consumer confidence in future economic conditions. Consumer purchases of regular service interval maintenance generally are reduced during
recessionary periods, when gasoline prices are high, or when disposable income is lower.

A decline in the usage of automobiles would
adversely affect demand for our products and services.

While the number of automobiles registered in the U.S. has historically
increased over time, a sustained reduction in the number of miles driven by automobile owners would adversely affect the demand for our products and services. For example, when the retail cost of gasoline increases or the economy enters a severe
recession, the number of miles driven by automobile owners typically decreases, which historically has resulted in less frequent service intervals and fewer repairs. In the U.S., in 2008 we experienced the largest one-year drop in miles driven since
World War II and we believe that this trend negatively impacted the Companys overall financial performance.

Virtually all of our
revenues outside of North America are derived from the license fees of one customer. The loss or reduction of these fees would have a material adverse effect on our net income.

Virtually all of our revenues outside of North America are derived from our master licensee in Europe and South America (previously Fiat Group S.p.A. and
now Norauto Group S.A. of France). As part of our licensing agreement, we received a fixed, U.S. dollar denominated license fee through 2007. From 2008 forward, our license fee is paid in Euros and varies based upon a percentage of retail sales. In
fiscal 2008, MDS realized $ 4.4 million in



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international license fee revenue under this agreement. This amount represented 2.4% of consolidated revenue and 20.7% of operating income. We realized $8.9
million in international license fees under this agreement in fiscal 2007, which represented approximately 5.0% of our consolidated revenue and 27.7% of our operating income. MDS does not hedge the related revenue exposure to Euros and thus the
Companys revenue stream is impacted by changes in the U.S. dollar vs. Euro exchange rate. The loss of the Norauto licensing fees due to an adverse change in our relationship with Norauto or in Norautos business would have a material
adverse effect on our net income.

We operate in a highly competitive market and the failure of our franchisees to effectively compete
would have a material adverse effect on our financial condition and results of operations.

The automotive services industry is highly
fragmented and highly competitive. There are numerous direct competitors for our retail auto service shops. Our shops compete with national, regional and local specialty chains, both franchised and company-owned, car dealerships, independent repair
shops and service bays of mass merchandisers. We believe the principal competitive factors in the markets served by our shops are, in no particular order, customer service and reputation, shop location, name awareness and price. We also compete with
businesses of the types noted above and with other parties in the sale of franchises. Competitive factors include startup costs, royalty rates, franchisee support and the financial performance of existing franchises. Many of our competitors are
large and have a substantially longer operating history. Many competitors have greater financial resources than we possess. Our failure to compete effectively or the failure of individual shops to compete effectively would have a material adverse
effect on our financial condition and results of operations.

Our inability to respond to consumer demands would adversely affect our
results of operations.

If we were unable to respond to changes in consumer demands in a timely manner, it would adversely affect our
revenues. Furthermore, if we fail to make continuous and successful new product and service introductions, this could adversely affect our financial performance. Our success in general, and at franchise system shops in particular, depends on our
ability to identify, originate and define automotive product and service trends as well as to anticipate, gauge and react to changing consumer demands in a timely manner. Our automotive products and services must appeal to a broad range of consumers
whose preferences cannot be predicted with certainty and are subject to rapid change. We may not be able to continue to develop appealing automotive products and services or meet changing consumer demands in the future. If we or our franchisees
misjudge the market for automotive products and services, we or our franchisees may be faced with excess inventories and sunk training and equipment costs for certain automotive products and services and missed opportunities for other products and
services.

Advances in automotive technology could adversely affect demand for our maintenance and repair services.

The demand for the services offered by our shops could be adversely affected by continuing developments in automotive technology. Automotive manufacturers
are producing cars that last longer and require service and maintenance at less frequent intervals. For example, some manufacturers now recommend that consumers change oil at 10,000 mile intervals and replace spark plugs and other engine components
at 100,000 miles, a significant increase from the mileage intervals recommended for earlier models and those currently recommended by most manufacturers. In addition, the improvement in original equipment manufacturers parts quality has in the
past reduced, and may in the future reduce, demand for the products and services offered by our shops, thereby adversely affecting our franchise system revenues. Improvement in the quality of parts manufactured may extend the useful lives and
warranties of those parts and may reduce demand for our products and services by decreasing the frequency of replacement or refurbishment of those parts. In turn, longer and more comprehensive warranty programs offered by automobile manufacturers
and other third parties also could adversely affect the demand for services offered by our shops. We believe that a majority of new automobile owners have their cars serviced by their new car dealer during the period the car is under warranty. Major
automobile manufacturers are



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experimenting with various advanced engine technologies, some of which could impact demand for services currently performed within our franchise systems.
Finally, advances in automotive technology could require that we and our franchisees incur additional costs to update our technical training programs and upgrade the diagnostic capabilities of Midas and SpeeDee shops.

The failure to attract and maintain an adequate supply of skilled labor would have a material adverse effect on our financial performance.

The provision of high quality services by our shops requires an adequate supply of skilled labor. In addition, the operating costs and
operating revenues of auto service shops may be adversely affected by high turnover in skilled technicians. Trained and experienced automotive technicians are in high demand. The expansion of our business model from muffler and brake service to more
complicated automotive repairs has required many franchised and company-operated shops to hire highly skilled full-service automobile technicians. Accordingly, our ability to increase productivity and revenues could be affected by our inability to
attract and maintain the employment of skilled technicians necessary to provide key shop services. If we or our franchisees are unable to attract and maintain the adequate skilled labor force necessary to operate these shops efficiently, or if labor
expenses increase as a result of a shortage in the supply of skilled technicians, our financial performance would be adversely affected.

The failure to comply with applicable franchise laws could have a material adverse effect on our financial condition and results of operations.

We are subject to federal and state laws and regulations, including the regulations of the Federal Trade Commission as well as similar authorities in individual states, in connection with the offer, sale and
termination of franchises and the regulation of the franchisorfranchisee relationship. Our failure to comply with these laws could subject us to liability to franchisees and to fines or other penalties imposed by governmental authorities. In
addition, we may become subject to litigation with, or other claims filed with state or federal authorities by, franchisees based on alleged unfair trade practices, implied covenants of good faith and fair dealing, payment of royalties, location of
shops, advertising expenditures, franchise renewal criteria or express violations of agreements. There can be no assurance that compliance problems will not be encountered from time to time, or that material disputes will not arise with one or more
franchisees. Accordingly, our failure to comply with applicable franchise laws and regulations could have a material adverse effect on our financial condition and results of operations.

We must commit resources to maintain and develop our key brands. The failure to maintain the Midas and SpeeDee brands would have a material adverse
effect on our financial condition and results of operations.

If we fail to continue maintaining and developing the Midas and SpeeDee
brand names, future revenues would be adversely affected. We believe that maintaining and developing our brand names is critical to our success and that the importance of brand recognition may increase as competitors offer products and services
similar to our products and services. We incur substantial marketing expenditures to create and maintain brand loyalty as well as increase awareness of our brands. If our brand-building strategies are unsuccessful, these expenses may never be
recovered, as we may be unable to increase future revenues or successfully implement certain business strategies.

Failure to protect
our intellectual property would reduce our competitiveness.

We rely on trademark, trade secret, patent and copyright law to protect our
intellectual property, including the Midas and SpeeDee brand names. We cannot be sure that these intellectual property rights can be successfully asserted or will not be invalidated, circumvented or challenged in the future. In addition, the laws of
some of the foreign countries in which our products and services are or may be sold do not protect our



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intellectual property rights to the same extent as the laws of the United States. Our failure to protect our proprietary information, and any successful
intellectual property challenges or infringement proceedings against us, could make us less competitive and could have a material adverse effect on our business, financial condition and results of operations.

The failure to comply with consumer protection regulations would have a material adverse effect on our financial condition and results of operations.

National automotive repair chains have been the subject of investigations and reports by consumer protection agencies and the Attorneys
General of various states. Negative publicity in connection with such investigations could have an adverse effect on the financial condition and results of operations of our company. In addition, state and local governments have enacted numerous
consumer protection laws and the failure to comply with these laws would have a material adverse effect on our financial condition and results of operations.

The failure to comply with extensive environmental regulation applicable to our business would have a material adverse effect on our financial condition and results of operations.

Environmental compliance costs and liabilities could have a material adverse effect on our financial condition. Our operations and properties are subject
to increasingly stringent laws and regulations relating to environmental protection, including laws and regulations governing air emissions, water discharges and waste management. Such laws and regulations can impose fines and criminal sanctions for
violations and require the installation of costly pollution control equipment or operational changes to limit pollution emissions and decrease the likelihood of accidental hazardous substance releases. Some of our current and former properties have
been used as gas stations and dry cleaners. Accordingly, we could become subject to potentially material liabilities relating to the investigation and cleanup of contaminated properties, and to claims alleging personal injury or property damage as
the result of exposures to, or releases of, hazardous substances. In addition, stricter interpretation of existing laws and regulations, new laws and regulations, the discovery of previously unknown contamination or the imposition of new or
increased requirements could require us to incur costs or become the basis of new or increased liabilities that could reduce earnings and cash available for our operations.

Significant changes in the market value of our defined benefit plan assets could have a material adverse effect on our financial condition and results
of operations.

We have a defined benefit plan that we offer to individuals employed by MDS. The assets in the plan are invested in a
combination of equities, bonds and cash in order to fund ongoing plan obligations and ensure the future funded status of the plan. Historically, our defined benefit plan has been well-funded and we have not had to make any material contributions to
fund the plan over the past several years. However, significant changes in the value of plan assets could result in incremental income statement expense for the Company and could result in our having to fund plan assets with incremental cash
contributions to the plan in current and future years. The U.S. Government establishes rules that govern the funding requirements of such plans and we comply with these rules. Currently, these rules are under review and changes could be made. We
cannot project the future funded status of our plan nor can we project the future funding requirements of the plan that would result from changes in the funded status or changes in government rules regarding required funding.

The failure to maintain adequate levels of taxable income within our U.S. and Canadian subsidiaries would have a material adverse effect on our
corporate income tax expense and the valuation of our net deferred tax assets.

Our balance sheet contains significant deferred tax
assets for net operating loss carry forwards and other reserves and liabilities that are deductible for tax purposes in future years. We must maintain adequate levels of taxable income in key subsidiaries in all future years to preserve the
utilization of these deferred tax assets prior to their expiration. If we determine that it is more likely than not that these assets will not be fully utilized in



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future years, we will have to record an incremental charge to income tax expense and record an incremental valuation allowance against the corresponding
deferred tax assets.

If our stock price remains at its current level, it will have a material adverse effect on our future corporate
income tax expense.

As prior MDS stock awards vest, the estimated fair value of the award is amortized as an expense charged to our
book income statement. For tax purposes, stock awards are not deductible until they vest (for restricted stock) or until they are exercised (for options). As the expense is amortized on our book income statement, we recognize a deferred tax asset on
our balance sheet. The deferred tax asset is then reversed when the corresponding restricted stock vests or when the corresponding options are exercised. If our tax deduction is less than our book income statement deduction, the full deferred tax
asset will not be realized. The tax effected difference between our book deduction and our tax deduction is charged to income tax expense. This will happen if and when restricted stock vests at a stock price below its grant price, or if stock
options are exercised at a stock price which results in a tax deduction that is less than the Black-Scholes valuation of the option at grant date.

The lowering of U.S. corporate income tax rates would have a material adverse effect on our corporate income tax expense.

Our balance sheet contains a significant U.S. deferred tax asset, which is valued at a combined (federal plus state) income tax rate of 39.2%. If the U.S. corporate income tax rates were reduced in the next several years, the deferred tax
assets would have to be written-down to their net realizable value. This would result in incremental U.S. income tax expense for the Company.

Our results of operations may be adversely affected by acts of war or terrorism

War or terrorist activities or the threat
of them may increase our cost of doing business or otherwise impact our financial performance.



|Item 1B. | Unresolved Staff Comments
|-------- | -------------------------

The
Company has no unresolved Staff Comments.



|Item 2. | Properties
|------- | ----------

MDS owns and
leases real estate in various communities throughout North America that it uses for company-operated shops or leases and sub-leases to Midas and SpeeDee franchisees. As of January 3, 2009, MDS owned 220 retail Midas locations, leased 510 Midas
locations and used other forms of real estate control over an additional 690 Midas locations. This approach provides effective control over 1,420 of the 1,674 Midas shops in North America, or approximately 85%.

As of January 3, 2009, SpeeDee Realty leased three SpeeDee locations.

MDS leases approximately 62,000 square feet of office space in Itasca, Illinois, where its corporate headquarters is located. This lease runs through January 2019. In addition, the Company leases two small office
facilities, one in Louisiana and one in California, in connection with the management of the SpeeDee franchise system.

MDS sold its
185,000 square foot manufacturing facility in Hartford, Wisconsin during the third quarter of fiscal 2007. The Companys central distribution warehouse for exhaust distribution closed during the first quarter of fiscal 2006 and was returned to
the landlord. The facility had been owned by the Company but was sold and leased back on a short term basis from March 2005 through March 2006. MDS no longer owns or leases any



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facilities in connection with its former exhaust manufacturing and distribution operation or its traditional wholesale distribution operations.



|Item 3. | Legal Proceedings
|------- | -----------------

Neither MDS nor
any of its subsidiaries are currently involved in any material legal proceedings. The Company has certain contingent liabilities arising from various pending claims and litigation related to a number of matters. While the amount of liability that
may result from these matters cannot be determined, the Company believes the ultimate liability will not materially affect the financial position or results of operations of MDS.

The Company is currently involved in two potential class action lawsuits. The first suit was filed in California in June 2006 and alleges that certain
franchised California Midas shops intentionally issued invoices to certain brake customers which incorrectly indicated that the customers had received Midas-branded brake products when, in fact, they had received inferior non-Midas brake products.
Midas denies the plaintiffs allegations and is vigorously defending this lawsuit. Midas has thus far been successful in challenging the legal sufficiency of the plaintiffs claims. The plaintiffs third amended complaint has been
dismissed. The plaintiffs filed a fourth amended complaint in March of 2009. The Company continues to believe that the allegations are without merit and that it will ultimately succeed in this litigation.

The second potential class action lawsuit was filed against the Company in Canada by two Canadian Midas franchisees. The plaintiffs allege various
violations of the Midas Franchise and Trademark Agreement and are seeking class certification and monetary damages of approximately $168 million. As stated in a previously filed Form 8-K, MDS believes that this lawsuit is completely without merit.
The class certification hearing took place in February 2009. To date, the Court has yet to issue a ruling on class certification.



|Item 4. | Submission of Matters to a Vote of Security Holders
|------- | ---------------------------------------------------

None

PART II



|Item 5. | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|------- | ------------------------------------------------------------------------------------------------------------

The Companys Common Stock is listed on the New York Stock Exchange under the symbol MDS. As of December 31, 2008, there were 4,429
holders of record of the Common Stock. Information about the high and low prices of MDS Common Stock is shown below.



|            |  |      |       |     |   |      
|----------- |  | ---- | ----- | --- | - | -----
|            |  | High |       | Low
|Fiscal 2008 |  |      |       |     |   |      
|1stQuarter  |  | $    | 19.12 |     | $ | 12.71
|2ndQuarter  |  |      | 18.40 |     |   | 12.60
|3rdQuarter  |  |      | 17.63 |     |   | 12.69
|4thQuarter  |  |      | 14.17 |     |   | 6.57 
|Fiscal 2007 |  |      |       |     |   |      
|1stQuarter  |  | $    | 23.24 |     | $ | 19.92
|2ndQuarter  |  |      | 23.73 |     |   | 21.11
|3rdQuarter  |  |      | 22.92 |     |   | 17.79
|4thQuarter  |  |      | 19.95 |     |   | 14.67

MDS has not paid a dividend during the last three fiscal years and has no current plans to pay a
dividend in the future.



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The following table includes all issuer repurchases, including those made pursuant to publicly announced
plans or programs and those not made pursuant to publicly announced plans or programs.



|                                                            |  |                                  |  |                            |  |                                                                                 |  |                                                                                     |           
|----------------------------------------------------------- |  | -------------------------------- |  | -------------------------- |  | ------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------- | ----------
|Period                                                      |  | TotalNumberof SharesPurchased(1) |  | AveragePrice Paidper Share |  | Total Number ofShares Purchasedas Part ofPubliclyAnnounced Plansor Programs (2) |  | Approximate DollarValue of SharesThat May Yet BePurchased Underthe Plans orPrograms
|October 2008: (September 27, 2008 through October 25, 2008) |  |                                 |  |                           |  |                                                                                |  | $                                                                                   | 34,347,399
|November 2008: (October 26, 2008 through November 29, 2008) |  |                                 |  |                           |  |                                                                                |  | $                                                                                   | 34,347,399
|December 2008: (November 30, 2008 through January 3, 2009)  |  |                                 |  |                           |  |                                                                                |  | $                                                                                   | 34,347,399
|                                                            |  |                                  |  |                            |  |                                                                                 |  |                                                                                     |           
|Total                                                       |  |                                 |  |                           |  |                                                                                |  |                                                                                     |           
|                                                            |  |                                  |  |                            |  |                                                                                 |  |                                                                                     |           



|(1) | Includes shares surrendered to cover the withholding taxes upon the vesting of restricted stock. In the fourth fiscal quarter of 2008, no shares were surrendered in lieu of taxes
and, for the full year 2008, a total of 10,962 shares were surrendered.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | On November 9, 2004, the Company announced that the Board of Directors had authorized a share repurchase of up to $25 million in MDS stock. On May 9, 2006, the MDS Board
of Directors authorized a $25 million increase in the share repurchase program, and on May 8, 2007, the Board authorized an additional $50 million increase. As of January 3, 2009, a total of approximately 3,248,100 shares had been
repurchased under this plan since its inception. The average price of shares repurchased under the plan was approximately $20.21.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Performance Graph

The following performance graph compares the Companys cumulative total shareholder return on
Common Stock from January 3, 2004 to January 3, 2009 with the cumulative total return during the same periods of S&P 500 Index and Standard & Poors 600 Specialty Stores (the peer group), neither of which
includes MDS. These comparisons assume an initial investment of $100 and the reinvestment of dividends.

LOGO



|                         |  |        |  |        |  |          |  |          |  |          |  |       
|------------------------ |  | ------ |  | ------ |  | -------- |  | -------- |  | -------- |  | ------
|Company/Index            |  | 1/3/04 |  | 1/1/05 |  | 12/31/05 |  | 12/30/06 |  | 12/29/07 |  | 1/3/09
|Midas, Inc.              |  | 100    |  | 141.7  |  | 131.0    |  | 164.1    |  | 104.9    |  | 75.5  
|S&P 500 Index            |  | 100    |  | 111.2  |  | 116.7    |  | 135.1    |  | 143.5    |  | 92.6  
|S&P 600 Specialty Stores |  | 100    |  | 102.5  |  | 92.7     |  | 92.8     |  | 64.2     |  | 43.2  



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|Item 6. | Selected Financial Data
|------- | -----------------------

The
following table presents selected historical financial information of MDS. The information set forth below should be read in conjunction with Item 7, Managements Discussion and Analysis of Financial Condition and Results of
Operations and the financial statements of MDS and the notes thereto. The operating results data set forth below for fiscal years 2008, 2007 and 2006 and the balance sheet data as of the end of fiscal 2008 and 2007 are derived from, and are
qualified by reference to, the audited financial statements of MDS included herein, and should be read in conjunction with those financial statements and the notes thereto. The operating results data for fiscal years 2005 and 2004 and the balance
sheet data as of the end of fiscal 2006, 2005 and 2004 are derived from audited financial statements of MDS not included herein.



|                                                    |  |                                  |       |      |   |       |  |      |       |      |   |       |  |   |      
|--------------------------------------------------- |  | -------------------------------- | ----- | ---- | - | ----- |  | ---- | ----- | ---- | - | ----- |  | - | -----
|Fiscal Year                                         |  | 2008                             |       | 2007 |   | 2006  |  | 2005 |       | 2004
|                                                    |  | (In millions, except share data)
|Operating results data:                             |  |                                  |       |      |   |       |  |      |       |      |   |       |  |   |      
|Sales and revenues (a)                              |  | $                                | 187.4 |      | $ | 178.2 |  | $    | 174.9 |      | $ | 192.5 |  | $ | 197.5
|Business transformation charges (b)                 |  |                                  | 1.6   |      |   | 3.7   |  |      | 3.3   |      |   | 12.3  |  |   | 1.2  
|Operating income (c)                                |  |                                  | 21.3  |      |   | 32.1  |  |      | 26.8  |      |   | 12.6  |  |   | 20.6 
|Income before income taxes                          |  |                                  | 13.0  |      |   | 23.4  |  |      | 19.0  |      |   | 3.2   |  |   | 3.6  
|Net income                                          |  |                                  | 7.8   |      |   | 13.0  |  |      | 10.3  |      |   | 2.2   |  |   | 4.1  
|Earnings per sharediluted                          |  | $                                | 0.56  |      | $ | 0.89  |  | $    | 0.66  |      | $ | 0.13  |  | $ | 0.26 
|                                                    |  |                                  |       |      |  
|Balance sheet data:                                 |  |                                  |       |      |   |       |  |      |       |      |   |       |  |   |      
|Total assets                                        |  | $                                | 235.4 |      | $ | 215.6 |  | $    | 215.7 |      | $ | 239.2 |  | $ | 252.0
|Obligations under capital leases and long-term debt |  |                                  | 85.8  |      |   | 79.1  |  |      | 65.2  |      |   | 70.1  |  |   | 75.1 
|Finance lease obligations                           |  |                                  | 32.8  |      |   | 34.0  |  |      | 34.8  |      |   | 36.8  |  |   | 37.6 
|Total shareholders equity                          |  |                                  | 19.6  |      |   | 25.1  |  |      | 33.2  |      |   | 49.5  |  |   | 48.9 



|(a) | On March 30, 2008 Midas acquired the assets of G.C. & K.B. Investments, Inc. and its affiliated entities that franchise or sub-franchise SpeeDee quick-lube and
automotive maintenance shops. During fiscal 2008, SpeeDee generated incremental revenue of approximately $3.5 million.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) | In late 2002, MDS began a process to exit wholesale parts distribution and to redirect the Companys strategic focus towards the core franchising business. This included
outsourcing the Companys traditional wholesale business, closing 77 PWI locations, rationalizing the company-operated shops operation and closing the Companys exhaust manufacturing and distribution operations. These and other actions led
to business transformation charges during all of the most recent five fiscal years. Business transformation costs for fiscal years 2006 through 2008 are described in Note 2 of Notes to Financial Statements.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(c) | In 2008 and 2007, the Company recorded favorable pre-tax adjustments to its estimated warranty liability of $3.4 million and $8.3 million, respectively.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------



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|Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

The following table presents, for the fiscal periods indicated, selected financial information as a percentage of total sales and revenues.



|                                                             |  |                                  |   |  |       |   |  |       |  
|------------------------------------------------------------ |  | -------------------------------- | - |  | ----- | - |  | ----- | -
|                                                             |  | Percentage of Sales and Revenues |  
|Fiscal Year                                                  |  | 2008                             |   |  | 2007  |   |  | 2006  |  
|Franchise royalties and license fees                         |  | 30.5                             | % |  | 33.8  | % |  | 36.3  | %
|Real estate revenues from franchised shops                   |  | 18.4                             |   |  | 20.2  |   |  | 20.7  |  
|Company-operated shop retail sales                           |  | 32.8                             |   |  | 25.7  |   |  | 23.2  |  
|Replacement part sales and product royalties                 |  | 15.6                             |   |  | 17.8  |   |  | 17.5  |  
|Software sales and maintenance revenue                       |  | 2.7                              |   |  | 2.5   |   |  | 2.3   |  
|                                                             |  |                                  |   |  |       |   |  |       |  
|Sales and revenues                                           |  | 100.0                            |   |  | 100.0 |   |  | 100.0 |  
|Franchised shopsoccupancy expenses                          |  | 12.2                             |   |  | 12.4  |   |  | 12.3  |  
|Company-operated shop parts cost of sales                    |  | 8.6                              |   |  | 6.3   |   |  | 5.5   |  
|Company-operated shop payroll and employee benefits          |  | 13.9                             |   |  | 10.7  |   |  | 10.0  |  
|Company-operated shop occupancy and other operating expenses |  | 11.1                             |   |  | 8.6   |   |  | 7.9   |  
|Replacement part cost of sales                               |  | 14.1                             |   |  | 14.6  |   |  | 13.7  |  
|Warranty expense (benefit)                                   |  | (1.4                             | ) |  | (2.4  | ) |  | 2.5   |  
|Selling, general, and administrative expenses                |  | 28.8                             |   |  | 29.8  |   |  | 32.8  |  
|Loss (gain) on sale of assets, net                           |  | 0.5                              |   |  | (0.1  | ) |  | (1.9  | )
|Business transformation charges                              |  | 0.8                              |   |  | 2.1   |   |  | 1.9   |  
|                                                             |  |                                  |   |  |       |   |  |       |  
|Total operating costs and expenses                           |  | 88.6                             |   |  | 82.0  |   |  | 84.7  |  
|                                                             |  |                                  |   |  |       |   |  |       |  
|Operating income                                             |  | 11.4                             |   |  | 18.0  |   |  | 15.3  |  
|Interest expense                                             |  | (4.9                             | ) |  | (5.1  | ) |  | (5.1  | )
|Other income, net                                            |  | 0.4                              |   |  | 0.2   |   |  | 0.7   |  
|                                                             |  |                                  |   |  |       |   |  |       |  
|Income before income taxes                                   |  | 6.9                              |   |  | 13.1  |   |  | 10.9  |  
|Income taxes                                                 |  | 2.7                              |   |  | 5.8   |   |  | 5.0   |  
|                                                             |  |                                  |   |  |       |   |  |       |  
|Net income                                                   |  | 4.2                              | % |  | 7.3   | % |  | 5.9   | %
|                                                             |  |                                  |   |  |       |   |  |       |  

Company Overview

MDS operates in a single business segment with retail, real estate, supply chain and point-of-sale technology operations in support of the franchising of Midas and SpeeDee automotive service shops in North America.
Retail operations consist of company-operated Midas and SpeeDee shops. Real estate activities include the development, ownership and leasing of Midas and SpeeDee shops in the U.S. and Canada. Supply chain activities include providing value-added
merchandising services to franchisees in which the Company establishes relationships with vendors who distribute products and equipment directly to Midas and SpeeDee shops. Point-of-sale technology operations consist of the ownership, development,
sale and leasing of automotive shop management software to Midas franchisees and other third-party automotive service providers. Outside of North America the Company operates on a master-franchise basis where the Midas and SpeeDee trademarks are
licensed to master franchisees that sub-franchise Midas and SpeeDee shops in their respective territories.

MDS management is focused on
building shareholder value through the profitable growth of the Company. The two main drivers of profit growth for MDS are increases in comparable shop sales and increases in shop count through the sale of additional franchised units. These two
drivers are closely integrated, as the sale of franchises is much easier in an environment where franchised shop sales and profits are growing.

Over the past several years the Midas system in North America has struggled both in terms of sales and shop profitability. Retail sales at franchised shops in the U.S. declined in each of the last three years as a weakening



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economy, high gasoline prices and the first reduction in miles driven since 1980 combined to erode customer demand. In addition, demand for exhaust
replacement, one of Midas historical core categories, has continued to decline. As a consequence, the Midas shop count in North America has decreased as franchisees have left the system. Since 2005, the number of Midas shops in North America
has fallen by 125 shops, or about 7%. The current weak economic conditions show no signs of abating, and while the recent decline in new car sales should increase demand for auto repair and maintenance services, consumers lack confidence and remain
cautious in their spending as they delay key repairs and maintenance in the near-term. Midas retail sales have been especially hard hit in the economically depressed West and Southeast regions of the U.S. where over 34% of U.S. Midas system shops
are located.

Growing Comparable Shop Sales

MDS management believes the key to growing sales in the Midas system in North America is to focus on those services that are most critical to the regular maintenance of vehicles: brake replacement, fluid replacement
and tire replacement. These services are required of all vehicles at periodic intervals and management believes future success in automotive service requires that a service provider possess expertise, credibility and top-of-mind awareness in all
three categories. These periodic services will serve as the gateway to forming broader, long-term relationships with customers, including factory scheduled maintenance and major repairs.

The Company is working in concert with Midas franchisees to implement key initiatives in each of these three service categories in order to grow sales as
follows.

Brakes: The Midas system has long been a leader in the brake category throughout North America. The Companys
strength in brake services dates back nearly 30 years and is backed by the well-known Midas lifetime guarantee. While brakes remain the largest and most profitable service category for the Midas system, brake sales at retail have declined over the
past several years, producing a significant drag on overall system sales performance. During 2008, retail comparable shop brake sales in the Midas system declined 8.1% in the U.S., although they increased 0.1% in Canada. Given the overall importance
of the brake category to the Midas system, improving brake sales in the U.S. is a priority.

The Companys efforts to drive retail
brake sales starts with ensuring brake product quality across the Midas system. During 2008, the Company introduced new mandatory minimum performance standards for Midas brake friction to be used by franchisees. In connection with the improved
product quality standards, the Company launched its SecureStop branded brake service, which helps Midas differentiate the service provided by the franchisees amongst numerous competitors who rely almost exclusively on price. During 2009 the Company
is changing its promotional brake strategy from national single-price-point television advertising to a more locally-focused advertising approach. Brake service is very competitive on a local level and management believes the move to more emphasis
on local advertising will provide Midas franchisees with greater flexibility in addressing local market conditions. Furthermore, it should allow for a more consistent share of voice in brake promotions.

Tires:In fiscal 2004, Midas successfully launched a major retail initiative to significantly expand Midas shop sales of tires and related tire
services. In support of this objective, the Company formed an alliance with Bridgestone-Firestone to distribute tires directly to Midas system shops throughout North America. As a result, comparable shop sales of tires and related tire services in
North America increased significantly in each of the past four years. Most recently, during 2008, comparable shop sales of tires increased 15% in the U.S. and nearly 30% in Canada. Despite this multi-year success in driving tire sales, tires remain
a relatively small component of the Midas system overall sales mix: less than 6% in the U.S. and 9% in Canada for 2008. Management now believes that achieving a 20% sales mix in tires is both attainable and important to the future growth of the
Midas system in North America.

The Company continues to test a significantly expanded tire program in certain company-operated and
franchised Midas shops. If this program succeeds, it will serve as a model for shops throughout the Midas



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system. Going forward, the Company believes that sales of tires and related tire services will be a significant component of future revenue growth for the
Midas system.

Fluid Exchanges:In fiscal 2005, the Company began the roll out of a series of initiatives designed to build sales in
maintenance services as a means to increase repeat customer business. The program most importantly included the standardization of the Midas oil change service and vehicle inspection process, providing all customers with suggested factory
maintenance schedules and increasing the Midas shops focus and capabilities in fluid exchange services, which are an increasingly important component of factory scheduled maintenance.

In response to the Companys efforts to build maintenance revenues and increase shop visit frequency, comparable shop sales of oil changes in North
America increased by more than 8% in 2008 on top of a 9% increase in 2007. However, revenues from this category still represent less than 7% of Midas system sales, and the typical Midas shop performs less than six oil changes per day. While oil
change revenue and car count have been growing over the past several years, management believes the Midas system has the capacity to significantly increase that number by leveraging the operating knowledge of the SpeeDee system and enhanced local
marketing efforts. Growth in car count is important to driving sales growth in the Midas system.

MDS management believes that while the
current economic environment, and the need to develop stronger customer relationships, pose significant challenges for automotive aftermarket service providers, the potential to succeed has never been greater for those existing franchisees that are
willing and able to adapt.

Growing Shop Count

Since fiscal 1998, annual Midas shop closings have exceeded annual new shop openings. The annual shop closing rate during this period of approximately 2.8% is consistent with other mature retail companies, however the
opening rate has lagged. This reduced opening rate is due to a variety of factors including the increased complexity of the Midas shop operating model, a lack of focus on new shop development by the MDS management team during many of those years, an
over-supply of automotive repair centers in general, and a re-deployment of capital by MDS away from real estate investments.

During this
time the Company has also diverted many new franchisees that may have opened new shops away from new shop development and instead have helped them buy existing Midas shops from existing Midas franchisees. Midas is an older franchise system and thus
numerous long-term franchisees have struggled with the ongoing changes required to adapt to the current automotive aftermarket. The Company has been working diligently to identify those franchisees that are not capable or not willing to adapt to the
new environment and has been assisting them in transitioning out of the Midas system. This has caused many new franchisees to purchase existing Midas shops rather than to develop new ones. This transformation has been underway for some time and
Midas achieved 100 shop transitions in fiscal 2008, a total of 97 shop transitions in 2007, and 115 shop transitions in fiscal 2006. During fiscal 2008, approximately 80% of these shops were transitioned to franchisees that were new to the Midas
system.

The benefits of transitioning Midas shops to new franchisees can be seen in the performance of these shops. Sales at shops within
the first year after transition have historically far outperformed the sales performance of the broader Midas system. In some cases, the improvement is dramatic with sales rising as much as 100%. In the next several years the Company hopes to
accelerate the number of transitions each year and thereby increase the capacity of the Midas system as a whole to adapt and thrive in this new business environment.

In addition to transitions, the Company believes that the roll-out of the Midas-SpeeDee Co-Brand concept and the acquisition/conversion of competing automotive repair centers both provide a significant opportunity to
grow the North American franchise system. A successful test of the new Midas-SpeeDee Co-Brand concept has the potential to create a new growth platform for the Company by substantially enhancing the economics and return-on-investment of a franchised
automotive service shop. Because the automotive service market is both fragmented and saturated, the Company believes that unit growth is best achieved through acquisitions and



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conversions of independents rather than de novo opening of newly constructed sites. These two opportunities are explained in greater detail below.

The Midas-SpeeDee Co-Brand Opportunity: In March 2008, MDS acquired the SpeeDee auto service franchise system. The SpeeDee business
model focuses on fluid exchanges and maintenance, providing a high quality auto service experience in a quick-service format. SpeeDee leverages the quick-service customer relationship as a gateway to a broader general repair relationship with its
customers. Since its acquisition, the SpeeDee system has performed well, generating approximately flat comparable shop sales in fiscal 2008 despite the weak economy.

The Company believes the acquisition of SpeeDee provides both the Midas and SpeeDee franchise systems with a unique opportunity for growth in the future. By combining into one location Midas expertise in general
repairs and strong brand awareness with SpeeDees strength in executing quick-lube and fluid exchanges, the Company believes it can create a powerful new format focused on satisfying the needs of time-pressed consumers seeking value, excellence
and a long-term auto service relationship. The Company expects that a Midas-SpeeDee Co-Brand format shop will see customers much earlier in the lifecycle of their vehicle (relative to the typical Midas shop) and will be more able to convert these
vehicles into general repair customers (relative to the typical SpeeDee shop) as the vehicles age. The resulting higher unit sales volume may produce a higher return on investment for the franchisee by better leveraging shop overhead expenses.

The Company launched its first test of the SpeeDee-Midas Co-Brand concept with three shops during the third quarter of fiscal 2008. All
three were existing SpeeDee locations in California that added the Midas brand to their shop. A fourth Co-Branded unit, also in California, opened on a de novo basis in October 2008. The initial results have been encouraging as the three test
units saw comparable shop sales increases of 7.8% in the third quarter (after they were co-branded) and 12.7% in the fourth quarter of fiscal 2008. The Company expects to test Co-Branding at additional SpeeDee locations during the first half of
2009.

During December of 2008, the Company began a test of the Co-Brand concept within existing Midas shops. Three Midas company-operated
shops in suburban Chicago were remodeled to accommodate the operating requirements of the SpeeDee concept, which generate much higher car throughput than the typical Midas shop. These three test locations officially launched with grand opening
promotions during the first quarter of fiscal 2009. The results of this test will be critical in determining the issues involved with integrating the SpeeDee model into selected Midas locations across the U.S. and Canada.

Testing of the Midas-SpeeDee Co-Brand concept across numerous shop formats will be completed during 2009. If successful, the new co-brand format could
provide a platform for accelerating Company growth by providing Co-Brand opportunities to existing Midas and SpeeDee franchisees, as well as a superior format for de novo shop growth in the future.

Acquisitions and Conversions: The U.S. automotive repair industry is highly fragmented. This is demonstrated by the fact that Midas, as one of the
largest automotive maintenance and repair providers in the U.S. with 1,496 locations, represents less than 1% of the estimated 235,000 automotive repair shops in the U.S. as of December 31, 2008. Despite the increase in the number of vehicles
on the road in the U.S. over the last 15 years, the number of automotive service outlets in the U.S. has been in decline. Vehicle complexity and the resulting need for highly skilled technicians, training programs and technologically advanced
diagnostic equipment, along with the increased cost of real estate, has caused a net decrease of almost 16,000 automotive repair outlets in the past 10 years. More recently, automobile dealerships have been closing in record numbers, causing
consumers to seek out alternatives.

The Company believes that the acquisition of existing automotive repair shops, as well as the
conversion of independent repair facilities to the Midas and SpeeDee brands, is the most efficient way to grow the MDS system. This strategy is consistent with the actions of other competitors such as Monro Muffler & Brake, whose growth has
been primarily the result of acquisitions rather than de novo shop openings. The implementation of



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this strategy included the fiscal 2008 acquisition of the 173 shop SpeeDee system, as well as the conversion to Midas of two independent automotive repair
shops. The Company believes that the current economic environment will result in an increase in acquisition and conversion opportunities, as competitors struggle to remain viable during this economic downturn.

Fiscal Reporting Periods

Fiscal 2008 was comprised
of 53 weeks, and fiscal years 2007 and 2006 each were comprised of 52 weeks. The extra week in fiscal year 2008 did not have a material impact on results of operations, because the approximately $2 million in additional revenues were completely
offset by a similar amount of additional costs and expenses.

Results of OperationsFiscal 2008 Compared to Fiscal 2007

Total sales and revenues for fiscal 2008 increased $9.2 million, or 5.2 %, from fiscal 2007 to $187.4 million. Within the retail auto service
business, royalty revenues and license fees decreased $3.1 million, or 5.1%, from fiscal 2007. This decrease primarily reflects a scheduled reduction in the international royalties paid by Midas Europe to MDS of approximately $4.5 million, weakness
in retail sales as total North American comparable shop sales declined 2.0% and an increase in the number of company-operated shops whose royalties are eliminated. These impacts were partially offset by a $3.1 million increase in royalties due to
the March 2008 acquisition of the SpeeDee business.

Revenues from real estate leases declined $1.3 million to $34.6 million as higher
revenues from scheduled rent increases were offset by a net reduction in the number of shops paying rent to Midas due to shop closures and the acquisition of company-operated shops, as well as lower revenue from sales-based rental agreements.

Sales from company-operated shops were $61.4 million in fiscal 2008 compared to $45.8 million in fiscal 2007. The increased revenues
reflect a higher company-operated shop count due to shop acquisitions in the past 12 months. Comparable shop sales for the Midas company-operated shops were flat during fiscal 2008.

Replacement part sales and product royalties decreased 7.9% from $31.7 million to $29.2 million in fiscal 2008. During fiscal 2007, replacement part
sales and product royalties included revenue of $1.9 million in connection with the sale of certain products that the Company purchased from AutoZone and simultaneously sold to NAPA, at cost, to facilitate the Companys transition from AutoZone
to NAPA as the key stocking product supplier to Midas franchisees in the U.S. Excluding these one-time sales to NAPA, replacement part sales and product royalties fell $0.6 million in fiscal 2008. A $2.5 million increase in replacement part sales
due to growth in sales of tires, batteries, oil and equipment to Midas franchisees was offset by a $3.3 million decline in product royalties, primarily as a result of the change in the Midas warranty program in the U.S. Software sales and
maintenance revenue increased $0.5 million to $5.0 million reflecting continued growth in the Companys RO Writer point-of-sale software business.

Total operating costs and expenses increased $20.0 million, or 13.7%, in fiscal 2008 to $166.1 million primarily driven by the higher number of company-operated shops. Occupancy expenses for franchised shops increased
$0.7 million, or 3.2%, reflecting scheduled increases in rent expense for shops leased by the Company, as well as a net increase in the number of leased shops. Company-operated shop costs and expenses rose to $63.0 million from $45.6 million in the
prior year, mostly as a result of additional shops and the incremental overhead required to support them compared to the same period one year ago. Payroll and employee benefit costs increased to 42.5% of company-operated shop sales in fiscal 2008
compared to 41.7% in the prior year. Company-operated shop occupancy and other expenses increased as a percentage of sales from 33.4% in fiscal 2007 to 33.9% in fiscal 2008 as a result of changes in the composition of the company-operated shop
portfolio. Company-operated shop cost of sales increased from 24.4% in fiscal 2007 to 26.2% in fiscal 2008, primarily as a result of an increase in sales of tires and higher discounts to drive customer traffic.



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Replacement part cost of sales increased to 90.4% of replacement part sales and product royalties from
82.0% in fiscal 2007. The increased cost of replacement part sales relative to revenue was due to the change in the U.S. warranty program beginning in fiscal 2008 in which Midas no longer collects product royalty revenue from U.S supply chain
partners (such product royalties had no offsetting cost of sales). Warranty benefit in fiscal 2008 was $2.7 million compared to a benefit of $4.3 million in fiscal 2007. In fiscal 2008, the Company recorded favorable adjustments totaling $3.4
million to its U.S. and Canadian warranty reserves due to a change in estimate for the expected redemption rates for warranted product sold by Midas franchisees. In fiscal 2007, an $8.3 million favorable adjustment was recorded to the U.S. warranty
reserve as a result of a change in estimate for the expected redemption rate on warranted brakes and exhaust.

Selling, general and
administrative expenses in fiscal 2008 increased $0.9 million, or 1.7%, from fiscal 2007 to $54.1 million. The increase reflects an incremental $1.4 million in operating expense for the SpeeDee business, a $1.1 million increase in outside legal
costs, primarily due to two potential class action lawsuits and a $0.8 million increase in costs incurred to accelerate the transition of shops to new owners. These areas of increased spending were partially offset by the Companys ongoing
expense reduction program, which included lower costs for rent in the Midas corporate office as a result of a new lease arrangement, as well as lower costs for management bonus compensation due to lower than expected operating results.

During fiscal 2008, the Company recorded business transformation charges of $1.6 million. The 2008 charges reflected $1.3 million for the
Companys partial funding of the rollout of a new shop image for Midas franchisees and $0.3 million for the closure of an unprofitable company operated shop. During fiscal 2007, the Company recorded business transformation charges of $3.7
million. The charges reflect $2.5 million in connection with the Companys partial funding of the rollout of a new shop image for Midas franchisees, $1.0 million related to the early termination of the Companys supply agreement with
AutoZone, and $0.6 million for severance and other charges. Offsetting these charges in fiscal 2007 were credits of $0.4 million to reflect adjustments to the Companys reserve for non-recoverable lease costs pertaining to the closure of six
company-operated shops in 2006.

During fiscal 2008, the Company recorded a loss on sale of $0.9 million in connection with the sale of
certain shop assets. During fiscal 2007, the Company sold its vacant manufacturing facility in Hartford, WI for approximately $1.1 million. As a result of this asset sale, the Company recorded a gain of approximately $0.2 million.

As a result of the above changes, operating income decreased $10.8 million to $21.3 million in fiscal 2008 from $32.1 million in fiscal 2007 and
operating income margin decreased to 11.4% of sales from 18.0% of sales.

Interest expense was $9.1 million in fiscal 2008 compared to $9.1
million in fiscal 2007. Interest expense was flat compared to the prior year despite higher average bank debt compared to the prior year (due to the SpeeDee acquisition in March 2008) primarily due to a reduction in the Companys borrowing
rate.

Other income was $0.8 million in fiscal 2008 compared to $0.4 million in fiscal 2007. Other income consists primarily of interest
income on overdue customer accounts and foreign currency exchange gains or losses.

The Companys effective tax rate was 40.3% in 2008
compared to 44.0% in fiscal 2007 and compared to the 2008 statutory tax rate of 39.2%. The fiscal 2008 variance from the statutory rate was primarily due to the impact of non-deductible executive compensation and other non-deductible expenses.

As a result of the above items, net income decreased $5.2 million from net income of $13.0 million in fiscal 2007 to net income of $7.8
million in fiscal 2008.



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Results of OperationsFiscal 2007 Compared to Fiscal 2006

Total sales and revenues for fiscal 2007 increased $3.3 million, or 1.9%, from fiscal 2006 to $178.2 million. Within the retail auto service business,
royalty revenues and license fees decreased $3.3 million, or 5.2%, from fiscal 2006. This decrease was primarily driven by a decrease in U.S. comparable shop retail sales, a decline in the number of North American shops compared to the prior fiscal
year and a scheduled reduction in international royalties paid by Norauto. For fiscal 2007, comparable shop sales in North America declined approximately 2% and the shop count decreased 2.3%. Significant comparable shop sales growth in the new
categories of tires of 13.4%, oil of 8.9% and other non-traditional services of 3.9%, could not offset a 7.1% decline in brakes and a 10.8% decline in exhaust. The decline in exhaust was anticipated and it was consistent with the long-term trend in
this business. However, the Company believes it lost market share in the brake category as intense price competition and a softening economy appear to have driven some consumers to lower priced competitors. Revenues from real estate leases declined
slightly to $35.9 million as higher revenues from scheduled rent increases were offset by the net reduction in the number of shops subject to real estate rental agreements and lower revenue from sales-based rental agreements.

Sales from company-operated shops were $45.8 million in fiscal 2007 compared to $40.5 million in fiscal 2006. The increased revenues reflect additional
company-operated shops as a result of acquisitions. The Company completed fiscal 2007 with 91 company-operated shops compared to 66 at the close of fiscal 2006. Comparable shop sales for the company-operated shops increased 0.1% during fiscal 2007.
The Chicago market improved significantly with comparable shop sales growing 10% after a slight decrease in 2006, while the Colorado market also improved, with comparable shop sales growing 1% after a 4% decline in 2006. The Florida market (28
shops), which has been hard hit by the economic slowdown, posted an approximate 2.5% decline in 2007 after generating comparable shop increases of 9% and 12% in 2006 and 2005, respectively.

Replacement part sales and product royalties increased 3.6% from $30.6 million to $31.7 million in fiscal 2007. This increase in replacement part sales
and product royalties was primarily due to increased sales of tires and batteries to Midas franchisees, partially offset by lower product royalties as a result of reduced U.S. franchisee purchases from approved supply chain partners. Software sales
and maintenance revenue increased $0.5 million to $4.5 million reflecting continued growth in the Companys RO Writer software business.

Total operating costs and expenses declined $2.0 million, or 1.4%, in fiscal 2007 to $146.1 million. Occupancy expenses for franchised shops increased $0.6 million, or 2.8%, reflecting scheduled increases in rent expense for shops leased by
the Company, as well as a net increase in the number of leased shops. Company-operated shop costs and expenses rose to $45.6 from $41.0 million mostly as a result of additional shops and the incremental overhead required to support them. Payroll and
employee benefit costs declined to 41.7% of company-operated shop sales in fiscal 2007 compared to 43.0% in the prior year, which enabled the business to generate its first operating profit in more than five years. Company-operated shop occupancy
and other expenses improved as a percentage of sales from 34.3% in fiscal 2006 to 33.4% in fiscal 2007. Company-operated shop cost of sales increased slightly from 24.0% in fiscal 2006 to 24.5% in fiscal 2007, primarily as a result of an increase in
lower margin tires sales.

Replacement part cost of sales increased $2.1 million to 82.0% of replacement part sales and product royalties
from 78.1% in fiscal 2006 driven by higher sales of lower margin tires and batteries and lower revenues from product royalties. Warranty expense in fiscal 2007 was a credit of $4.3 million compared to an expense of $4.4 million in fiscal 2006 mostly
reflecting a fiscal 2007 favorable adjustment of $8.3 million to the U.S. warranty reserve as a result of a change in estimate for the expected redemption rate on warranted brakes and exhaust product sold by Midas franchisees. (See Note 1 of the
Notes to Financial Statements for a further discussion)

Selling, general and administrative expenses in fiscal 2007 decreased $4.2
million, or 7.3%, from fiscal 2006 to $53.2 million. This reduction primarily reflects a $1.1 million reduction in expenses related to the annual



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franchisee convention and savings of $1.2 million on exhaust distribution expense due to the final exit from that business in the first quarter of fiscal
2006 as well as savings on executive compensation of $0.9 million and legal costs of $1.2 million.

During fiscal 2007, the Company
recorded business transformation charges of $3.7 million. The charges reflect $2.5 million in connection with the Companys partial funding of the rollout of a new shop image for Midas franchisees, $1.0 million related to the early termination
of the Companys supply agreement with AutoZone, and $0.6 million for severance and other charges. Offsetting these charges were credits of $0.4 million to reflect adjustments to the Companys reserve for non-recoverable lease costs
pertaining to the closure of six company-operated shops in 2006. During fiscal 2006, the Company recorded business transformation charges of $3.3 million primarily in connection with the Companys partial funding of the rollout of the new shop
image for Midas franchisees and the closure of six unprofitable company-operated shops at the end of 2006.

During fiscal 2007, the Company
sold its vacant manufacturing facility in Hartford, WI for approximately $1.1 million. As a result of this asset sale, the Company recorded a gain of approximately $0.2 million. During fiscal 2006, the Company recorded a $3.4 million gain on sale of
assets. This included the final recognition of the remaining $1.8 million deferred gain from the March 2005 sale of the Companys Chicago warehouse, and a $1.6 million gain on the sale of equipment liquidated in connection with the
Companys exit from exhaust manufacturing and distribution.

As a result of the above changes, operating income increased $5.3 million
to $32.1 million in fiscal 2007 from $26.8 million in fiscal 2006. Excluding the impact of the above described business transformation charges and gains on sale, operating income for fiscal 2007 was $35.6 million compared to $26.7 million for fiscal
2006. Excluding the impact of business transformation charges and gains on sale, operating income margin increased to 20.0% of sales in fiscal 2007 from 15.3% in fiscal 2006. The improvement in operating margin primarily reflects the adjustment to
the U.S. warranty reserve, savings on administrative overhead expense, the elimination of operating losses in the Companys exhaust distribution operation and improved profitability of company-operated shops, all of which offset the negative
impact of lower franchise royalties.

Interest expense was $9.1 million in fiscal 2007 compared to $9.0 million in fiscal 2006. Interest
expense increased only slightly despite higher average bank debt compared to the year ago period primarily due to the reduction in interest rates that resulted from changes in the Companys debt agreement in 2006.

Other income declined from $1.2 million in fiscal 2006 to $0.4 million in fiscal 2007 primarily due to currency exchange related losses and lower
interest collected on franchisee receivables. Other income consists primarily of interest income on overdue customer accounts and foreign currency exchange gains or losses.

The Companys effective tax rate was 44.0% in fiscal 2007 compared to 45.8% in fiscal 2006 and compared to the 2007 statutory tax rate of 39.0%. The
fiscal 2007 variance from the statutory rate is primarily due to the impact of non-deductible executive compensation and a reduction of the Companys Canadian deferred tax asset to its net realizable value as a result of the recent reduction in
Canadas corporate income tax rates. The tax rate for fiscal 2006 was unusually high due to the correction of an error in 2004 and 2005 income tax expense.

As a result of the above items, net income increased $2.7 million from net income of $10.3 million in fiscal 2006 to net income of $13.0 million in fiscal 2007.



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Liquidity, Financial Condition and Capital Resources

Following is a summary of the Companys cash flows from operating, investing and financing activities for fiscal 2008 and 2007, respectively (in
millions):



|                                                                                                                                      |  |      |       |   |      |   |       |  
|------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ----- | - | ---- | - | ----- | -
|                                                                                                                                      |  | 2008 |       |   | 2007 |  
|Cash provided by operating activities before cash outlays for business transformation costs and net changes in assets and
liabilities |  | $    | 26.9  |   |      | $ | 32.0  |  
|Cash outlays for business transformation costs                                                                                        |  |      | (1.5  | ) |      |   | (3.8  | )
|Net changes in assets and liabilities, exclusive of the effects of business transformation charges, acquisitions and
dispositions     |  |      | 1.0   |   |      |   | 2.4   |  
|                                                                                                                                      |  |      |       |   |      |   |       |  
|Net cash provided by operating activities                                                                                             |  |      | 26.4  |   |      |   | 30.6  |  
|Net cash used in investing activities                                                                                                 |  |      | (29.9 | ) |      |   | (16.2 | )
|Net cash provided by (used in) financing activities                                                                                   |  |      | 3.3   |   |      |   | (15.5 | )
|                                                                                                                                      |  |      |       |   |      |   |       |  
|Net change in cash and cash equivalents                                                                                               |  | $    | (0.2  | ) |      | $ | (1.1  | )
|                                                                                                                                      |  |      |       |   |      |   |       |  

The Companys cash management system permits the Company to make daily borrowings and
repayments on its revolving line of credit, allowing MDS to minimize interest expense and to maintain a low cash balance. The Companys cash and cash equivalents decreased $0.2 million in fiscal 2008.

The Companys operating activities provided net cash of $26.4 million during fiscal 2008 compared to $30.6 million in fiscal 2007. Excluding cash
outlays for business transformation costs and changes in assets and liabilities, cash from operating activities decreased from $32.0 million in fiscal 2007 to $26.9 million in fiscal 2008, as the decrease in net income, lower utilization of deferred
tax assets, lower stock-based compensation and reduced business transformation charges were only partially offset by the lower warranty liability adjustment, $1.1 million decrease in the gain on sale of assets and higher depreciation and
amortization. Cash outlays for business transformation costs declined from $3.8 million in fiscal 2007 to $1.5 million in fiscal 2008. Cash outlays for business transformation costs in fiscal 2008 were related to the Companys update of its
retail shop image and the closure of a company-operated shop while cash outlays in fiscal 2007 were related to the early termination of the supply agreement with AutoZone and the Companys update of its retail shop image.

Changes in assets and liabilities declined from a $2.4 million source of cash in fiscal 2007 to a $1.0 million source of cash in fiscal 2008. The $1.0
million source of cash in 2008 resulted primarily from an increase in accounts payable due to higher tire sales in the fourth quarter of fiscal 2008 and the timing of payments partially offset by a decline in accrued expenses and an increase in
inventories, while the $2.4 million source of cash in 2007 was primarily due to a decline in inventories as a result of the final liquidation of exhaust inventory.

Investing activities used $29.9 million of cash in fiscal 2008 compared to $16.2 million of cash used in fiscal 2007. Fiscal 2008 investing activities consisted of $24.5 million paid in conjunction with the
acquisition of SpeeDee and the acquisition of shops and other assets from certain Midas franchisees, $6.4 million in capital expenditures and $1.0 million in cash generated as the result of the sale of ten company-operated shops. The $6.4 million in
capital expenditures included $0.6 million in office renovation costs, $2.5 million for real estate purchases, $0.9 million for systems development projects, $1.8 million for company-operated shop equipment additions, $0.6 million in Co-Branding
spending and other capital expenditures. Fiscal 2007 investing activities primarily consisted of $13.7 million paid in conjunction with the acquisition of 37 shops and other assets from certain Midas franchisees, $5.1 million in systems development
projects, company-operated shop equipment additions, office renovations and other capital expenditures and $2.6 million in cash generated as the result of the sale of 12 company-operated shops and the sale of the former exhaust manufacturing
facility.

Net cash provided by financing activities was $3.3 million in fiscal 2008, compared to net cash used of $15.5 million in fiscal
2007. During fiscal 2008, MDS increased total debt by $5.5 million, partially offset by a decrease in outstanding checks of $2.0 million, payment of $0.4 million to repurchase shares of the Companys common stock and the receipt of $0.2 million
in cash from the exercise of outstanding stock options. Cash paid



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for treasury shares decreased $28.8 million in fiscal 2008 compared to fiscal 2007 as the Company suspended its stock repurchase program in order to help
fund the SpeeDee acquisition in March 2008. During fiscal 2007, MDS increased total debt by $13.3 million, decreased outstanding checks by $2.3 million, paid $29.2 million to repurchase shares of the Companys common stock and received $2.7
million in cash from the exercise of outstanding stock options.

On October 27, 2005, MDS entered into a five-year, unsecured $110
million revolving credit facility. On February 4, 2008, the Company amended the loan by increasing the revolving credit facility to $130 million. The amended facility is further expandable to $165 million at the Companys discretion with
lender approval. The interest rate floats based on the underlying rate of LIBOR and the Companys leverage and was priced at LIBOR plus 1.50% at January 3, 2009. This facility requires maintenance of certain financial covenants including
maximum allowable leverage and minimum tangible net worth. As of January 3, 2009, the Company was in compliance with all debt covenants.

As of fiscal year end 2008, a total of $83.6 million was outstanding under the revolving credit facility. Fiscal year end 2007, a total of $76.3 million was outstanding under the revolving credit facility.

In November 2005, $20 million in senior bank debt was converted from floating rate to fixed rate by locking-in LIBOR at 4.89% for a five year period. In
addition, in March 2007, MDS entered into an interest rate swap arrangement to convert an additional $25 million in senior bank debt from floating rate to a fixed rate by locking-in LIBOR at 4.91% for the remaining term of the Companys bank
agreement (October 2010). This swap effectively replaced a declining balance swap that expired in March 2007 under which LIBOR was locked-in at 2.76% for a three-year term. As a consequence, currently $45 million of the Companys $83.6 million
in senior bank debt is at fixed rates.

Both the November 2005 and March 2007 swap arrangements have been designated as cash flow hedges
and have been evaluated to be highly effective. As a result, the after-tax change in the fair value of these swaps is recorded in accumulated other comprehensive income as a gain or loss on derivative financial instruments.

The fair values of the Companys interest rate swaps are estimated using Level 2 inputs, which are based on model-derived valuations in which all
significant inputs and significant value drivers are observable in active markets. The Company also considers counterparty credit-risk and bilateral or own credit risk adjustments in estimating fair value, in accordance with the
requirements of SFAS 157. The Companys adoption of this provision resulted in a $237,000 decrease in long-term swap liability, a $92,000 reduction in deferred income taxes and a $145,000 increase in accumulated other comprehensive loss through
fiscal 2008. The adoption of SFAS 157 had no impact on cash provided by operating activities.

On November 9, 2004, the MDS Board of
Directors authorized a share repurchase program to begin in fiscal 2005 for up to $25 million of the Companys outstanding common stock. On May 9, 2006, the MDS Board of Directors authorized a $25 million increase in the share repurchase
program and on May 8, 2007 the Board authorized an additional $50 million increase. The Company has paid approximately $65.7 million for shares acquired under this current program since the buyback program was first authorized in 2004. As a
result of the March 2008 acquisition of the SpeeDee business, only $0.4 million in stock repurchases were made during fiscal 2008. At this time, the Company has temporarily suspended its share repurchases and is focused on reducing outstanding bank
debt.

The Company has entered into a purchase agreement, which could result in the purchase of up to four shops from a Midas franchisee if
the purchase agreements are not assigned to third party buyers prior the expiration of the option periods. The purchase agreements require MDS to purchase four shops for approximately $1.1 million no later than March 30, 2009. MDS has the right
to assign these purchase agreements to an approved third party at any point prior to March 30, 2009. Additionally, the purchase agreements require MDS, or an assigned third party, to purchase land and buildings for three of the four locations
for approximately $1.6 million. The related land and building purchase must coincide with the business purchase and also must be completed prior to March 30, 2009, subject to certain closing conditions.



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Recent market conditions have negatively affected the value of assets held by the Companys pension
plans as of January 3, 2009 and could impact the value of these assets in the future. The most recently reported pension values as of January 3, 2009 reflected plan assets at fair market value of $44.8 million and an actuarial present
value of projected benefit obligations of $63.8 million.

The Companys policy is to fund the pension plans in accordance with
applicable U.S. and Canadian government regulations and to make additional contributions as required. As of January 3, 2009, the Company has met all regulatory minimum funding requirements. In fiscal year 2008, MDS made no contributions to the
Companys pension plans as per the regulatory minimum funding requirements. As a result of the significant reduction in the fair value of the U.S. plan assets MDS will be required to make a contribution to the U.S. plan in fiscal year 2009.
Under the U.S. Pension Protection Act of 2006 (PPA) MDS would have been expected to contribute approximately $2.9 million to the U.S. pension plan during 2009. New legislation, the Worker, Retiree, Employer Recovery Act of 2008
(WRERA), was passed in late December 2008 and provides temporary loosening of pension funding requirements. The 2009 funding requirements under WRERA are less than the funding requirements under PPA. Under WRERA, the Company expects to
contribute approximately $1.8 million to the U.S. Plan during 2009.

The Company believes that cash generated from operations and
availability under the current debt agreement provides sufficient liquidity to finance operations and execute strategic initiatives for at least the next 12 months.

Contractual Obligations

The following table reflects the Companys contractual obligations
under long-term debt and lease agreements as of January 3, 2009:



|                              |  |                                      |       |                 |   |          |  |          |       |              |   |      |  |   |     
|----------------------------- |  | ------------------------------------ | ----- | --------------- | - | -------- |  | -------- | ----- | ------------ | - | ---- |  | - | ----
|                              |  | Payments Due by Period (In millions)
|                              |  | Total                                |       | Less Than1 Year |   | 1-3Years |  | 4-5Years |       | After5 Years
|Short and long-term debt      |  | $                                    | 83.6  |                 | $ |         |  | $        | 83.6  |              | $ |     |  | $ |    
|Capital lease obligations     |  |                                      | 2.2   |                 |   | 0.4      |  |          | 0.5   |              |   | 0.5  |  |   | 0.8 
|Finance lease obligations     |  |                                      | 32.8  |                 |   | 1.1      |  |          | 2.7   |              |   | 3.4  |  |   | 25.6
|Operating leases              |  |                                      | 143.8 |                 |   | 25.2     |  |          | 43.4  |              |   | 30.4 |  |   | 44.8
|Other long-term obligations   |  |                                      |      |                 |   |         |  |          |      |              |   |     |  |   |    
|                              |  |                                      |       |                 |   |          |  |          |       |              |   |      |  |   |     
|Total contractual obligations |  | $                                    | 262.4 |                 | $ | 26.7     |  | $        | 130.2 |              | $ | 34.3 |  | $ | 71.2
|                              |  |                                      |       |                 |   |          |  |          |       |              |   |      |  |   |     

The debt, capital lease obligations and finance lease obligation payments shown above represent
principal payments required under those agreements. Additionally, MDS is required to make certain interest payments in connection with those obligations.

In addition to the amounts shown above, the Company currently has $1.3 million outstanding on standby letters of credit that expire in 2009.

Additionally, MDS is due rental revenue in the amounts shown below under sublease agreements on leased properties and rental agreements on owned
properties:



|                                                |  |                                                    |       |                 |   |          |  |          |      |              |   |      |  |   |     
|----------------------------------------------- |  | -------------------------------------------------- | ----- | --------------- | - | -------- |  | -------- | ---- | ------------ | - | ---- |  | - | ----
|                                                |  | Rental Revenue Due to Midas by Period(In
millions)
|                                                |  | Total                                              |       | Less Than1 Year |   | 1-3Years |  | 4-5Years |      | After5 Years
|Rental revenue commitments on leased properties |  | $                                                  | 119.7 |                 | $ | 21.4     |  | $        | 36.3 |              | $ | 25.1 |  | $ | 36.9
|Rental revenue commitments on owned properties  |  |                                                    | 100.2 |                 |   | 8.6      |  |          | 16.0 |              |   | 14.1 |  |   | 61.5
|                                                |  |                                                    |       |                 |   |          |  |          |      |              |   |      |  |   |     
|Total rental revenue commitments                |  | $                                                  | 219.9 |                 | $ | 30.0     |  | $        | 52.3 |              | $ | 39.2 |  | $ | 98.4
|                                                |  |                                                    |       |                 |   |          |  |          |      |              |   |      |  |   |     



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Critical Accounting Policies and Estimates

In preparing the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, management
must make a variety of decisions which impact the reported amounts and related disclosures. Such decisions include the selection of the appropriate accounting principles to be applied, the assumptions on which to base accounting estimates, and the
consistent application of those accounting principles. Due to the type of industry in which the Company operates and the nature of its business, and the Companys recent business transformation process, the following accounting policies are
those that management believes are most important to the portrayal of the Companys financial condition and results and that require managements most difficult, subjective or complex judgments, often as a result of the need to make
estimates about the effect of matters that are inherently uncertain.

Valuation of Warranty Liabilities

Customers are provided a written warranty from MDS on certain Midas products purchased from Midas shops in North America, namely brake friction, mufflers,
shocks and struts. The warranty will be honored at any Midas shop in North America and is valid for the lifetime of the vehicle, but is voided if the vehicle is sold. The Company maintains a warranty accrual to cover the estimated future liability
associated with outstanding warranties. The Company determines the estimated value of outstanding warranty claims based on: 1) an estimate of the percentage of all warranted products sold and registered in prior periods at retail that are likely to
be redeemed; and 2) an estimate of the cost of redemption of each future warranty claim on a current cost basis. These estimates are computed using actual historical registration and redemption data as well as actual cost information on current
redemptions.

The determination of the number of warranted products sold that are likely to be redeemed requires MDS to make significant
estimates and assumptions regarding the relationship of historical warranty claim behavior to future warranty claim behavior; warranty claim behavior across product lines and geographical areas; and, the impact of changes in consumer behavior on
future warranty claims. A decrease of one percentage point in the estimated percentage of warranted products likely to be redeemed in the U.S. would have the effect of changing the Companys January 3, 2009 outstanding U.S. warranty
liability by approximately $2.2 million. A change in the estimated current cost of warranty redemptions of one dollar would have the effect of changing the outstanding U.S. warranty liability by $0.8 million.

As of January 1, 2008, the Company changed how the Midas warranty obligations are funded in the United States. From June 2003 through December 2007,
product royalties received from the Companys preferred supply chain vendors were recorded as revenue and substantially offset the cost of warranty claims. Beginning in fiscal 2008, the Midas warranty program in the United States is funded
directly by Midas franchisees. The franchisees are charged a fee for each warranted product sold to customers. The fee is charged when the warranty is registered with the Company. The fee billed to franchisees is deferred and is recognized as
revenue when the actual warranty is redeemed and included in warranty expense. This fee is intended to cover the Companys cost of the new warranty program, thus revenues under this program will match expenses and the new warranty program will
have no impact on the results of operations. In connection with this change, beginning in 2008 Midas system franchisees in the United States started receiving rebates on their purchases from the Companys preferred supply chain vendors and MDS
no longer receives product royalties on Midas franchisee purchases in the United States. Because the Companys U.S. supply chain partners are responsible for the warranty of parts during the first 12 months, MDS will not begin to record
revenues or expenses under the new program until fiscal 2009. As of January 3, 2009, deferred warranty obligations under this new program were $3.0 million.

The Midas warranty program in Canada has not changed. The Company continues to receive royalties from certain preferred supply chain vendors based on Midas franchisee purchases in Canada and records a periodic
warranty expense.



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Valuation of Receivables

The Company records receivables due from its franchisees and other customers at the time the sale is recorded in accordance with its revenue recognition
policies. These receivables consist of amounts due from the sale of products, royalties due from franchisees and suppliers, rents and other amounts. The future collectibility of these amounts can be impacted by the Companys collection efforts,
the financial stability of its customers, and the general economic climate in which it operates. Recent market conditions have increased the inherent uncertainty involved in making these estimates. Any adverse change in these factors could have a
significant impact on the collectibility of these assets and could have a material impact on the Companys consolidated financial statements.

The Company applies a consistent practice of establishing an allowance for accounts that it feels may become uncollectible through reviewing the historical aging of its receivables and by monitoring the financial strength of its franchisees
and other customers. Where MDS becomes aware of a customers inability to meet its financial obligations (e.g., where it is in financial distress or has filed for bankruptcy), the Company specifically reserves for the potential bad debt to
reduce the net recognized receivable to the amount it reasonably believes will be collected. The valuation of receivables is performed on a quarterly basis.

Pensions

The Company has non-contributory defined benefit pension plans covering certain of
its employees. The Companys funding policy for the U.S. plan is to contribute amounts sufficient to meet the minimum funding requirement of the Employee Retirement Income Act of 1974, plus any additional amounts the Company may deem to be
appropriate. The Company accounts for its defined benefit pension plans in accordance with Statement of Financial Accounting Standards (SFAS) No. 87, Employers Accounting for Pensions, and SFAS No. 158,
Employers Accounting for Defined Benefit Pension and Other Postretirement Plansan amendment of FASB Statements No. 87, 88, 106 and 132(R), which require that amounts recognized in the financial statements be determined
on an actuarial basis. Under SFAS No. 158, the amount recorded as pension assets or liabilities is determined by comparing the projected benefit obligation (PBO) to the fair value of the plan assets. Amounts recognized in accumulated other
comprehensive loss consist of unrecognized actuarial gains, losses, and prior service costs, net of tax.

As of January 3, 2009, the
Company has recorded accrued pension costs as follows (in millions):



|                          |  |      |       |  
|------------------------- |  | ---- | ----- | -
|Fiscal Year               |  | 2008 |      
|Prepaid pension asset     |  | $    | 2.3   |  
|Canadian prepaid reserve  |  |      | (2.3  | )
|Accrued pension liability |  |      | (21.2 | )
|                          |  |      |       |  
|Accrued pension costs     |  | $    | (21.2 | )
|                          |  |      |       |  

The $2.3 million valuation reserve pertains to the partial wind-up of the Canadian Salaried
Defined Benefit Pension Plan. As per provincial laws, the asset balance in excess of the Projected Benefit Obligation is not an asset of the Company.

To account for its defined benefit pension plans in accordance with SFAS No. 87, the Company must make three main determinations at the end of each fiscal year: First, it must determine the actuarial assumption
for the discount rate used to reflect the time value of money in the calculation of the projected benefit obligation for the end of the current fiscal year and to determine the net periodic pension cost for the subsequent year. For guidance in
determining this rate, the Company looks at rates of return on high-quality fixed-income investments and periodic published rate ranges. See Note 9 of Notes to Financial Statements for a listing of the discount rates used by year.



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Second, the Company must determine the actuarial assumption for rates of increase in compensation levels
used in the calculation of the accumulated and projected benefit obligations for the end of the current fiscal year and to determine the net periodic pension cost for the subsequent year. In determining these rates the Company looks at its
historical and expected rates of annual salary increases. See Note 9 of Notes to Financial Statements for a listing of the rates of increase in compensation levels used by year.

Third, the Company must determine the expected long-term rate of return on assets assumption that is used to determine the expected return on plan assets
component of the net periodic pension cost for the subsequent year. The difference between the actual return on plan assets and the expected return is deferred under SFAS No. 87 and is recognized in net periodic pension cost over a five-year
period. See Note 9 of Notes to Financial Statements for a listing of the expected long-term rates used by year. The Company assumed a long-term rate of return on pension assets of 8.5% in fiscal 2008 and 2007, and experienced a loss on plan assets
of $14.6 million in fiscal 2008, and a gain on plan assets of $7.4 million in fiscal 2007.

Recent market conditions have resulted in an
unusually high degree of volatility and increased risks associated with certain investments held by MDS pension plans, which could impact the value of investments, net periodic pension costs and future funding requirements after the date of this
filing. The Companys pension plan investments are comprised of bond and equity mutual funds and cash reserves. The pension plans have no investments in alternative investment vehicles such as private equity funds or hedge funds, nor have the
plans ever held such investments.

Carrying Values of Goodwill and Long-Lived Assets

Goodwill:The Company tests the recorded amount of goodwill for recovery on an annual basis in the fourth quarter of each fiscal year. Goodwill is
tested more frequently if indicators of impairment exist. The Company continually assesses whether any indicators of impairment exist, which requires a significant amount of judgment. Such indicators may include: a sustained significant decline in
the Companys share price and market capitalization; a decline in the Companys expected future cash flows; a significant adverse change in legal factors or in the business climate; unanticipated competition; the testing for recoverability
of a significant asset group within a reporting unit; or slower growth rates, among others. Any adverse change in these factors could have a significant impact on the recoverability of these assets and could have a material impact on the
Companys consolidated financial statements.

The goodwill impairment test is a two step analysis. In Step One, the fair value of each
reporting unit is compared to its book value. Management must apply judgment in determining the estimated fair value of these reporting units. Fair value is determined using a combination of present value techniques and quoted market prices of
comparable businesses. If the fair value of the reporting unit exceeds its carrying value, goodwill is not deemed to be impaired for that reporting unit, and no further testing would be necessary. If the fair value of the reporting unit is less than
the carrying value, the Company performs Step Two. Step Two uses the calculated fair value of the reporting unit to perform a hypothetical purchase price allocation to the fair value of the assets and liabilities of the reporting unit. The
difference between the fair value of the reporting unit calculated in Step One and the fair value of the underlying assets and liabilities of the reporting unit is the implied fair value of the reporting units goodwill. A charge is recorded in
the financial statements if the carrying value of the reporting units goodwill is greater than its implied fair value.

The
determination of fair value of the reporting units and assets and liabilities within the reporting units requires management to make significant estimates and assumptions. These estimates and assumptions primarily include, but are not limited to,
the discount rate, terminal growth rates, earnings before depreciation and amortization, and capital expenditures forecasts. Due to the inherent uncertainty involved in making these estimates, actual results could differ from those estimates. In
both the U.S. and Canada, the reporting unit is defined as retail operations, which consists of both franchised and company-operated locations.

Long-lived Assets: Long-lived assets include property and equipment, intangible assets, long-term prepaid assets and other non-current assets. The Company reviews long-lived assets held for use for impairment



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whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Events that may indicate long-lived assets may not be
recoverable include, but are not limited to, a significant decrease in the market price of long-lived assets, a significant adverse change in the manner in which the Company utilizes a long-lived asset, a significant adverse change in the business
climate, a recent history of operating or cash flow losses, or a current expectation that it is more likely than not likely that a long-lived asset will be sold or disposed of in the future. For impairment testing purposes, the Company groups its
long-lived assets at the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities (the asset group).

If the Company determines that a long-lived asset or asset group may not be recoverable, it compares the sum of the expected undiscounted future cash
flows that the asset or asset group is expected to generate to the asset or asset groups carrying value. If the sum of the undiscounted future cash flows exceed the carrying amount of the asset or asset group, the asset or asset group is not
considered impaired. However, if the sum of the undiscounted future cash flows is less than the carrying amount of the assets or asset group, a loss is recognized for the difference between the fair value of the asset or asset group and the carrying
value of the asset or asset group. The fair value of the asset or asset group is generally determined by discounting the expected future cash flows using a discount rate that is commensurate with the risk associated with the amount and timing of the
expected future cash flows. Due to the inherent uncertainty involved in making these estimates, actual results could differ from those estimates.

Deferred Income Taxes

In assessing the realizability of deferred tax assets, management considers whether it is more
likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary
differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Any adverse change in these factors could have a
significant impact on the realizability of the Companys deferred tax assets and could have a material impact on the Companys consolidated financial statements.

Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are
deductible, management believes it is more likely than not that the Company will realize the benefits of these deductible differences at January 3, 2009. In the event that management determines the Company would not be able to realize all or
part of the net deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to income in the period such determination was made. As of January 3, 2009, the Company had recorded a valuation allowance of $0.6
million against certain state income tax net operating loss carryforwards because the Company has determined that it is more likely than not that this portion of these deferred tax assets will not be realized. However, due to the inherent
uncertainty involved in determining the realizability of the Companys deferred tax assets, the future realizability could differ from management estimates at January 3, 2009.

Impact of New Accounting Standards

In September 2006, the FASB issued Statement of Financial
Accounting Standard (SFAS) No. 157, Fair Value Measurements, (SFAS 157). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair
value measurements. The provisions of this standard apply to other accounting pronouncements that require or permit fair value measurements. SFAS 157 became effective for MDS on December 30, 2007 (the beginning of fiscal 2008). The only
applicability of this standard for the Company was related to its existing interest rate swaps. The Company adopted this provision, which resulted in a $237,000 decrease in long-term swap liability, a $92,000 reduction in deferred income taxes and a
$145,000 increase in accumulated other comprehensive loss through the end of fiscal 2008. The adoption of SFAS 157 had no impact on the results of operations or cash provided by operating activities.



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In September 2006, the FASB issued SFAS No. 158, Employers Accounting for Defined
Benefit Pension and Other Postretirement Plansan amendment of FASB Statements No. 87, 88, 106 and 132(R), (SFAS 158). The Company adopted SFAS 158 on December 30, 2006, which resulted in a $7.0 million reduction in other
assets, a $2.8 million increase in deferred tax assets, a $0.2 million increase in other liabilities and a $4.4 million increase in accumulated other comprehensive loss. The adoption had no impact on the Companys results of operations or cash
flows.

SFAS 158 also requires an employer to measure plan assets and benefit obligations as of the balance sheet date effective for
periods ending after December 15, 2008. On December 30, 2007 the Company adopted this provision by recording adjustments to opening balances, which resulted in a $110,000 increase in other assets, a $40,000 reduction in deferred income
taxes, a $50,000 increase in retained earnings and a $20,000 reduction in accumulated other comprehensive loss. The adoption of SFAS 158 had no impact on cash provided by operating activities.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial LiabilitiesIncluding an
amendment of FASB Statement No. 115 (SFAS 159). SFAS 159 permits a company to choose to measure certain financial assets and liabilities at fair value that are not currently required to be measured at fair value (i.e., the Fair Value
Option). Election of the Fair Value Option is made on an instrument-by-instrument basis and is irrevocable. At the adoption date, unrealized gains and losses on financial assets and liabilities for which the Fair Value Option has been elected would
be reported as a cumulative adjustment to beginning retained earnings. The adoption of SFAS 159 had no impact on the Company as the Company elected to not measure any of the assets or liabilities subject to this pronouncement at fair value.

In December 2007, the FASB issued SFAS No. 141 (revised 2007) (SFAS 141R), a revision of SFAS 141, Business
Combinations. SFAS 141R establishes requirements for the recognition and measurement of acquired assets, liabilities, goodwill and non-controlling interests. SFAS 141R also provides disclosure requirements related to business combinations.
SFAS 141R is effective for fiscal years beginning after December 15, 2008. SFAS 141R will be applied prospectively to business combinations with an acquisition date on or after the effective date.

In February 2008, the FASB issued FASB Staff Position 157-2, which delays the effective date of SFAS 157 for non-financial assets and liabilities, which
are not measured at fair value on a recurring basis (at least annually) until fiscal years beginning after November 15, 2008. The Company is currently assessing the impact of adopting SFAS 157 for non-financial assets and liabilities on the
Companys consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activitiesan amendment of FASB Statement No. 133, (SFAS 161). SFAS 161 requires enhanced disclosures about an entitys derivative and hedging activities, including (i) how and why an entity uses
derivative instruments, (ii) how derivative instruments and related hedged items are accounted for under SFAS 133, and (iii) how derivative instruments and related hedged items affect an entitys financial position, financial
performance, and cash flows. MDS adopted SFAS 161 effective December 30, 2007. As SFAS 161 only requires enhanced disclosures, this standard had no impact on the consolidated financial statements.

In April 2008, the FASB issued FSP No. FAS 142-3, Determination of the Useful Life of Intangible Assets, (FSP FAS 142-3). FSP FAS 142-3
amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, Goodwill and Other Intangible Assets, (SFAS
142) in order to improve the consistency between the useful life of a recognized intangible asset under SFAS 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS 141(R) and other GAAP. FSP FAS 142-3 became
effective for MDS on January 4, 2009. FSP FAS 142-3 requires prospective adoption and therefore will have no impact on the current intangible assets of the Company. The disclosure requirements of FSP FAS 142-3 will, however, require disclosure
of both existing and newly acquired intangible assets.



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Forward Looking Statements

This report contains (and oral communications made by MDS may contain) forward-looking statements that may be identified by their use of words like plans, expects, anticipates,
intends, estimates, forecasts, will, outlook should or other words of similar meaning. All statements that address the Companys expectations or projections about the
future, including statements about MDSs strategy for growth, cost reduction goals, expenditures and financial results, are forward-looking statements. Forward-looking statements are based on the Companys estimates, assumptions and
expectations of future events and are subject to a number of risks and uncertainties. MDS cannot guarantee that these estimates, assumptions and expectations are accurate or will be realized. MDS disclaims any intention or obligation (other than as
required by law) to update or revise any forward-looking statements.

The Companys results of operations and the forward-looking
statements could be affected by, among others things: general economic conditions in the markets in which the Company operates; economic developments that have a particularly adverse effect on one or more of the markets served by the Company; the
ability to execute managements internal operating plans; the timing and magnitude of capital expenditures; the Companys ability to access debt and equity markets; economic and market conditions in the U.S. and worldwide; currency
exchange rates; changes in consumer spending levels and demand for new products and services; and overall competitive activities. Certain of these risks are more fully described in Item 1 of Part I of this annual report. The Company disclaims
any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.



|Item 7A. | Quantitative and Qualitative Disclosures About Market Risk
|-------- | ----------------------------------------------------------

The Company is subject to certain market risks, including foreign currency and interest rates. MDS uses a variety of practices to manage these market risks, including, when considered appropriate, derivative financial
instruments. The Company uses derivative financial instruments only for risk management and does not use them for trading or speculative purposes. MDS is exposed to potential gains or losses from foreign currency fluctuations affecting net
investments and earnings denominated in foreign currencies. Historically, the Companys primary exposure is to changes in exchange rates for the U.S. dollar versus the Canadian dollar. Beginning in fiscal 2008, the Company became exposed to
changes in exchange rates between the U.S. dollar and the Euro for international license fees from Europe that were previously fixed and denominated in U.S. dollars.

Interest rate risk is managed through variable rate borrowings in combination with swaps to fixed interest rates on a portion of those borrowings. The Company is exposed to credit risk on certain assets, primarily
accounts receivable. The Company provides credit to customers in the ordinary course of business and performs ongoing credit evaluations. Concentrations of credit risk with respect to trade receivables are limited due to the large number of
customers comprising the Companys customer base. The Company believes its allowance for doubtful accounts is sufficient to cover customer credit risk.

The table below provides information about the Companys financial instruments that are sensitive to changes in interest rates. The table presents principal cash flows and related weighted-average interest rates
by the expected maturity dates. The actual cash flows for each instrument are denominated and presented in U.S. dollar equivalents (in millions), which is the Companys reporting currency.



|                                          |  |      |   |      |   |      |      |  |             |   |       |   |   |           |   |      |   |  |   |     
|----------------------------------------- |  | ---- | - | ---- | - | ---- | ---- |  | ----------- | - | ----- | - | - | --------- | - | ---- | - |  | - | ----
|Expected Maturity Date                    |  | 2009 |   | 2010 |   |      | 2011 |  | There-after |   | Total |   |   | FairValue
|Long-term debt:                           |  |      |   |      |   |      |      |  |             |   |       |   |   |           |   |      |   |  |   |     
|Revolving credit facility (variable rate) |  | $    |  |      | $ | 83.6 |      |  | $           |  |       | $ |  |           | $ | 83.6 |   |  | $ | 77.6
|Average interest rate                     |  |      |   |      |   | 4.4  | %    |  |             |   |       |   |   |           |   | 4.4  | % |  |   |     

The fair value of the Companys revolving credit facility is determined as the present value
of expected future cash flows discounted at the current interest rate for loans of similar terms and comparable credit risk.



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In November 2005, $20 million in senior bank debt was converted from floating rate to fixed rate by
locking-in LIBOR at 4.89% for a five year period. In addition, in March 2007, MDS entered into an interest rate swap arrangement to convert an additional $25 million in senior bank debt from floating rate to a fixed rate by locking-in LIBOR at 4.91%
for the remaining term of the Companys bank agreement (October 2010). This swap effectively replaced a declining balance swap that expired in March 2007 under which LIBOR was locked-in at 2.76% for a three-year term. As a consequence,
currently $45 million of the Companys $83.6 million in senior bank debt is at fixed rates.

Both the November 2005 and March 2007
swap arrangements have been designated as cash flow hedges and have been evaluated to be highly effective. As a result, the after-tax change in the fair value of these swaps is recorded in accumulated other comprehensive income as a gain or loss on
derivative financial instruments. As of January 3, 2008, the fair value of these instruments was a pre-tax loss of approximately $2.6 million.

The Company has no firmly committed sales transactions denominated in foreign currencies.



|Item 8. | Financial Statements and Supplementary Data
|------- | -------------------------------------------

See Index to Financial Statements on page F-1



|Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|------- | ------------------------------------------------------------------------------------

Not applicable.



|Item 9A. | Controls and Procedures
|-------- | -----------------------

(a)
Evaluation of disclosure controls and procedures.

The Companys management, with the participation of the Companys Chief
Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Companys disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended
(the Exchange Act)) as of the end of the period covered by this report. Based on such evaluation, the Companys Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the
Companys disclosure controls and procedures were effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange
Act.

The Companys management, including the Chief Executive Officer and Chief Financial Officer, does not expect that its disclosure
controls and procedures and its internal controls over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives
of the control system are met.

(b) Changes in internal controls over financial reporting.

There were no changes in internal controls during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially
affect, internal controls over financial reporting.

Managements Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. The Companys
internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles.

Our internal control over financial reporting includes those policies and procedures that:



| |  |  | Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of MDS;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted
accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of the Companys management and directors; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material
effect on the financial statements.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Because of its inherent limitations, internal control over financial reporting may
not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the
policies or procedures may deteriorate.

Management assessed the effectiveness of the Companys internal control over financial
reporting as of January 3, 2009. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal ControlIntegrated Framework. Based on our
assessment and those criteria, management believes that MDS maintained effective internal control over financial reporting as of January 3, 2009.



41



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##### Table of Contents

Report of Independent Registered Public Accounting Firm on Internal Control Over Financial
Reporting

The Board of Directors and Shareholders

Midas, Inc.:

We have audited Midas, Inc.s internal control over financial reporting as of
January 3, 2009, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).Midas, Incs management is responsible for
maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Managements Report on Internal Control over Financial
Reporting. Our responsibility is to express an opinion on the Companys internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.

A companys internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material
effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.

In our opinion, Midas, Inc. maintained, in all material respects, effective internal control over financial
reporting as of January 3, 2009, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets
of Midas, Inc. as of fiscal year end 2008 and 2007, and the related consolidated statements of operations, cash flows, and changes in shareholders equity for each of the fiscal years 2008, 2007 and 2006, and our report dated March 20,
2009 expressed an unqualified opinion on those consolidated financial statements.

LOGO

KPMG LLP

Chicago, Illinois

March 20, 2009



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##### Table of Contents

|Item 9B. | Other Information
|-------- | -----------------

None

PART III



|Item 10. | Directors, Executive Officers and Corporate Governance of the Registrant
|-------- | ------------------------------------------------------------------------

Executive Officers of the Registrant

Information with respect to those individuals who serve as
executive officers of the Company is set forth below.



|                                                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|---------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Name, Age and Position                                                       |  | Background and Experience                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Alan D. Feldman (57) Chairman, President and Chief Executive Officer         |  | Mr. Feldman joined MDS as President and Chief Executive Officer in January 2003 and was named Chairman of the Board of Directors in May 2006. From 1994 through 2002, Mr. Feldman held senior
management posts at McDonalds Corporation. His most recent positions were President and Chief Operating Officer of McDonalds Americas and President of McDonalds USA. From 1983 to 1994, Mr. Feldman held financial and operational
posts with the Pizza Hut and Frito-Lay units of Pepsico. In 1993 he was named Senior Vice President, Business Strategy, and Chief Financial Officer of Pizza Hut, and he served as Senior Vice President of Operations for Pizza Hut from 1990 to 1993.
|                                                                             | 
|William M. Guzik (49) Executive Vice President and Chief Financial Officer   |  | Mr. Guzik joined MDS in December 1999 and was named Senior Vice President and Chief Financial Officer in May 2001. He was named Executive Vice President of the Company in November 2006. From
1995 to 1999, Mr. Guzik served as Chief Financial Officer of Delray Farms, LLC, a start-up grocery retailer located in Chicago, Illinois. From 1993 to 1995, Mr. Guzik served as Vice President and Chief Financial Officer of JG Industries, Inc., a
publicly-traded, diversified retailer. Prior to that, Mr. Guzik spent 11 years with Coopers & Lybrand, LLP.                                                                                                                            
|                                                                             | 
|Frederick W. Dow, Jr. (58) Senior Vice President and Chief Marketing Officer |  | Mr. Dow joined MDS in June 2003. From October 2001 to March 2003, Mr. Dow was Senior Vice President, Marketing Programs and Sales, for Burger King Corporation. From December 2000 to October
2001, Mr. Dow served as Senior Vice President, Brand Management and Marketing Programs, for West Group, a provider of e-information solutions to the legal market. From September 1995 to December 2000, Mr. Dow served as Vice President, Marketing
Programs and Worldwide Advertising, for Northwest Airlines.                                                                                                                                                                              



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##### Table of Contents

|                                                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Name, Age and Position                                                     |  | Background and Experience                                                                                                                                                                                                                                                                                                                                                                                                               
|Alvin K. Marr (43) Senior Vice President, General Counsel & Secretary      |  | Mr. Marr was named Senior Vice President, General Counsel and Secretary in March 2005. From 2001 to 2005, Mr. Marr served as Vice President, General Counsel and Secretary of MDS. Mr. Marr
joined MDS in 1997 as Assistant General Counsel and Assistant Secretary. From 1990 to 1997, Mr. Marr practiced law with the firm of Holleb & Coff in Chicago, IL.                                                                           
|                                                                           | 
|John A. Warzecha (60) Senior Vice PresidentFranchise Operations and Sales |  | Mr. Warzecha served as Vice President and General Manager of MDSs company-operated shops from 1989 to 1993 and as Senior Vice PresidentU.S. Franchise Operations from 1993 to 1997.
He joined Midas in 1973.                                                                                                                                                                                                                          
|                                                                           | 
|John E. Brisson, Jr. (44) Vice PresidentFinance and Planning              |  | Mr. Brisson joined MDS in August 2001. He was named Vice President of Finance and Planning in February 2006. From 2004 to 2006, he served as Vice President of Financial Planning and Analysis
and, from 2001 to 2004, he served as Director of Financial Planning and Analysis for the Company. From 1997 to 2001, Mr. Brisson served as Director of Planning for the automotive and major appliance divisions of Montgomery Ward &
Co.
|                                                                           | 
|James M. Haeger, Jr. (44) Vice PresidentController                        |  | Mr. Haeger joined MDS in April 2001. He was named Vice PresidentController in February 2002. From 2000 to 2001, Mr. Haeger served in various financial positions for Valent Biosciences,
a biotechnology subsidiary of Sumitomo Chemical. From 1991 to 2000, Mr. Haeger held various financial, operating and accounting positions with Abbott Laboratories. Prior to that, Mr. Haeger spent five years with KPMG LLP.                 

Additional information required by this item, which is set forth under the headings Proposal
1: Election Of Directors, Meetings and Committees of the Board and Beneficial Ownership of Common StockSection 16 (a) Beneficial Ownership Reporting Compliance in the Companys proxy statement (the
2009 Proxy Statement) for the Annual Meeting of Shareholders to be held on May 12, 2009, is incorporated herein by reference.

There are no family relationships among any of our directors, executive officers or persons nominated to become a director or executive officer.

The Company has adopted a code of ethics that applies to all of its employees, officers, and directors, including its principal executive officer, principal financial officer, and principal accounting officer
(controller). The text of the Companys code of ethics is posted on its website at www.midas.com. The Company intends to disclose future amendments to, or waivers from, certain provisions of the code of ethics for executive officers and
directors on the Companys website within five business days following the date of such amendment or waiver. Stockholders may request a free copy of the code of ethics from:

Alvin K. Marr

Corporate Secretary

Midas, Inc.

1300 Arlington Heights Road

Itasca, IL
60143

Telephone: (630) 438-3000



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##### Table of Contents

MDS has also adopted written charters for its Audit and Finance, Compensation, and Nominating and
Corporate Governance Committees, and Corporate Governance Guidelines, all of which are posted on the Companys website at www.midas.com. Stockholders may request a free copy of the charters and guidelines from the address or telephone number
set forth above.

On May 30, 2008, MDS submitted its Section 303A Annual Written Affirmation to the New York Stock Exchange
(NYSE), including the CEO certification regarding the Companys compliance with the NYSE corporate governance listing standards, in accordance with the NYSE rules.

Information required by this item is set forth in the 2009 Proxy Statement and is incorporated herein by reference.



|Item 11. | Executive Compensation
|-------- | ----------------------

Information
required by this item is set forth in the 2009 Proxy Statement and is incorporated herein by reference.



|Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|-------- | ----------------------------------------------------------------------------------------------

The following table gives information about the Companys common stock that may be issued under the Companys equity compensation plans as of
January 3, 2009.



|                                                              |  |                                                                                          |  |                                                                         |       |                                                                                                                                         |        
|------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------- | ----- | --------------------------------------------------------------------------------------------------------------------------------------- | -------
|Plan Category                                                 |  | Number of securities tobe issued upon exerciseof outstanding options,warrants and
rights |  | Weighted-averageexercise price ofoutstandingoptions, warrantsand rights |       | Number of securities remainingavailable for future
issuanceunder equity compensationplans (excluding securitiesreflected in column (a))
|                                                              |  | (a)                                                                                      |  | (b)                                                                     |       | (c)                                                                                                                                    
|Equity compensation plans approved by security holders1,2     |  | 1,031,027                                                                                |  | $                                                                       | 14.08 |                                                                                                                                         | 688,639
|Equity compensation plans not approved by security holders3,4 |  | 646,526                                                                                  |  |                                                                         | 9.44  |                                                                                                                                         | 941    
|                                                              |  |                                                                                          |  |                                                                         |       |                                                                                                                                         |        
|Total                                                         |  | 1,677,553                                                                                |  | $                                                                       | 12.29 |                                                                                                                                         | 689,580
|                                                              |  |                                                                                          |  |                                                                         |       |                                                                                                                                         |        



|1 | Includes the MDS Stock Incentive Plan and the MDS Directors Deferred Compensation Plan.
|- | ----------------------------------------------------------------------------------------

|2 | The MDS Directors Deferred Compensation Plan was adopted in 2002. This plan provides non-officer directors the option of using their Board and Board Committee annual retainer
and meeting attendance fees from the Company to purchase shares of the Companys Common Stock, or of deferring receipt of such fees in the form of cash units and units representing shares of the Companys Common Stock. The Plan provides
for a 100,000 maximum aggregate number of shares. The Companys intention is to use treasury shares for such purposes. No shares have been issued under this plan. All current fees and other compensation for directors are outlined in the 2009
Proxy Statement.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3 | The MDS Treasury Stock Plan, adopted in 2002, authorizes the issuance of up to 400,000 shares of MDS common stock held in Treasury pursuant to the exercise of incentive stock
options, non-qualified stock options and stock appreciation rights and the grant of restricted stock and performance awards. As of January 3, 2009, only 941 shares under this plan remain available for issuance.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4 | The Company issues non-qualified stock options to certain individuals in order to induce them to accept employment with the Company. Pursuant to the rules of the New York Stock
Exchange, options issued under this program are not considered part of the MDS Stock Incentive Plan and are not deducted from the number of securities remaining available for future issuance. As of January 3, 2009, inducement options for a
total of 552,526 shares were outstanding. These options have a ten-year term and vest over a period of five years commencing from the date of grant.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

Information required by Item 403 of Regulation S-K, which is set forth under the heading
Beneficial Ownership of Common Stock in the 2009 Proxy Statement, is incorporated herein by reference.



|Item 13. | Certain Relationships and Related Transactions, and Director Independence
|-------- | -------------------------------------------------------------------------

Information required by this item is set forth in the 2009 Proxy Statement and is incorporated herein by reference.



|Item 14. | Principal Accounting Fees and Services
|-------- | --------------------------------------

Information required by this item, which is set forth under the heading Principal Accounting Firm Fees in the 2009 Proxy Statement, is incorporated herein by reference.

PART IV



|Item 15. | Exhibits and Financial Statement Schedules
|-------- | ------------------------------------------



| | (a) | 1. Financial Statements
| | --- | -----------------------

See Index to
Financial Statements on Page F-1.

2. Financial Statement Schedules

See Index to Financial Statements on Page F-1.



| | (b) | Exhibits
| | --- | --------



|            |  |                                                                                                                                                                                                                                                                            
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                
|3.1         |  | Certificate of Incorporation (incorporated by reference to Exhibit 3(i).1 to Midas, Inc. Registration Statement on Form 10/A No. 3 (Post-Effective Amendment No. 1) (Commission File No. 1-13409)
(the Form 10)).                                                        
|            | 
|3.2         |  | Certificate of Amendment of the Certificate of Incorporation, dated December 30, 1997 (incorporated by reference to Exhibit 3(i).2 to the Form 10).                                                                                                                        
|            | 
|3.3         |  | By-Laws (as amended December 31, 1997) (incorporated by reference to Exhibit 4.4 to Midas, Inc. Registration Statement on Form S-8 relating to its Retirement Savings Plans (Registration
No. 333-44625) (the RSP Form S-8)).                                            
|            | 
|4.1         |  | Certificate of Designation of Series A Junior Participating Preferred Stock (incorporated by reference to Exhibit 4.3 to the RSP Form S-8).                                                                                                                                
|            | 
|4.2         |  | Amended Certificate of Designation of Series A Junior Participating Preferred Stock (incorporated by reference to Form 10/A dated as of January 10, 2008).                                                                                                                 
|            | 
|4.3         |  | Warrant Agreement, dated as of March 27, 2003, by and among Midas, Inc. and the Warrant Holders named therein (incorporated by reference to Exhibit 4.21 to the Midas, Inc. Annual Report on Form
10-K for the annual period ended December 28, 2002).                     
|            | 
|4.4         |  | Rights Agreement, dated as of December 7, 2007, effective December 31, 2007, between Midas, Inc. and National City Bank, as rights agent. (incorporated by reference to Exhibit to 99.1 to the
Midas, Inc. Current Report on Form 8-K dated as of December 7, 2007).       
|            | 
|10.1        |  | Distribution and Indemnity Agreement dated as of December 31, 1997 among Midas, Inc., Midas International Corporation and Whitman Corporation (incorporated by reference to Exhibit 2.1 to Midas,
Inc. Current Report on Form 8-K dated January 30, 1998 (the Form 8-K)).



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|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.2        |  | Tax Sharing Agreement dated as of December 31, 1997 among Midas, Inc., Midas International Corporation and Whitman Corporation (incorporated by reference to Exhibit 2.2 to the Form
8-K).                                                                                                                                                                                                                                                                                                                  
|            | 
|10.3        |  | Credit Agreement, dated as of October 27, 2005, among Midas International Corporation and JP Morgan Chase Bank, N.A. as Administrative Agent, National City Bank, as Syndication Agent, and Bank
of America, N.A. as Documentation Agent (incorporated by reference to Exhibit to 4.30 to the Midas, Inc. Quarterly Report on Form 10-Q for the quarterly period ended October 1, 2005).                                                                                                                    
|            | 
|10.4        |  | First Amendment to Credit Agreement dated as of October 27, 2005, among Midas International Corporation and JP Morgan Chase Bank, N.A. as Administrative Agent, National City Bank, as Syndication
Agent, and Bank of America, N.A. as Documentation Agent (incorporated by reference to the Midas, Inc. Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2006).                                                                                                                  
|            | 
|10.5        |  | Second Amendment to Credit Agreement dated as of October 27, 2005, among Midas International Corporation and JP Morgan Chase Bank, N.A. as Administrative Agent, National City Bank, as
Syndication Agent, and Bank of America, N.A. as Documentation Agent (incorporated by reference to Exhibit 10.44 to the Midas, Inc. Annual Report on Form 10-K for the annual period ended December 30, 2006).                                                                                                       
|            | 
|10.6        |  | Third Amendment to Credit Agreement dated as of October 27, 2005, among Midas International Corporation and JP Morgan Chase Bank, N.A. as Administrative Agent, National City Bank, as Syndication
Agent, and Bank of America, N.A. as Documentation Agent (incorporated by reference to Exhibit 10.45 to the Midas, Inc. Annual Report on Form 10-K for the annual period ended December 29, 2007).                                                                                                        
|            | 
|10.7        |  | Amendment to Agreement for Strategic Alliance and License Agreement dated as of March 14, 2003, by and between Midas International Corporation and Magneti Marelli Services S.p.A., which
amends the Agreement for Strategic Alliance and License Agreement dated as of October 1, 1998, between Midas International Corporation and Magneti Marelli S.p.A. (incorporated by reference to Exhibit 10.25 to the Midas, Inc. Quarterly Report on
Form 10-Q for the quarterly period ended September 27, 2003).
|            | 
|10.8        |  | Second Amendment to Agreement for Strategic Alliance and License Agreement, dated as of July 28, 2004, by and between Midas International Corporation and Magneti Marelli Services S.p.A.
(incorporated by reference to Exhibit to 10.26 to the Midas, Inc. Quarterly Report on Form 10-Q for the quarterly period ended October 2, 2004).                                                                                                                                                                  
|            | 
|10.9        |  | Third Amendment to Agreement for Strategic Alliance and License Agreement, dated as of September 29, 2004, by and between Midas International Corporation and Magneti Marelli Services S.p.A.
(incorporated by reference to Exhibit to 10.27 to the Midas, Inc. Quarterly Report on Form 10-Q for the quarterly period ended October 2, 2004).                                                                                                                                                              
|            | 
|10.10       |  | Agreement, dated as of September 29, 2004, by and between Midas International Corporation and Norauto S.A. relating to Agreement for Strategic Alliance between Midas International Corporation
and Magneti Marelli Services S.p.A., as amended (incorporated by reference to Exhibit to 10.28 to the Midas, Inc. Quarterly Report on Form 10-Q for the quarterly period ended October 2, 2004).                                                                                                            
|            | 
|10.11*#     |  | Amended and Restated Directors Deferred Compensation Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|            | 
|10.12*#     |  | Severance Plan for Full-Time Salaried (Exempt) and Hourly (Non-Exempt) Employees.                                                                                                                                                                                                                                                                                                                                                                                                                           
|            | 
|10.13*#     |  | Executive Retirement Plan  Account Balance Component                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|            | 
|10.14*#     |  | Executive Retirement Plan  Defined Benefit Retirement Component                                                                                                                                                                                                                                                                                                                                                                                                                                            
|            | 
|10.15*#     |  | Form of Amended and Restated Change in Control Agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                   



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|            |  |                                                                                                                                                                                                                                                                                                                                                     
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                         
|10.16*      |  | Form of Retention Agreement with certain executive officers (Messrs. Guzik, Warzecha and Marr) (incorporated by reference to Exhibit 10.16 to the Midas, Inc. Quarterly Report on Form 10-Q for
the quarterly period ended September 28, 2002).                                                                                                     
|            | 
|10.17*#     |  | Form of Amendment to Retention Agreement with certain executive officers (Messrs. Guzik, Warzecha and Marr) dated as of November 11, 2008.                                                                                                                                                                                                          
|            | 
|10.18*      |  | Employment Confirmation Letter with President and Chief Executive Officer (incorporated by reference to Exhibit 10.19 to the Midas, Inc. Annual Report on Form 10-K for the annual period ended
December 28, 2002).                                                                                                                                 
|            | 
|10.19*#     |  | Amendment to Employment Confirmation Letter with President and Chief Executive Officer dated as of November 11, 2008.                                                                                                                                                                                                                               
|            | 
|10.20*      |  | Employment Confirmation Letter with Senior Vice President and Chief Marketing Officer (incorporated by reference to Exhibit 10.32 to the Midas, Inc. Annual Report on Form 10-K for the annual
period ended January 1, 2005).                                                                                                                       
|            | 
|10.21*#     |  | Amendment to Employment Confirmation Letter with Senior Vice President and Chief Marketing Officer dated as of November 11, 2008.                                                                                                                                                                                                                   
|            | 
|10.22*      |  | Amended and Restated Midas, Inc. Stock Incentive Plan, as amended on May 8, 2007 (incorporated by reference to Exhibit 10.10 to the Midas, Inc. Annual Report on Form 10-K for the annual period
ended December 29, 2007).                                                                                                                          
|            | 
|10.23*      |  | Treasury Stock Plan (incorporated by reference to Exhibit 4.6 to Midas, Inc. Registration Statement on Form S-8 relating to its Treasury Stock Plan (Registration No. 333-89226).                                                                                                                                                                   
|            | 
|10.24*      |  | Stock Option Agreement with Non-Executive Chairman of the Board of Directors (incorporated by reference to Exhibit 10.17 to the Midas, Inc. Annual Report on Form 10-K for the annual period ended
December 28, 2002).                                                                                                                              
|            | 
|10.25*      |  | Stock Option Agreement with President and Chief Executive Officer (incorporated by reference to Exhibit 10.20 to the Midas, Inc. Annual Report on Form 10-K for the annual period ended
December 28, 2002).                                                                                                                                         
|            | 
|10.26*      |  | Form of Stock Option Agreement for Supplemental Stock Options issued to certain executive officers (Mr. Feldman) under the Stock Incentive Plan in fiscal 2004 (incorporated by reference to
Exhibit 10.30 to the Midas, Inc. Annual Report on Form 10-K for the annual period ended January 1, 2005).                                              
|            | 
|10.27*      |  | Form of Stock Option Agreement for Stock Options issued under either the Stock Incentive Plan, the Treasury Stock Plan, or outside of the Stock Incentive Plan and Treasury Stock Plan in fiscal
2005 and 2006 (incorporated by reference to Exhibit 10.11 to Midas, Inc. Annual Report on Form 10-K for the annual period ended December 31, 2005).
|            | 
|10.28*#     |  | Form of Stock Option Agreement for Stock Options issued under the Stock Incentive Plan in fiscal 2007.                                                                                                                                                                                                                                              
|            | 
|10.29*#     |  | Form of Stock Option Agreement for Stock Options issued under the Stock Incentive Plan in fiscal 2008.                                                                                                                                                                                                                                              
|            | 
|10.30*      |  | Restricted Stock Award Agreement with Non-Executive Chairman of the Board of Directors (incorporated by reference to Exhibit 10.18 to the Midas, Inc. Annual Report on Form 10-K for the annual
period ended December 28, 2002).                                                                                                                    
|            | 
|10.31*      |  | Restricted Stock Award Agreement with President and Chief Executive Officer (incorporated by reference to Exhibit 10.21 to the Midas, Inc. Annual Report on Form 10-K for the annual period ended
December 28, 2002).                                                                                                                               



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|            |  |                                                                                                                                                                                                                                                                                                                                               
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                   
|10.32*      |  | Form of Restricted Stock Award Agreement for Restricted Stock Awards issued under the Stock Incentive Plan in fiscal 2004 (incorporated by reference to Exhibit 10.29 to the Midas, Inc. Annual
Report on Form 10-K for the annual period ended January 1, 2005).                                                                             
|            | 
|10.33*      |  | Form of Restricted Stock Award Agreement for Supplemental Restricted Stock Awards issued to certain executive officers (Messrs. Dow, Guzik and Warzecha) under the Stock Incentive Plan in fiscal
2004 (incorporated by reference to Exhibit 10.31 to the Midas, Inc. Annual Report on Form 10-K for the annual period ended January 1, 2005).
|            | 
|10.34*      |  | Form of Restricted Stock Award Agreement for Restricted Stock Awards issued under the Stock Incentive Plan or the Treasury Stock Plan in fiscal 2005 and 2006 (incorporated by reference to
Exhibit to 10.39 to the Midas, Inc. Quarterly Report on Form 10-Q for the quarterly period ended July 2, 2005).                                   
|            | 
|10.35*#     |  | Form of Restricted Stock Award Agreement for Restricted Stock Awards (time-based vesting) issued under the Stock Incentive Plan in fiscal 2007.                                                                                                                                                                                               
|            | 
|10.36*#     |  | Form of Restricted Stock Award Agreement for Restricted Stock Awards (performance-based vesting) issued under the Stock Incentive Plan in fiscal 2007.                                                                                                                                                                                        
|            | 
|10.37*#     |  | Form of Restricted Stock Award Agreement for Restricted Stock Awards (time-based vesting) issued under the Stock Incentive Plan in fiscal 2008.                                                                                                                                                                                               
|            | 
|10.38*#     |  | Form of Restricted Stock Award Agreement for Restricted Stock Awards (performance-based vesting) issued under the Stock Incentive Plan in fiscal 2008.                                                                                                                                                                                        
|            | 
|10.39*      |  | Description of 2008 Incentive Compensation Plan (incorporated by reference to the Midas, Inc. report on Form 8-K dated March 13, 2008).                                                                                                                                                                                                       
|            | 
|10.40*      |  | Description of 2009 Incentive Compensation Plan (incorporated by reference to the Midas, Inc. report on Form 8-K dated March 18, 2009).                                                                                                                                                                                                       
|            | 
|10.41*#     |  | Summary of Employment Arrangements with Named Executive Officers (Messrs. Feldman, Guzik, Warzecha, and Dow).                                                                                                                                                                                                                                 
|            | 
|10.42*#     |  | Summary of Directors Compensation.                                                                                                                                                                                                                                                                                                            
|            | 
|21#         |  | Subsidiaries of Midas, Inc.                                                                                                                                                                                                                                                                                                                   
|            | 
|23#         |  | Consent of Independent Registered Public Accounting Firm.                                                                                                                                                                                                                                                                                     
|            | 
|31.1#       |  | Certification of Chief Executive Officer pursuant to Rule 13a  14(a) / 15d  14(a).                                                                                                                                                                                                                                                          
|            | 
|31.2#       |  | Certification of Chief Financial Officer pursuant to Rule 13a  14(a) / 15d  14(a).                                                                                                                                                                                                                                                          
|            | 
|32.1#       |  | Section 1350 Certifications.                                                                                                                                                                                                                                                                                                                  



|* | Management Compensatory Plan or Contract
|- | ----------------------------------------

|# | Document to be attached to the Form 10-K
|- | ----------------------------------------



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##### Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, this 20th day of March, 2009.



MIDAS, INC.By:

/s/    WILLIAM M.
GUZIKWilliam M. Guzik Executive Vice President and Chief Financial Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons in the capacities indicated on behalf of the Registrant, this 20th day of March, 2009.



|                                                 |  |                                                                                       
|------------------------------------------------ |  | --------------------------------------------------------------------------------------
|Signature                                        |  | Title                                                                                 
|                                                 | 
|/s/    ALAN D.
FELDMAN Alan D. Feldman           |  | Chairman, President, Chief Executive Officer and Director(principal executive officer)
|                                                
|                                                 | 
|/s/    WILLIAM M.
GUZIK William M. Guzik         |  | Executive Vice President and Chief Financial Officer(principal financial officer)     
|                                                
|                                                 | 
|/s/    JAMES M. HAEGER,
JR. James M. Haeger, Jr. |  | Vice President and Controller(principal accounting officer)                           
|                                                
|                                                 | 
|/s/    ROBERT R.
SCHOEBERL Robert R. Schoeberl   |  | Lead Director                                                                         
|                                                
|                                                 | 
|/s/    THOMAS L.
BINDLEY Thomas L. Bindley       |  | Director                                                                              
|                                                
|                                                 | 
|/s/    ARCHIE R.
DYKES Archie R. Dykes           |  | Director                                                                              
|                                                
|                                                 | 
|/s/    JAROBIN GILBERT,
JR. Jarobin Gilbert, Jr. |  | Director                                                                              
|                                                
|                                                 | 
|/s/    DIANE L.
ROUTSON Diane L. Routson         |  | Director                                                                              
|                                                



50



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##### Table of Contents

MIDAS

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



|                                                                                   |  |    
|---------------------------------------------------------------------------------- |  | ---
|Report of Independent Registered Public Accounting Firm                            |  | F-2
|Statements of Operations for fiscal years 2008, 2007 and 2006                      |  | F-3
|Balance Sheets as of fiscal year end 2008 and 2007                                 |  | F-4
|Statements of Cash Flows for fiscal years 2008, 2007 and 2006                      |  | F-5
|Statements of Changes in Shareholders Equity for fiscal years 2008, 2007 and 2006 |  | F-6
|Notes to Consolidated Financial Statements                                         |  | F-7

Financial statement schedules are omitted because they are not applicable or the required
information is presented in the financial statements or related notes.



F-1



---

##### Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders

Midas, Inc.:

We have audited the accompanying consolidated balance sheets of Midas, Inc. (the Company) as of fiscal year end 2008 and 2007,
and the related consolidated statements of operations, cash flows, and changes in shareholders equity for each of the fiscal years 2008, 2007 and 2006. These consolidated financial statements are the responsibility of Midas, Inc.s
management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our
audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Midas, Inc. as of fiscal year end 2008 and 2007, and the results of its
operations and cash flows for fiscal years 2008, 2007 and 2006, in conformity with U.S. generally accepted accounting principles.

As
discussed in Note 1 to the accompanying consolidated financial statements, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements and Statement of Financial Accounting Standards SFAS
No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plansan amendment of FASB Statements No. 87, 88, 106, and 132(R) in 2006.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Midas, Inc.s internal
control over financial reporting as of January 3, 2009, based on criteria established inInternal ControlIntegrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report
dated March 20, 2009 expressed an unqualified opinion on the effectiveness of the Companys internal control over financial reporting.

LOGO

KPMG LLP

Chicago, Illinois

March 20, 2009



F-2



---

##### Table of Contents

MIDAS

STATEMENTS OF OPERATIONS

(In millions, except for earnings per share)



|                                                             |  |      |       |   |      |   |       |      |  |   |       |  
|------------------------------------------------------------ |  | ---- | ----- | - | ---- | - | ----- | ---- |  | - | ----- | -
|Fiscal Year                                                  |  | 2008 |       |   | 2007 |   |       | 2006 | 
|Sales and revenues:                                          |  |      |       |   |      |   |       |      |  |   |       |  
|Franchise royalties and license fees                         |  | $    | 57.2  |   |      | $ | 60.3  |      |  | $ | 63.6  |  
|Real estate revenues from franchised shops                   |  |      | 34.6  |   |      |   | 35.9  |      |  |   | 36.2  |  
|Company-operated shop retail sales                           |  |      | 61.4  |   |      |   | 45.8  |      |  |   | 40.5  |  
|Replacement part sales and product royalties                 |  |      | 29.2  |   |      |   | 31.7  |      |  |   | 30.6  |  
|Software sales and maintenance revenue                       |  |      | 5.0   |   |      |   | 4.5   |      |  |   | 4.0   |  
|                                                             |  |      |       |   |      |   |       |      |  |   |       |  
|Total sales and revenues                                     |  |      | 187.4 |   |      |   | 178.2 |      |  |   | 174.9 |  
|                                                             |  |      |       |   |      |   |       |      |  |   |       |  
|Operating costs and expenses:                                |  |      |       |   |      |   |       |      |  |   |       |  
|Franchised shopsoccupancy expenses                          |  |      | 22.8  |   |      |   | 22.1  |      |  |   | 21.5  |  
|Company-operated shop parts cost of sales                    |  |      | 16.1  |   |      |   | 11.2  |      |  |   | 9.7   |  
|Company-operated shop payroll and employee benefits          |  |      | 26.1  |   |      |   | 19.1  |      |  |   | 17.4  |  
|Company-operated shop occupancy and other operating expenses |  |      | 20.8  |   |      |   | 15.3  |      |  |   | 13.9  |  
|Replacement part cost of sales                               |  |      | 26.4  |   |      |   | 26.0  |      |  |   | 23.9  |  
|Warranty expense (benefit)                                   |  |      | (2.7  | ) |      |   | (4.3  | )    |  |   | 4.4   |  
|Selling, general, and administrative expenses                |  |      | 54.1  |   |      |   | 53.2  |      |  |   | 57.4  |  
|Loss (gain) on sale of assets, net                           |  |      | 0.9   |   |      |   | (0.2  | )    |  |   | (3.4  | )
|Business transformation charges                              |  |      | 1.6   |   |      |   | 3.7   |      |  |   | 3.3   |  
|                                                             |  |      |       |   |      |   |       |      |  |   |       |  
|Total operating costs and expenses                           |  |      | 166.1 |   |      |   | 146.1 |      |  |   | 148.1 |  
|                                                             |  |      |       |   |      |   |       |      |  |   |       |  
|Operating income                                             |  |      | 21.3  |   |      |   | 32.1  |      |  |   | 26.8  |  
|Interest expense                                             |  |      | (9.1  | ) |      |   | (9.1  | )    |  |   | (9.0  | )
|Other income, net                                            |  |      | 0.8   |   |      |   | 0.4   |      |  |   | 1.2   |  
|                                                             |  |      |       |   |      |   |       |      |  |   |       |  
|Income before income taxes                                   |  |      | 13.0  |   |      |   | 23.4  |      |  |   | 19.0  |  
|Income tax expense                                           |  |      | 5.2   |   |      |   | 10.4  |      |  |   | 8.7   |  
|                                                             |  |      |       |   |      |   |       |      |  |   |       |  
|Net income                                                   |  | $    | 7.8   |   |      | $ | 13.0  |      |  | $ | 10.3  |  
|                                                             |  |      |       |   |      |   |       |      |  |   |       |  
|Earnings per share:                                          |  |      |       |   |      |   |       |      |  |   |       |  
|Basic                                                        |  | $    | 0.58  |   |      | $ | 0.93  |      |  | $ | 0.68  |  
|                                                             |  |      |       |   |      |   |       |      |  |   |       |  
|Diluted                                                      |  | $    | 0.56  |   |      | $ | 0.89  |      |  | $ | 0.66  |  
|                                                             |  |      |       |   |      |   |       |      |  |   |       |  
|Average number of shares:                                    |  |      |       |   |      |   |       |      |  |   |       |  
|Common shares outstanding                                    |  |      | 13.3  |   |      |   | 13.9  |      |  |   | 15.1  |  
|Common stock warrants                                        |  |      | 0.1   |   |      |   | 0.1   |      |  |   | 0.1   |  
|                                                             |  |      |       |   |      |   |       |      |  |   |       |  
|Shares applicable to basic earnings                          |  |      | 13.4  |   |      |   | 14.0  |      |  |   | 15.2  |  
|Equivalent shares on outstanding stock awards                |  |      | 0.5   |   |      |   | 0.6   |      |  |   | 0.4   |  
|                                                             |  |      |       |   |      |   |       |      |  |   |       |  
|Shares applicable to diluted earnings                        |  |      | 13.9  |   |      |   | 14.6  |      |  |   | 15.6  |  
|                                                             |  |      |       |   |      |   |       |      |  |   |       |  



See accompanying notes
to financial statements.



F-3



---

##### Table of Contents

MIDAS

BALANCE SHEETS

(In millions, except per share data)



|                                                                                                              |  |      |       |   |      |   |       |  
|------------------------------------------------------------------------------------------------------------- |  | ---- | ----- | - | ---- | - | ----- | -
|Fiscal Year End                                                                                               |  | 2008 |       |   | 2007 |  
|Assets:                                                                                                       |  |      |       |   |      |   |       |  
|Current assets:                                                                                               |  |      |       |   |      |   |       |  
|Cash and cash equivalents                                                                                     |  | $    | 1.1   |   |      | $ | 1.3   |  
|Receivables, net                                                                                              |  |      | 30.4  |   |      |   | 30.4  |  
|Inventories                                                                                                   |  |      | 4.3   |   |      |   | 3.2   |  
|Deferred income taxes                                                                                         |  |      | 10.7  |   |      |   | 12.4  |  
|Prepaid assets                                                                                                |  |      | 4.7   |   |      |   | 3.9   |  
|Other current assets                                                                                          |  |      | 4.6   |   |      |   | 4.1   |  
|                                                                                                              |  |      |       |   |      |   |       |  
|Total current assets                                                                                          |  |      | 55.8  |   |      |   | 55.3  |  
|Property and equipment, net                                                                                   |  |      | 92.6  |   |      |   | 96.6  |  
|Goodwill and other intangible assets, net                                                                     |  |      | 35.5  |   |      |   | 14.0  |  
|Deferred income taxes                                                                                         |  |      | 46.9  |   |      |   | 42.3  |  
|Pension asset                                                                                                 |  |      |      |   |      |   | 1.2   |  
|Other assets                                                                                                  |  |      | 4.6   |   |      |   | 6.2   |  
|                                                                                                              |  |      |       |   |      |   |       |  
|Total assets                                                                                                  |  | $    | 235.4 |   |      | $ | 215.6 |  
|                                                                                                              |  |      |       |   |      |   |       |  
|Liabilities and equity:                                                                                       |  |      |       |   |      |   |       |  
|Current liabilities:                                                                                          |  |      |       |   |      |   |       |  
|Current portion of long-term obligations                                                                      |  | $    | 1.5   |   |      | $ | 1.7   |  
|Current portion of accrued warranty                                                                           |  |      | 2.4   |   |      |   | 3.5   |  
|Accounts payable                                                                                              |  |      | 21.0  |   |      |   | 16.8  |  
|Accrued expenses                                                                                              |  |      | 23.3  |   |      |   | 24.5  |  
|                                                                                                              |  |      |       |   |      |   |       |  
|Total current liabilities                                                                                     |  |      | 48.2  |   |      |   | 46.5  |  
|Long-term debt                                                                                                |  |      | 83.6  |   |      |   | 76.3  |  
|Obligations under capital leases                                                                              |  |      | 1.8   |   |      |   | 2.2   |  
|Finance lease obligation                                                                                      |  |      | 31.7  |   |      |   | 32.9  |  
|Pension liability                                                                                             |  |      | 21.2  |   |      |   | 1.2   |  
|Accrued warranty                                                                                              |  |      | 14.1  |   |      |   | 21.3  |  
|Deferred warranty obligation                                                                                  |  |      | 3.0   |   |      |   |      |  
|Other liabilities                                                                                             |  |      | 6.5   |   |      |   | 5.7   |  
|                                                                                                              |  |      |       |   |      |   |       |  
|Total liabilities                                                                                             |  |      | 210.1 |   |      |   | 186.1 |  
|                                                                                                              |  |      |       |   |      |   |       |  
|Temporary equity:                                                                                             |  |      |       |   |      |   |       |  
|Non-vested restricted stock subject to redemption                                                             |  |      | 5.7   |   |      |   | 4.4   |  
|Shareholders equity:                                                                                         |  |      |       |   |      |   |       |  
|Common stock ($.001 par value, 100 million shares authorized, 17.7 million shares issued) and paid-in capital |  |      | 6.8   |   |      |   | 8.8   |  
|Treasury stock, at cost (3.7 million shares and 3.9 million shares)                                           |  |      | (76.8 | ) |      |   | (81.0 | )
|Retained income                                                                                               |  |      | 108.4 |   |      |   | 100.6 |  
|Accumulated other comprehensive loss                                                                          |  |      | (18.8 | ) |      |   | (3.3  | )
|                                                                                                              |  |      |       |   |      |   |       |  
|Total shareholders equity                                                                                    |  |      | 19.6  |   |      |   | 25.1  |  
|                                                                                                              |  |      |       |   |      |   |       |  
|Total liabilities and shareholders equity                                                                    |  | $    | 235.4 |   |      | $ | 215.6 |  
|                                                                                                              |  |      |       |   |      |   |       |  



See accompanying notes
to financial statements.



F-4



---

##### Table of Contents

MIDAS

STATEMENTS OF CASH FLOWS

(In millions)



|                                                                                                                           |  |      |       |   |      |   |       |      |  |   |       |  
|-------------------------------------------------------------------------------------------------------------------------- |  | ---- | ----- | - | ---- | - | ----- | ---- |  | - | ----- | -
|Fiscal Year                                                                                                                |  | 2008 |       |   | 2007 |   |       | 2006 | 
|Cash flows from operating activities:                                                                                      |  |      |       |   |      |   |       |      |  |   |       |  
|Net income                                                                                                                 |  | $    | 7.8   |   |      | $ | 13.0  |      |  | $ | 10.3  |  
|Adjustments reconciling net income to net cash provided by operating activities:                                           |  |      |       |   |      |   |       |      |  |   |       |  
|Depreciation and amortization                                                                                              |  |      | 10.1  |   |      |   | 9.3   |      |  |   | 9.1   |  
|Stock-based compensation                                                                                                   |  |      | 3.7   |   |      |   | 4.2   |      |  |   | 3.5   |  
|Amortization of financing fees and change in debt swap valuation                                                           |  |      | 0.3   |   |      |   | 0.4   |      |  |   | 0.6   |  
|Warranty liability adjustment                                                                                              |  |      | (3.4  | ) |      |   | (8.3  | )    |  |   | (1.1  | )
|Business transformation charges                                                                                            |  |      | 1.6   |   |      |   | 3.7   |      |  |   | 3.3   |  
|Deferred income taxes                                                                                                      |  |      | 5.9   |   |      |   | 9.9   |      |  |   | 7.7   |  
|Loss (gain) on sale of fixed assets                                                                                        |  |      | 0.9   |   |      |   | (0.2  | )    |  |   | (3.4  | )
|Cash outlays for business transformation costs                                                                             |  |      | (1.5  | ) |      |   | (3.8  | )    |  |   | (5.8  | )
|Changes in assets and liabilities, exclusive of effects of business transformation charges, acquisitions and dispositions: |  |      |       |   |      |   |       |      |  |   |       |  
|Receivables                                                                                                                |  |      | (0.7  | ) |      |   | (3.6  | )    |  |   | 2.9   |  
|Inventories                                                                                                                |  |      | (1.0  | ) |      |   |      |      |  |   | 3.4   |  
|Accounts payable                                                                                                           |  |      | 6.2   |   |      |   | 3.1   |      |  |   | 0.5   |  
|Accrued expenses                                                                                                           |  |      | (2.6  | ) |      |   | 1.9   |      |  |   | 0.7   |  
|Other                                                                                                                      |  |      | (0.9  | ) |      |   | 1.0   |      |  |   | (3.4  | )
|                                                                                                                           |  |      |       |   |      |   |       |      |  |   |       |  
|Total changes in assets and liabilities                                                                                    |  |      | 1.0   |   |      |   | 2.4   |      |  |   | 4.1   |  
|                                                                                                                           |  |      |       |   |      |   |       |      |  |   |       |  
|Net cash provided by operating activities                                                                                  |  |      | 26.4  |   |      |   | 30.6  |      |  |   | 28.3  |  
|                                                                                                                           |  |      |       |   |      |   |       |      |  |   |       |  
|Cash flows from investing activities:                                                                                      |  |      |       |   |      |   |       |      |  |   |       |  
|Capital investments                                                                                                        |  |      | (6.4  | ) |      |   | (5.1  | )    |  |   | (3.9  | )
|Cash paid for acquired businesses                                                                                          |  |      | (24.5 | ) |      |   | (13.7 | )    |  |   | (1.8  | )
|Proceeds from sales of assets                                                                                              |  |      | 1.0   |   |      |   | 2.6   |      |  |   | 1.8   |  
|                                                                                                                           |  |      |       |   |      |   |       |      |  |   |       |  
|Net cash used in investing activities                                                                                      |  |      | (29.9 | ) |      |   | (16.2 | )    |  |   | (3.9  | )
|                                                                                                                           |  |      |       |   |      |   |       |      |  |   |       |  
|Cash flows from financing activities:                                                                                      |  |      |       |   |      |   |       |      |  |   |       |  
|Net borrowings under revolving lines of credit                                                                             |  |      | 7.3   |   |      |   | 15.2  |      |  |   | (3.9  | )
|Increase (decrease) in outstanding checks                                                                                  |  |      | (2.0  | ) |      |   | (2.3  | )    |  |   | 1.8   |  
|Payment of principal obligations under capital leases                                                                      |  |      | (0.7  | ) |      |   | (0.9  | )    |  |   | (1.1  | )
|Payment of principal obligations under finance lease                                                                       |  |      | (1.1  | ) |      |   | (1.0  | )    |  |   | (0.9  | )
|Cash received for common stock                                                                                             |  |      | 0.2   |   |      |   | 2.7   |      |  |   | 2.3   |  
|Cash paid for treasury shares                                                                                              |  |      | (0.4  | ) |      |   | (29.2 | )    |  |   | (21.6 | )
|                                                                                                                           |  |      |       |   |      |   |       |      |  |   |       |  
|Net cash provided by (used in) financing activities                                                                        |  |      | 3.3   |   |      |   | (15.5 | )    |  |   | (23.4 | )
|                                                                                                                           |  |      |       |   |      |   |       |      |  |   |       |  
|Net change in cash and cash equivalents                                                                                    |  |      | (0.2  | ) |      |   | (1.1  | )    |  |   | 1.0   |  
|Cash and cash equivalents at beginning of period                                                                           |  |      | 1.3   |   |      |   | 2.4   |      |  |   | 1.4   |  
|                                                                                                                           |  |      |       |   |      |   |       |      |  |   |       |  
|Cash and cash equivalents at end of period.                                                                                |  | $    | 1.1   |   |      | $ | 1.3   |      |  | $ | 2.4   |  
|                                                                                                                           |  |      |       |   |      |   |       |      |  |   |       |  



See accompanying notes
to financial statements.



F-5



---

##### Table of Contents

MIDAS

STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY

(In millions)



|                                                                     |  |                                |  |        |                |   |        |                                  |   |        |                |       |   |                            |   |      |                                   |  |   |       |   |  |   |       |   |  |   |       |  
|-------------------------------------------------------------------- |  | ------------------------------ |  | ------ | -------------- | - | ------ | -------------------------------- | - | ------ | -------------- | ----- | - | -------------------------- | - | ---- | --------------------------------- |  | - | ----- | - |  | - | ----- | - |  | - | ----- | -
|                                                                     |  | Common StockAnd Paid-inCapital |  |        | Treasury Stock |   |        | UnamortizedRestrictedStockAwards |   |        | RetainedIncome |       |   | ComprehensiveIncome (Loss) |   |      | AccumulatedOtherComprehensiveLoss | 
|                                                                     |  | Shares                         |  | Amount |                |   | Shares |                                  |   | Amount |                |       |   |                            |  
|Fiscal year end 2005                                                 |  | 17.7                           |  | $      | 19.8           |   |        | (2.0                             | ) |        | $              | (45.0 | ) |                            | $ | (4.2 | )                                 |  | $ | 81.1  |   |  |   |       |   |  | $ | (2.2  | )
|Adjustment to initially apply SAB 108, net of tax (a)                |  |                               |  |        |               |   |        |                                 |   |        |                |      |   |                            |   |     |                                   |  |   | (2.5  | ) |  | $ |      |   |  |   |      |  
|Reclassify remaining deferred compensation (a)                       |  |                               |  |        | (4.2           | ) |        |                                 |   |        |                |      |   |                            |   | 4.2  |                                   |  |   |      |   |  |   |      |   |  |   |      |  
|Correction of pension error, net of tax (c)                          |  |                               |  |        |               |   |        |                                 |   |        |                |      |   |                            |   |     |                                   |  |   | (1.3  | ) |  |   |      |   |  |   |      |  
|Restricted stock awards                                              |  |                               |  |        | (4.8           | ) |        | 0.2                              |   |        |                | 4.8   |   |                            |   |     |                                   |  |   |      |   |  |   |      |   |  |   |      |  
|Tax effect of restricted stock vesting                               |  |                               |  |        | (0.3           | ) |        |                                 |   |        |                |      |   |                            |   |     |                                   |  |   |      |   |  |   |      |   |  |   |      |  
|Purchase of treasury shares                                          |  |                               |  |        |               |   |        | (1.1                             | ) |        |                | (21.6 | ) |                            |   |     |                                   |  |   |      |   |  |   |      |   |  |   |      |  
|Stock option transactions                                            |  |                               |  |        | (1.5           | ) |        | 0.2                              |   |        |                | 4.1   |   |                            |   |     |                                   |  |   |      |   |  |   |      |   |  |   |      |  
|Stock option expense                                                 |  |                               |  |        | 2.2            |   |        |                                 |   |        |                |      |   |                            |   |     |                                   |  |   |      |   |  |   |      |   |  |   |      |  
|Amortization of restricted stock awards                              |  |                               |  |        | 1.3            |   |        |                                 |   |        |                |      |   |                            |   |     |                                   |  |   |      |   |  |   |      |   |  |   |      |  
|Forfeiture of restricted stock awards                                |  |                               |  |        | 0.1            |   |        |                                 |   |        |                | (0.1  | ) |                            |   |     |                                   |  |   |      |   |  |   |      |   |  |   |      |  
|Non-vested restricted stock subject to redemption (b)                |  |                               |  |        | (2.3           | ) |        |                                 |   |        |                |      |   |                            |   |     |                                   |  |   |      |   |  |   |      |   |  |   |      |  
|Adjustment to initially apply FASB Statement no. 158, net of tax (a) |  |                               |  |        |               |   |        |                                 |   |        |                |      |   |                            |   |     |                                   |  |   |      |   |  |   |      |   |  |   | (4.4  | )
|Net income                                                           |  |                               |  |        |               |   |        |                                 |   |        |                |      |   |                            |   |     |                                   |  |   | 10.3  |   |  |   | 10.3  |   |  |   |      |  
|Other comprehensive income                                           |  |                                |  |        |                |   |        |                                  |   |        |                |       |   |                            |   |      |                                   |  |   |       |   |  |   |       |   |  |   |       |  
|foreign currency translation                                        |  |                               |  |        |               |   |        |                                 |   |        |                |      |   |                            |   |     |                                   |  |   |      |   |  |   | (0.1  | ) |  |   | (0.1  | )
|unrecognized pension costs, net of taxes                            |  |                               |  |        |               |   |        |                                 |   |        |                |      |   |                            |   |     |                                   |  |   |      |   |  |   | (0.3  | ) |  |   | (0.3  | )
|gain on derivative financial instruments, net of tax                |  |                               |  |        |               |   |        |                                 |   |        |                |      |   |                            |   |     |                                   |  |   |      |   |  |   | 0.1   |   |  |   | 0.1   |  
|                                                                     |  |                                |  |        |                |   |        |                                  |   |        |                |       |   |                            |   |      |                                   |  |   |       |   |  |   |       |   |  |   |       |  
|Comprehensive income                                                 |  |                               |  |        |               |   |        |                                 |   |        |                |      |   |                            |   |     |                                   |  |   |      |   |  | $ | 10.0  |   |  |   |      |  
|                                                                     |  |                                |  |        |                |   |        |                                  |   |        |                |       |   |                            |   |      |                                   |  |   |       |   |  |   |       |   |  |   |       |  
|Fiscal year end 2006                                                 |  | 17.7                           |  |        | 10.3           |   |        | (2.7                             | ) |        |                | (57.8 | ) |                            |   |     |                                   |  |   | 87.6  |   |  |   |       |   |  |   | (6.9  | )
|Restricted stock awards                                              |  |                               |  |        | (2.5           | ) |        | 0.1                              |   |        |                | 2.5   |   |                            |   |     |                                   |  |   |      |   |  | $ |      |   |  |   |      |  
|Purchase of treasury shares                                          |  |                               |  |        |               |   |        | (1.5                             | ) |        |                | (29.2 | ) |                            |   |     |                                   |  |   |      |   |  |   |      |   |  |   |      |  
|Stock option transactions                                            |  |                               |  |        | (1.7           | ) |        | 0.2                              |   |        |                | 4.1   |   |                            |   |     |                                   |  |   |      |   |  |   |      |   |  |   |      |  
|Stock option expense                                                 |  |                               |  |        | 1.9            |   |        |                                 |   |        |                |      |   |                            |   |     |                                   |  |   |      |   |  |   |      |   |  |   |      |  
|Forfeiture of restricted stock awards                                |  |                               |  |        | 0.6            |   |        |                                 |   |        |                | (0.6  | ) |                            |   |     |                                   |  |   |      |   |  |   |      |   |  |   |      |  
|Restricted stock vesting                                             |  |                               |  |        | 0.2            |   |        |                                 |   |        |                |      |   |                            |   |     |                                   |  |   |      |   |  |   |      |   |  |   |      |  
|Net income                                                           |  |                               |  |        |               |   |        |                                 |   |        |                |      |   |                            |   |     |                                   |  |   | 13.0  |   |  |   | 13.0  |   |  |   |      |  
|Other comprehensive income                                           |  |                                |  |        |                |   |        |                                  |   |        |                |       |   |                            |   |      |                                   |  |   |       |   |  |   |       |   |  |   |       |  
|foreign currency translation                                        |  |                               |  |        |               |   |        |                                 |   |        |                |      |   |                            |   |     |                                   |  |   |      |   |  |   | 2.1   |   |  |   | 2.1   |  
|unrecognized pension costs, net of taxes                            |  |                               |  |        |               |   |        |                                 |   |        |                |      |   |                            |   |     |                                   |  |   |      |   |  |   | 2.3   |   |  |   | 2.3   |  
|loss on derivative financial instruments, net of tax                |  |                               |  |        |               |   |        |                                 |   |        |                |      |   |                            |   |     |                                   |  |   |      |   |  |   | (0.8  | ) |  |   | (0.8  | )
|                                                                     |  |                                |  |        |                |   |        |                                  |   |        |                |       |   |                            |   |      |                                   |  |   |       |   |  |   |       |   |  |   |       |  
|Comprehensive income                                                 |  |                               |  |        |               |   |        |                                 |   |        |                |      |   |                            |   |     |                                   |  |   |      |   |  | $ | 16.6  |   |  |   |      |  
|                                                                     |  |                                |  |        |                |   |        |                                  |   |        |                |       |   |                            |   |      |                                   |  |   |       |   |  |   |       |   |  |   |       |  
|Fiscal year end 2007                                                 |  | 17.7                           |  |        | 8.8            |   |        | (3.9                             | ) |        |                | (81.0 | ) |                            |   |     |                                   |  |   | 100.6 |   |  |   |       |   |  |   | (3.3  | )
|Restricted stock awards                                              |  |                               |  |        | (4.3           | ) |        | 0.2                              |   |        |                | 4.3   |   |                            |   |     |                                   |  |   |      |   |  | $ |      |   |  |   |      |  
|Purchase of treasury shares                                          |  |                               |  |        |               |   |        |                                 |   |        |                | (0.4  | ) |                            |   |     |                                   |  |   |      |   |  |   |      |   |  |   |      |  
|Stock option transactions                                            |  |                               |  |        | (0.1           | ) |        |                                 |   |        |                | 0.3   |   |                            |   |     |                                   |  |   |      |   |  |   |      |   |  |   |      |  
|Stock option expense                                                 |  |                               |  |        | 1.3            |   |        |                                 |   |        |                |      |   |                            |   |     |                                   |  |   |      |   |  |   |      |   |  |   |      |  
|Restricted stock vesting                                             |  |                               |  |        | 1.1            |   |        |                                 |   |        |                |      |   |                            |   |     |                                   |  |   |      |   |  |   |      |   |  |   |      |  
|Net income                                                           |  |                               |  |        |               |   |        |                                 |   |        |                |      |   |                            |   |     |                                   |  |   | 7.8   |   |  |   | 7.8   |   |  |   |      |  
|Other comprehensive income                                           |  |                                |  |        |                |   |        |                                  |   |        |                |       |   |                            |   |      |                                   |  |   |       |   |  |   |       |   |  |   |       |  
|foreign currency translation                                        |  |                               |  |        |               |   |        |                                 |   |        |                |      |   |                            |   |     |                                   |  |   |      |   |  |   | (2.1  | ) |  |   | (2.1  | )
|unrecognized pension costs, net of taxes                            |  |                               |  |        |               |   |        |                                 |   |        |                |      |   |                            |   |     |                                   |  |   |      |   |  |   | (12.6 | ) |  |   | (12.6 | )
|loss on derivative financial instruments, net of tax                |  |                               |  |        |               |   |        |                                 |   |        |                |      |   |                            |   |     |                                   |  |   |      |   |  |   | (0.8  | ) |  |   | (0.8  | )
|                                                                     |  |                                |  |        |                |   |        |                                  |   |        |                |       |   |                            |   |      |                                   |  |   |       |   |  |   |       |   |  |   |       |  
|Comprehensive income                                                 |  |                               |  |        |               |   |        |                                 |   |        |                |      |   |                            |   |     |                                   |  |   |      |   |  | $ | (7.7  | ) |  |   |      |  
|                                                                     |  |                                |  |        |                |   |        |                                  |   |        |                |       |   |                            |   |      |                                   |  |   |       |   |  |   |       |   |  |   |       |  
|Fiscal year end 2008                                                 |  | 17.7                           |  | $      | 6.8            |   |        | (3.7                             | ) |        | $              | (76.8 | ) |                            | $ |     |                                   |  | $ | 108.4 |   |  |   |       |   |  | $ | (18.8 | )
|                                                                     |  |                                |  |        |                |   |        |                                  |   |        |                |       |   |                            |   |      |                                   |  |   |       |   |  |   |       |   |  |   |       |  



|(a) | See Note 1 Summary of Significant Accounting Policies Impact of New Accounting Standards.
|--- | -----------------------------------------------------------------------------------------

|(b) | See Note 10 Stock-Based Compensation and Other Equity Instruments Restricted Stock.
|--- | -----------------------------------------------------------------------------------

|(c) | See Note 1 Summary of Significant Accounting Policies Correction of Error.
|--- | --------------------------------------------------------------------------



See accompanying notes to financial statements.



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##### Table of Contents

MIDAS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Summary of Significant Accounting Policies

Nature of Business and Basis of Presentation

Midas, Inc. (MDS or the Company) provides retail automotive services principally through franchised or licensed shops in the U.S., Canada, Europe and other countries. Through March of 2008, the
Companys sole franchise concept was Midas auto repair centers (Midas). In April of 2008, MDS acquired the SpeeDee Oil Change and Tune-up franchise system (SpeeDee) and now sells Midas, SpeeDee and Midas/SpeeDee
Co-Branded franchises. The consolidated financial statements presented herein include Midas, Inc. and all of its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

In connection with the preparation of its fiscal 2008 year-end financial statements, the Company discovered an error in its pension projected benefit
obligation. The actuarially determined projected benefit obligation was not properly considering certain plan amendments that changed the participant benefit formulas in 1988 and 1991. As a result, the Companys projected benefit obligation was
understated by $3.8 million at fiscal year end 2008. This error had accumulated over the time since the benefit formula changes took place. The Company corrected this error by recording the cumulative impact as an adjustment to opening equity as of
the beginning of fiscal 2006, and recording additional pension expense in fiscal 2006, 2007 and 2008. Specifically, the Company recorded a $2.1 million reduction to the pension asset, a $0.8 million deferred tax asset, and a $1.3 million reduction
to retained earnings as of the beginning of fiscal 2006. In addition, the Company recorded additional pre-tax pension expense of $0.2 million, $0.4 million, and $0.3 million in fiscal 2008, 2007 and 2006, respectively. Certain revisions were also
made to Note 9 to reflect these changes.

Certain reclassifications have been made to the previously reported fiscal 2007 and fiscal 2006
financial statements in order to provide consistency with the fiscal 2008 results. In 2008, the Company accounts for replacement part cost of sales net of rebates received from its suppliers in the Statement of Operations. In prior periods,
replacement part cost of sales were presented gross of supplier rebates received, thereby resulting in overstatements in revenue and cost of sales by equal amounts. The prior periods have been revised by reducing revenue and cost of sales by $1.8
million for fiscal 2007 and $1.8 million for fiscal 2006. The 2007 Balance Sheet has been revised by increasing accounts receivable and accrued expenses each by $1.1 million. The prior periods in the Consolidated Statements of Operations and Balance
Sheets have been revised to conform to the current year presentation. These reclassifications did not affect previously reported operating income, income before income taxes, net income or earnings per share.

Fiscal Periods

Fiscal year 2008
ended on January 3, 2009 and consisted of 53 weeks. Fiscal year 2007 ended on December 29, 2007 and consisted of 52 weeks. Fiscal year 2006 ended on December 30, 2006 and consisted of 52 weeks.

Foreign Currency Translation and Transactions

All assets and liabilities of non-U.S. operations are translated into U.S. dollars using exchange rates as of the end of each fiscal period. Income and expense items are translated at average exchange rates prevailing during each fiscal
period. The resulting translation adjustments are recorded as a component of shareholders equity. Gains and losses from foreign currency transactions are included in net earnings.

Cash and Cash Equivalents

Cash and
cash equivalents consist of deposits with banks and financial institutions and are unrestricted as to withdrawal or use, and which have an original maturity of three months or less. Cash and cash equivalents also includes customer credit card
payments that settle within 2-3 business days of the fiscal period end.



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##### Table of Contents

MIDAS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Fair Value of Financial Instruments

MDSs financial instruments include cash and cash equivalents, receivables, accounts payable, and long-term debt. While there is no public market for
the Companys long term debt, the Company believes that the carrying value of the debt exceeds its fair value by approximately $6 million as of January 3, 2009. The carrying amounts of the other financial assets and liabilities approximate
their fair values because of the short maturities of those instruments.

Derivative Financial Instruments

The Company has market risk exposure to changes in interest rates, principally in the United States. MDS attempts to minimize this risk and fix a portion
of its overall borrowing costs through the utilization of interest rate swaps. These swaps are entered into with financial institutions and have initial reset dates and critical terms that match those of the underlying debt.

Valuation of Receivables

The Company
records receivables due from its franchisees and other customers at the time the sale is recorded in accordance with its revenue recognition policies. These receivables consist of amounts due from the sale of products, royalties due from franchisees
and suppliers, rents and other amounts. The future collectibility of these amounts can be impacted by the Companys collection efforts, the financial stability of its customers, and the general economic climate in which it operates. The Company
applies a consistent practice of establishing an allowance for accounts that it feels may become uncollectible through reviewing the historical aging of its receivables and by monitoring the financial strength of its franchisees and other customers.
Where the Company becomes aware of a customers inability to meet its financial obligations (e.g., where it is in financial distress or has filed for bankruptcy), the Company specifically reserves for the potential bad debt to reduce the net
recognized receivable to the amount it reasonably believes will be collected. The valuation of receivables is performed on a quarterly basis.

In addition, the Company records receivables from third parties at the time a transaction is completed. These third party receivables are recorded at their estimated net realizable value. On a quarterly basis, the Company assesses the
collectibility of these receivables.

Notes Receivable

Notes receivable relate to franchisee financing arrangements for certain previously past due balances and other long-term receivables that exceed one year. They bear interest at a market rate based on the
customers credit quality and are recorded at face value. Interest is recognized over the life of the note. The notes are typically collateralized by inventory, equipment or similar assets of the franchisee. The Company has not and does not
intend to sell these receivables. Past due notes receivable are considered during the Companys valuation of receivables.

Inventory Valuation

Inventories are valued at the lower of cost or net realizable value. Inventory cost is determined using
the weighted-average cost method, which approximates the first-in, first-out method. Additionally, the Company periodically evaluates the carrying value of its inventory to assess the proper valuation. This evaluation includes having adequate
allowances to cover losses in the normal course of operations, providing for excess and obsolete inventory, and ensuring that inventory is valued at the lower of cost or market. In performing this evaluation, the Company considers historical data
such as actual loss experience, past and projected usage, and actual margins generated from sales of its products.



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##### Table of Contents

MIDAS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Property and Equipment

Property and equipment are recorded at cost. Depreciation is computed using the straight-line method and includes amortization of assets held under
capital and finance leases. When property is sold or retired, the cost and accumulated depreciation are eliminated from the accounts and gains or losses are recorded in the statement of operations. Expenditures for maintenance and repairs are
expensed as incurred.

Buildings and improvements are depreciated over useful lives ranging from 10 to 40 years. Machinery and equipment is
depreciated over useful lives ranging from three to 12 years, and computer hardware is depreciated over useful lives of three to five years. Major enterprise-level computer software is depreciated over 10 years while all other software is
depreciated over five years.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled
reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the
deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of these deductible differences at January 3, 2009. In the event that management determines the Company would not be
able to realize all or part of the net deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to income in the period in which such determination was made.

Carrying Value of Goodwill and Long-Lived Assets

In accordance with Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets, the Company conducts tests for impairment of goodwill and indefinite lived
intangible assets annually or more frequently if circumstances indicate that an asset might be impaired. An impairment loss is recognized to the extent that an assets carrying amount exceeds its fair value. In both the U.S. and Canada, the
reporting unit is defined as retail operations, which consists of both franchised and company-operated locations.

In accordance with SFAS
No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, long-lived assets, such as property and equipment, are reviewed for impairment whenever events and circumstances indicate that the carrying amount of an asset
may not be recoverable. The recoverability of assets to be held and used is measured by reviewing the undiscounted cash flows expected to be generated by the asset. If the sum of the projected undiscounted cash flows over the remaining lives of the
related assets does not exceed the carrying values of the assets, the carrying values are adjusted for differences between the asset fair values and the carrying values.

Fixed assets held for sale are carried at the lower of the carrying amount or fair value, less costs to sell. Assets held for sale are no longer depreciated.



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##### Table of Contents

MIDAS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Revenue Recognition

Franchise royalties are recognized in the periods that correspond to the periods in which retail sales and revenues are recognized by franchisees.
Franchise renewal fees are recognized when the new franchise agreement is signed by the franchisee, the renewal period commences and all contractual obligations have been met. Product royalties are recognized as earned based on the volume of
franchisee purchases of products from certain vendors. Real estate revenues are recognized as earned on a monthly basis in accordance with underlying property lease terms using the straight-line method. The majority of real estate revenues are
derived from Midas shop locations. Nearly all of these locations are subject to an annual percentage rent based upon the locations retail sales volume for the calendar year. Replacement part sales are recognized at the time products are
shipped. Sales and revenues of company-operated shops are recognized when customer vehicles are repaired or serviced. Taxes collected on behalf of taxing authorities are not recognized as revenue, but rather are recorded as a liability and remitted
to the proper taxing authority.

Revenues derived from franchise fees, which represented approximately 1.1%, 0.7% and 0.8% of franchising
revenues in fiscal 2008, 2007 and 2006, respectively, are recognized when the franchised shop opens and after certain contractual obligations have been met. Costs related to securing initial franchise agreements and performing the required services
under such agreements are charged to expense as incurred.

Advertising

Advertising costs are expensed as incurred.

Recognition of Warranty Costs

Customers are provided a written warranty from MDS on certain Midas products purchased from
Midas shops in North America, namely brake friction, mufflers, shocks and struts. The warranty will be honored at any Midas shop in North America and is valid for the lifetime of the vehicle, but is voided if the vehicle is sold. The Company
maintains a warranty accrual to cover the estimated future liability associated with outstanding warranties. The Company determines the estimated value of outstanding warranty claims based on: 1) an estimate of the percentage of all warranted
products sold and registered in prior periods at retail that are likely to be redeemed; and 2) an estimate of the cost of redemption of each future warranty claim on a current cost basis. These estimates are computed using actual historical
registration and redemption data as well as actual cost information on current redemptions.

Annual warranty activity is summarized as
follows (in millions):



|                                                             |  |      |      |   |      |   |      |      |  |   |      |  
|------------------------------------------------------------ |  | ---- | ---- | - | ---- | - | ---- | ---- |  | - | ---- | -
|Fiscal Year                                                  |  | 2008 |      |   | 2007 |   |      | 2006 | 
|Accrued warranty expense at beginning of period              |  | $    | 24.8 |   |      | $ | 33.4 |      |  | $ | 35.4 |  
|Warranty expense (benefit)                                   |  |      | (2.7 | ) |      |   | (4.3 | )    |  |   | 4.4  |  
|Changes in foreign currency exchange rate                    |  |      | (1.1 | ) |      |   | 1.0  |      |  |   |     |  
|Warranty credit issued to franchisees (warranty claims paid) |  |      | (4.5 | ) |      |   | (5.3 | )    |  |   | (6.4 | )
|                                                             |  |      |      |   |      |   |      |      |  |   |      |  
|Accrued warranty expense at end of period                    |  |      | 16.5 |   |      |   | 24.8 |      |  |   | 33.4 |  
|Less current portion                                         |  |      | 2.4  |   |      |   | 3.5  |      |  |   | 4.6  |  
|                                                             |  |      |      |   |      |   |      |      |  |   |      |  
|Accrued warrantynon-current                                 |  | $    | 14.1 |   |      | $ | 21.3 |      |  | $ | 28.8 |  
|                                                             |  |      |      |   |      |   |      |      |  |   |      |  

Warranty expense is included in operating costs and expenses in the statements of operations. A
portion of warranty expense incurred is also paid as claims within the same fiscal year. Warranty expense was reduced by $3.4 million, $8.3 million and $1.1 million in fiscal 2008, 2007 and 2006, respectively, due to changes in estimated warranty
redemptions.



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##### Table of Contents

MIDAS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



As of January 1, 2008, the Company changed how the Midas warranty obligations are funded in the
United States. From June 2003 through December 2007, product royalties received from the Companys preferred supply chain vendors were recorded as revenue and substantially offset the cost of warranty claims. Beginning in fiscal 2008, the Midas
warranty program in the United States is funded directly by Midas franchisees. The franchisees are charged a fee for each warranted product sold to customers. The fee is charged when the warranty is registered with the Company. The fee billed to
franchisees is deferred and is recognized as revenue when the actual warranty is redeemed and included in warranty expense. This fee is intended to cover the Companys cost of the new warranty program, thus revenues under this program will
match expenses and the new warranty program will have no impact on the results of operations. In connection with this change, beginning in 2008 Midas system franchisees in the United States started receiving rebates on their purchases from the
Companys preferred supply chain vendors and MDS no longer receives product royalties on Midas franchisee purchases in the United States. Because the Companys U.S. supply chain partners are responsible for the warranty of parts during the
first 12 months, MDS will not begin to record revenues or expenses under the new program until fiscal 2009. As of January 3, 2009, deferred warranty obligations under this new program were $3.0 million.

The Midas warranty program in Canada has not changed. The Company continues to receive royalties from certain preferred supply chain vendors based on
Midas franchisee purchases in Canada and records a periodic warranty expense.

Stock-Based Compensation

On January 1, 2006, the Company adopted the provisions of Statement of Financial Accounting Standards No. 123R, Share-Based Payment
(SFAS No. 123R) using the Modified Prospective Application method. The adoption of SFAS No. 123R resulted in recording compensation expense for employee stock options. The Company records an expense for outstanding
unvested stock awards based on the grant-date fair value of those awards. The fair value of stock option awards has been determined using the Black-Scholes option pricing model and the Modified Prospective Application method of adoption as allowed
under SFAS No. 123R.

Earnings (Loss) Per Share

Basic and diluted earnings per share were calculated based on the following share counts (in millions):



|                                           |  |      |  |      |  |     
|------------------------------------------ |  | ---- |  | ---- |  | ----
|Fiscal Year                                |  | 2008 |  | 2007 |  | 2006
|Weighted-average common shares outstanding |  | 13.3 |  | 13.9 |  | 15.1
|Common stock warrants                      |  | 0.1  |  | 0.1  |  | 0.1 
|                                           |  |      |  |      |  |     
|Shares applicable to basic earnings        |  | 13.4 |  | 14.0 |  | 15.2
|Effect of dilutive stock awards            |  | 0.5  |  | 0.6  |  | 0.4 
|                                           |  |      |  |      |  |     
|Shares applicable to diluted earnings      |  | 13.9 |  | 14.6 |  | 15.6
|                                           |  |      |  |      |  |     
|Potential common share equivalents:        |  |      |  |      |  |     
|Stock options                              |  | 1.4  |  | 1.2  |  | 1.3 

Use of Estimates

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires
management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of
revenues and expenses. Such estimates include inventory valuation, valuation of receivables, business transformation charges, carrying values of goodwill,



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##### Table of Contents

MIDAS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



intangible assets, long-lived assets, and net deferred tax assets and warranty obligations. These estimates and assumptions are based on managements
best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the
circumstances. The Company adjusts such estimates and assumptions when facts and circumstances dictate. Illiquid credit markets, volatile equity, foreign currency, and energy markets, and declines in consumer spending have combined to increase the
uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in those estimates resulting from continuing
changes in the economic environment will be reflected in the financial statements in future periods.

Impact of New Accounting Standards

In September 2006, the FASB issued Statement of Financial Accounting Standard (SFAS) No. 157, Fair Value Measurements,
(SFAS 157). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. The provisions of this standard apply to other accounting
pronouncements that require or permit fair value measurements. SFAS 157 became effective for MDS on December 30, 2007 (the beginning of fiscal 2008). The only applicability of this standard for the Company was related to its existing interest rate
swaps. The Company adopted this provision which resulted in a $237,000 decrease in long-term swap liability, a $92,000 reduction in deferred income taxes and a $145,000 increase in accumulated other comprehensive loss through the end of fiscal 2008.
The adoption of SFAS 157 had no impact on cash provided by operating activities.

In September 2006, the FASB issued SFAS No. 158,
Employers Accounting for Defined Benefit Pension and Other Postretirement Plansan amendment of FASB Statements No. 87, 88, 106 and 132(R), (SFAS 158). The Company adopted SFAS 158 on December 30, 2006, which
resulted in a $7.0 million reduction in other assets, a $2.8 million increase in deferred tax assets, a $0.2 million increase in other liabilities and a $4.4 million increase in accumulated other comprehensive loss. The adoption had no impact on the
Companys results of operations or cash flows.

SFAS 158 also requires an employer to measure plan assets and benefit obligations as
of the balance sheet date effective for periods ending after December 15, 2008. On December 30, 2007 the Company adopted this provision by recording adjustments to opening balances which resulted in a $110,000 increase in other assets, a
$40,000 reduction in deferred income taxes, a $50,000 increase in retained earnings and a $20,000 reduction in accumulated other comprehensive loss. The adoption of SFAS 158 had no impact on cash provided by operating activities.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial LiabilitiesIncluding an
amendment of FASB Statement No. 115 (SFAS 159). SFAS 159 permits a company to choose to measure certain financial assets and liabilities at fair value that are not currently required to be measured at fair value (i.e. the Fair Value
Option). Election of the Fair Value Option is made on an instrument-by-instrument basis and is irrevocable. At the adoption date, unrealized gains and losses on financial assets and liabilities for which the Fair Value Option has been elected would
be reported as a cumulative adjustment to beginning retained earnings. The adoption of SFAS 159 had no impact on the Company as the Company elected to not measure any of the assets or liabilities subject to this pronouncement at fair value.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activitiesan amendment
of FASB Statement No. 133, (SFAS 161). SFAS 161 requires enhanced disclosures about an entitys derivative and hedging activities, including (i) how and why an entity uses derivative



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MIDAS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



instruments, (ii) how derivative instruments and related hedged items are accounted for under SFAS 133, and (iii) how derivative instruments and
related hedged items affect an entitys financial position, financial performance, and cash flows. MDS adopted SFAS 161 effective December 30, 2007. As SFAS 161 only requires enhanced disclosures, this standard had no impact on the
consolidated financial statements.

(2) Business Transformation Charges

As part of the Companys business transformation, the Company developed and implemented strategic initiatives during the past three fiscal years that
it believes will enhance its long-term competitive position. These initiatives included a major update to its retail shop image, the closure and re-franchising of certain company-operated shops, changes to its U.S. warranty program and the early
termination of a supplier contract.

The implementation of these business transformation initiatives has resulted in the Company recording
substantial business transformation charges to reflect the write-down of assets, the disposition of lease agreements, severance costs, and other related expenses. The charges recorded in connection with the Companys business transformation
process in fiscal years 2008, 2007 and 2006 are summarized in the following table (in millions):



|                                          |  |      |     |      |   |      |      |  |   |      |  
|----------------------------------------- |  | ---- | --- | ---- | - | ---- | ---- |  | - | ---- | -
|Fiscal Year                               |  | 2008 |     | 2007 |   |      | 2006 | 
|Retail image update                       |  | $    | 1.3 |      | $ | 2.5  |      |  | $ | 1.6  |  
|Rationalization of company-operated shops |  |      | 0.3 |      |   | (0.4 | )    |  |   | 1.9  |  
|Other                                     |  |      |    |      |   | 1.6  |      |  |   | (0.2 | )
|                                          |  |      |     |      |   |      |      |  |   |      |  
|Total business transformation charges     |  | $    | 1.6 |      | $ | 3.7  |      |  | $ | 3.3  |  
|                                          |  |      |     |      |   |      |      |  |   |      |  

Retail Image Update

In connection with the Companys ongoing retail transformation, MDS developed a major update to its retail shop image. The new image program
incorporates changes to internal shop appearance and merchandising, as well as a significant redesign of the Midas shop façade. MDS management believes the new image will better showcase the Companys expansion into new services, enhance
efforts to educate customers and significantly increase the visibility and curb appeal of the typical Midas shop. In order to encourage Midas franchisees to adopt this new image, the Company offered an incentive program whereby MDS provides a
subsidy of up to $2,600 per shop for franchisees who agreed to adopt the program prior to certain target dates. Currently, over 1,300 locations have now converted to the new image. The incentive program ended for U.S. shops in fiscal 2008 and will
conclude for Canadian shops in fiscal 2009.

During fiscal 2008, 2007 and 2006, the Company recorded business transformation charges of
$1.3 million, $2.5 million and $1.6 million, respectively, in connection with the Companys partial funding of the retail image update for Midas franchisees and company-operated shops.

Rationalization of Company-Operated Shops

During fiscal 2006, the Company closed six under-performing company-operated shops, all of which were located in Florida. In connection with the December 2006 closure of these shops, the Company recorded charges of $1.9 million in fiscal
2006. These charges were comprised of $1.5 million in projected non-recoverable lease costs, $0.2 million inventory write-down, $0.1 million to write off disposed assets and $0.1 million of severance and other costs related to the closures. During
fiscal 2007, the Company recognized a reversal of a previously recorded reserve of $0.4 million upon the favorable disposition of certain leases. In fiscal 2008, the Company incurred charges of $0.3 million in connection with the closure of an
under-performing company-operated shop located in Connecticut.



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MIDAS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The Company will continue to evaluate all company-operated shop locations and may re-franchise
additional owned locations where it is determined that the Companys return on investment objectives are best achieved through re-franchising instead of ownership.

Other

The Company recorded business transformation charges in fiscal 2007 of approximately $1.0
million related to the early termination of the Companys supply agreement with AutoZone, $0.3 million in conjunction with the change in the U.S. warranty program and $0.3 million for other charges. During fiscal 2006, the Company recorded a
$0.2 million credit to business transformation charges to reflect the true-up of prior year charges.

(3) Debt Agreements

On October 27, 2005, MDS entered into a five-year, unsecured $110 million revolving credit facility. On February 4, 2008, the Company amended
the loan by increasing the revolving credit facility to $130 million. The amended facility is further expandable to $165 million at the Companys discretion with lender approval. The interest rate floats based on the underlying rate of LIBOR
and the Companys leverage and was priced at LIBOR plus 1.50% at January 3, 2009. This facility requires maintenance of certain financial covenants including maximum allowable leverage and minimum tangible net worth. As of January 3,
2009, the Company was in compliance with all debt covenants.

As of January 3, 2009, a total of $83.6 million was outstanding under
the revolving credit facility. As of December 29, 2007, a total of $76.3 million was outstanding under the revolving credit facility.

In November 2005, $20 million in senior bank debt was converted from floating rate to fixed rate by locking-in LIBOR at 4.89% for a five year period. In addition, in March 2007, MDS entered into an interest rate swap arrangement to convert
an additional $25 million in senior bank debt from floating rate to a fixed rate by locking-in LIBOR at 4.91% for the remaining term of the Companys bank agreement (October 2010). This swap effectively replaced a declining balance swap that
expired in March 2007 under which LIBOR was locked-in at 2.76% for a three-year term. As a consequence, currently $45 million of the Companys $83.6 million in senior bank debt is at fixed rates.

Both the November 2005 and March 2007 swap arrangements have been designated as cash flow hedges and have been evaluated to be highly effective. As a
result, the after-tax change in the fair value of these swaps is recorded in accumulated other comprehensive income as a gain or loss on derivative financial instruments.

(4) Supplemental Balance Sheet, Cash Flow and Shareholders Equity Information

Receivables

Receivables are stated net of an allowance for doubtful accounts. The allowance for doubtful accounts consisted of (in millions):



|                                                     |  |      |      |   |      |   |      |      |  |   |      |  
|---------------------------------------------------- |  | ---- | ---- | - | ---- | - | ---- | ---- |  | - | ---- | -
|Fiscal Year End                                      |  | 2008 |      |   | 2007 |   |      | 2006 | 
|Allowance for doubtful accounts at beginning of year |  | $    | 3.8  |   |      | $ | 4.2  |      |  | $ | 3.9  |  
|Additions charged to bad debts                       |  |      | 2.1  |   |      |   | 1.9  |      |  |   | 2.0  |  
|Write-downs charged against allowance                |  |      | (2.4 | ) |      |   | (2.3 | )    |  |   | (1.7 | )
|                                                     |  |      |      |   |      |   |      |      |  |   |      |  
|Allowance for doubtful accounts at end of year       |  | $    | 3.5  |   |      | $ | 3.8  |      |  | $ | 4.2  |  
|                                                     |  |      |      |   |      |   |      |      |  |   |      |  



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MIDAS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The current portion of notes receivable is included in net receivables and the long term portion is
included in other assets. Notes receivable consisted of (in millions):



|                  |  |      |     |      |   |     
|----------------- |  | ---- | --- | ---- | - | ----
|Fiscal Year End   |  | 2008 |     | 2007
|Current portion   |  | $    | 3.6 |      | $ | 5.1 
|Long term portion |  |      | 3.7 |      |   | 5.3 
|                  |  |      |     |      |   |     
|Notes receivable  |  | $    | 7.3 |      | $ | 10.4
|                  |  |      |     |      |   |     

The acquisition of certain company-operated shops resulted in non-cash reductions of accounts
receivable of approximately $1.0 million and $2.7 million during fiscal 2008 and 2007, respectively.

Receivables include certain non-trade
receivables such as vendor receivables, insurance recoveries and other non-recurring items. Non-trade receivables were $4.4 million as of January 3, 2009 and $4.6 million as of December 29, 2007.

Inventories

Inventories are
comprised of finished goods, net of reserves. Inventory reserves consisted of (in millions):



|                                                  |  |      |      |   |      |   |      |      |  |   |      |  
|------------------------------------------------- |  | ---- | ---- | - | ---- | - | ---- | ---- |  | - | ---- | -
|Fiscal Year End                                   |  | 2008 |      |   | 2007 |   |      | 2006 | 
|Inventory reserves at beginning of year           |  | $    | 0.7  |   |      | $ | 0.7  |      |  | $ | 3.2  |  
|Additions charged to expense                      |  |      | 0.2  |   |      |   | 0.2  |      |  |   | 0.1  |  
|Reserve against inventory of newly acquired shops |  |      | 0.1  |   |      |   | 0.2  |      |  |   |     |  
|Write-downs charged against reserves              |  |      | (0.6 | ) |      |   | (0.4 | )    |  |   | (2.6 | )
|                                                  |  |      |      |   |      |   |      |      |  |   |      |  
|Inventory reserves at end of year                 |  | $    | 0.4  |   |      | $ | 0.7  |      |  | $ | 0.7  |  
|                                                  |  |      |      |   |      |   |      |      |  |   |      |  

Property and Equipment

Property and equipment consisted of the following (in millions):



|                                          |  |      |        |   |      |   |        |  
|----------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | -
|Fiscal Year End                           |  | 2008 |        |   | 2007 |  
|Land                                      |  | $    | 42.9   |   |      | $ | 42.8   |  
|Buildings and improvements                |  |      | 97.2   |   |      |   | 97.0   |  
|Machinery and equipment                   |  |      | 15.1   |   |      |   | 13.9   |  
|Computer hardware                         |  |      | 24.4   |   |      |   | 25.9   |  
|Computer software                         |  |      | 34.0   |   |      |   | 33.0   |  
|                                          |  |      |        |   |      |   |        |  
|Total property and equipment              |  |      | 213.6  |   |      |   | 212.6  |  
|Accumulated depreciation and amortization |  |      | (121.0 | ) |      |   | (116.0 | )
|                                          |  |      |        |   |      |   |        |  
|Property and equipment, net               |  | $    | 92.6   |   |      | $ | 96.6   |  
|                                          |  |      |        |   |      |   |        |  

The Company recorded depreciation expense of $9.3 million, $8.9 million, and $9.0 million in
fiscal 2008, 2007 and 2006, respectively. Depreciation expense is included in operating costs and expenses in the Statement of Operations.



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MIDAS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Goodwill and Other Intangible Assets

Goodwill and other intangible assets consisted of the following (in millions):



|                                           |  |      |      |   |      |   |      |  
|------------------------------------------ |  | ---- | ---- | - | ---- | - | ---- | -
|Fiscal Year End                            |  | 2008 |      |   | 2007 |  
|Goodwill                                   |  | $    | 18.7 |   |      | $ | 10.0 |  
|Trademark                                  |  |      | 12.6 |   |      |   | 3.1  |  
|Franchise agreements                       |  |      | 3.9  |   |      |   |     |  
|Customer lists                             |  |      | 1.5  |   |      |   | 1.3  |  
|                                           |  |      |      |   |      |   |      |  
|Total goodwill and other intangible assets |  |      | 36.7 |   |      |   | 14.4 |  
|Accumulated amortization                   |  |      | (1.2 | ) |      |   | (0.4 | )
|                                           |  |      |      |   |      |   |      |  
|Goodwill and other intangible assets, net  |  | $    | 35.5 |   |      | $ | 14.0 |  
|                                           |  |      |      |   |      |   |      |  

On March 30, 2008, Midas acquired the assets of G.C. & K.B. Investments, Inc. and
its affiliated entities that franchise or sub-franchise SpeeDee quick-lube and automotive maintenance shops. The purchase price was $21.0 million. As a result of this acquisition, the Company recorded $19.9 million in incremental goodwill and other
intangibles, which included $8.7 million of intangible trademark, $3.9 million of intangible franchise agreements and $7.3 million of goodwill. The $3.9 million of intangible franchise agreements will be amortized over a period of 22 years.

In fiscal 2008, goodwill and other intangible assets also increased $2.7 million due to the acquisition of 15 company-operated shops,
which generated $3.4 million of incremental goodwill, trademark and customer list intangibles partially offset by write-offs of $0.7 million in conjunction with the re-franchising of seven company-operated shops. In fiscal 2007, goodwill and other
intangible assets increased $12.8 million due to the acquisition of 37 company-operated shops, which generated $13.1 million of incremental goodwill, trademark and customer list intangibles partially offset by write-offs of $0.3 million in
conjunction with the re-franchising of 12 company-operated shops.

Acquired customer lists, which are the Companys only amortizing
intangible assets, are amortized over the first two years after acquisition. The Company recorded amortization expense of $0.8 million in fiscal 2008 and $0.3 million in fiscal 2007.

The intangible trademark and goodwill have indefinite lives and, therefore, are not amortized, but are tested annually for impairment in the fourth
quarter. MDS computed its annual test in the fourth quarter, which resulted in no impairment. All of the acquired intangible assets are deductible for tax purposes.



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MIDAS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Accrued Expenses

Accrued expenses consisted of the following (in millions):



|                                                  |  |      |      |      |   |     
|------------------------------------------------- |  | ---- | ---- | ---- | - | ----
|Fiscal Year End                                   |  | 2008 |      | 2007
|Advertising                                       |  | $    | 11.4 |      | $ | 10.3
|Salaries and wages                                |  |      | 1.4  |      |   | 1.9 
|Taxes other than income taxes                     |  |      | 3.5  |      |   | 3.3 
|Deferred gains / revenue                          |  |      | 0.1  |      |   | 0.4 
|Income taxes                                      |  |      | 0.7  |      |   | 0.1 
|Business transformation charges (current portion) |  |      | 0.1  |      |   | 0.4 
|Insurance reserves (current portion)              |  |      | 0.4  |      |   | 0.9 
|Vendor rebates                                    |  |      | 1.1  |      |   | 1.1 
|Property reserves (current portion)               |  |      | 0.1  |      |   | 0.5 
|Straight line rent (current portion)              |  |      | 0.2  |      |   | 0.6 
|Accrued legal fees                                |  |      | 0.4  |      |   | 1.0 
|Accrued rent                                      |  |      | 0.8  |      |   |    
|Accrued interest                                  |  |      | 0.4  |      |   | 0.3 
|Other                                             |  |      | 2.7  |      |   | 3.7 
|                                                  |  |      |      |      |   |     
|Accrued expenses                                  |  | $    | 23.3 |      | $ | 24.5
|                                                  |  |      |      |      |   |     

Supplemental Cash Flow Information

Net cash flow from operating activities includes cash payments for interest and income taxes as follows (in millions):



|                                      |  |      |     |      |   |      |  |   |    
|------------------------------------- |  | ---- | --- | ---- | - | ---- |  | - | ---
|Fiscal Year                           |  | 2008 |     | 2007 |   | 2006
|Interest paid                         |  | $    | 8.5 |      | $ | 8.8  |  | $ | 8.3
|Income taxes paid, net of tax refunds |  |      | 0.7 |      |   | 1.2  |  |   | 0.9

Supplemental Shareholders Equity Information

Accumulated other comprehensive loss consisted of the following (in millions):



|                                                            |  |      |       |   |      |   |      |      |  |   |      |  
|----------------------------------------------------------- |  | ---- | ----- | - | ---- | - | ---- | ---- |  | - | ---- | -
|Fiscal Year                                                 |  | 2008 |       |   | 2007 |   |      | 2006 | 
|Foreign currency translation                                |  | $    | (2.3  | ) |      | $ | (0.2 | )    |  | $ | (2.3 | )
|Unrecognized pension costs, net of taxes                    |  |      | (15.0 | ) |      |   | (2.4 | )    |  |   | (4.7 | )
|Gain (loss) on derivative financial instruments, net of tax |  |      | (1.5  | ) |      |   | (0.7 | )    |  |   | 0.1  |  
|                                                            |  |      |       |   |      |   |      |      |  |   |      |  
|Accumulated other comprehensive loss                        |  | $    | (18.8 | ) |      | $ | (3.3 | )    |  | $ | (6.9 | )
|                                                            |  |      |       |   |      |   |      |      |  |   |      |  

(5) Advertising

Under the terms of its Midas franchise agreements, MDS is obligated to spend an amount equal to one-half of the royalty payments received from Midas franchisees for advertising expenditures. Amounts received from
Midas franchisees for advertising are recorded as liabilities until disbursed. MDS also administers cooperative advertising programs under which amounts received from certain Midas franchisees are recorded as liabilities until they are disbursed.
Aggregate expenditures under these programs by Midas North American operations amounted to $49.6 million, $48.7 million, and $53.0 million in fiscal 2008, 2007, and 2006, respectively.



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MIDAS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Under the terms of its SpeeDee franchise agreements, MDS must use all weekly marketing fees collected
from franchisees for the development of advertising and marketing materials and programs or the placement of advertising. Amounts received from SpeeDee franchisees are recorded as a liability until disbursed. Aggregate expenditures under this
program for the nine months in fiscal 2008 after the MDS purchase of SpeeDee were $2.7 million.

MDS also incurs certain advertising costs
that are included in selling, general and administrative expenses, which amounted to $4.4 million, $3.9 million, and $3.9 million in fiscal 2008, 2007, and 2006, respectively.

(6) Income Taxes

Income tax expense consisted of the following (in millions):



|                         |  |      |     |      |   |      |      |  |   |    
|------------------------ |  | ---- | --- | ---- | - | ---- | ---- |  | - | ---
|Fiscal Year              |  | 2008 |     | 2007 |   |      | 2006
|Current:                 |  |      |     |      |   |      |      |  |   |    
|U.S. Federal             |  | $    |    |      | $ |     |      |  | $ |   
|Non-U.S.                 |  |      | 0.4 |      |   | 0.9  |      |  |   | 0.7
|U.S. state and local     |  |      | 0.2 |      |   | 0.2  |      |  |   | 0.2
|                         |  |      |     |      |   |      |      |  |   |    
|Total current            |  |      | 0.6 |      |   | 1.1  |      |  |   | 0.9
|                         |  |      |     |      |   |      |      |  |   |    
|Deferred:                |  |      |     |      |   |      |      |  |   |    
|U.S. Federal             |  |      | 3.0 |      |   | 6.8  |      |  |   | 5.9
|Non-U.S.                 |  |      | 1.0 |      |   | (0.2 | )    |  |   | 0.8
|U.S. state and local     |  |      | 0.6 |      |   | 2.7  |      |  |   | 1.1
|                         |  |      |     |      |   |      |      |  |   |    
|Total deferred           |  |      | 4.6 |      |   | 9.3  |      |  |   | 7.8
|                         |  |      |     |      |   |      |      |  |   |    
|Total income tax expense |  | $    | 5.2 |      | $ | 10.4 |      |  | $ | 8.7
|                         |  |      |     |      |   |      |      |  |   |    

The items which gave rise to differences between the income taxes in the statements of operations
and the income taxes computed at the U.S. statutory rate are summarized as follows:



|                                                                   |  |      |   |  |      |   |  |      |  
|------------------------------------------------------------------ |  | ---- | - |  | ---- | - |  | ---- | -
|Fiscal Year                                                        |  | 2008 |   |  | 2007 |   |  | 2006 |  
|Income tax expense computed at U.S. statutory rate                 |  | 35.0 | % |  | 35.0 | % |  | 35.0 | %
|U.S. state and local taxes, net of U.S. Federal income tax effects |  | 3.4  |   |  | 4.1  |   |  | 3.7  |  
|Non-U.S. effective tax rate differential                           |  | (0.5 | ) |  | 0.2  |   |  | 0.1  |  
|Foreign tax refunds                                                |  |     |   |  |     |   |  | (1.4 | )
|Non-deductible expenses                                            |  | 1.8  |   |  | 2.0  |   |  | 6.1  |  
|Increase (decrease) in valuation allowance                         |  | 1.2  |   |  | 0.3  |   |  | (1.5 | )
|Revaluation of deferred tax asset for rate change and utilization  |  | (0.5 | ) |  | 2.6  |   |  | 1.1  |  
|Other items                                                        |  | (0.1 | ) |  | (0.2 | ) |  | 2.7  |  
|                                                                   |  |      |   |  |      |   |  |      |  
|Effective income tax rate                                          |  | 40.3 | % |  | 44.0 | % |  | 45.8 | %
|                                                                   |  |      |   |  |      |   |  |      |  

The Companys effective tax rate for fiscal 2008 was 40.3%, which exceeds the Companys
statutory tax rate of 39.2% primarily as a result of incremental non-deductible expenses and a reduction of the Canadian deferred tax asset to net realizable value as a result of the reduction in Canadian statutory tax rates.

Pretax income from non-U.S. operations amounted to $2.7 million in fiscal 2008, income of $35 thousand in fiscal 2007, and $1.8 million in fiscal 2006.
As of January 3, 2009, the non-U.S. operations had no accumulated earnings and profits.



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##### Table of Contents

MIDAS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Deferred income taxes are created by temporary differences between amounts of assets and
liabilities for financial reporting purposes and such amounts as reported under income tax regulations. Deferred tax assets and liabilities consisted of (in millions):



|                                                 |  |      |      |   |      |   |      |  
|------------------------------------------------ |  | ---- | ---- | - | ---- | - | ---- | -
|Fiscal Year End                                  |  | 2008 |      |   | 2007 |  
|Deferred tax assets attributable to:             |  |      |      |   |      |   |      |  
|Business transformation accruals                 |  | $    | 1.1  |   |      | $ | 1.1  |  
|Employee benefits and vacation accruals          |  |      | 4.6  |   |      |   | 2.7  |  
|Long term property reserves                      |  |      |     |   |      |   | 0.2  |  
|Goodwill                                         |  |      | 3.1  |   |      |   | 4.0  |  
|Net operating loss carryforwards and tax credits |  |      | 30.8 |   |      |   | 37.3 |  
|Warranty reserve                                 |  |      | 7.4  |   |      |   | 8.3  |  
|Depreciation and amortization                    |  |      | 0.6  |   |      |   |     |  
|Pensions                                         |  |      | 8.5  |   |      |   |     |  
|Other items                                      |  |      | 2.1  |   |      |   | 3.8  |  
|                                                 |  |      |      |   |      |   |      |  
|Total deferred tax assets                        |  |      | 58.2 |   |      |   | 57.4 |  
|Valuation allowance                              |  |      | (0.6 | ) |      |   | (0.6 | )
|                                                 |  |      |      |   |      |   |      |  
|Net deferred tax asset                           |  | $    | 57.6 |   |      | $ | 56.8 |  
|                                                 |  |      |      |   |      |   |      |  
|Deferred tax liabilities attributable to:        |  |      |      |   |      |   |      |  
|Depreciation and amortization                    |  | $    |     |   |      | $ | (1.4 | )
|Pensions                                         |  |      |     |   |      |   | (0.7 | )
|                                                 |  |      |      |   |      |   |      |  
|Total deferred tax liabilities                   |  |      |     |   |      |   | (2.1 | )
|                                                 |  |      |      |   |      |   |      |  
|Net deferred tax assets                          |  | $    | 57.6 |   |      | $ | 54.7 |  
|                                                 |  |      |      |   |      |   |      |  
|Net deferred tax assets included in:             |  |      |      |   |      |   |      |  
|Current assets                                   |  | $    | 10.7 |   |      | $ | 12.4 |  
|Non-current assets                               |  |      | 46.9 |   |      |   | 42.3 |  
|                                                 |  |      |      |   |      |   |      |  
|Net deferred tax assets                          |  | $    | 57.6 |   |      | $ | 54.7 |  
|                                                 |  |      |      |   |      |   |      |  

As of both January 3, 2009 and December 29, 2007, the Company had recorded valuation
allowances of $0.6 million against certain state income tax net operating loss carryovers because the Company has determined that it is more likely than not that this portion of these deferred tax assets will not be realized. The Company believes
that it is more likely than not that the results of future operations will generate sufficient taxable income to realize the remaining U.S. and Canadian deferred tax assets.

As of January 3, 2009, the Company has net operating loss carryforwards of approximately $73.3 million available to offset future taxable income for
Federal and Canadian income tax purposes. The Federal net operating loss carryforwards of approximately $66.5 million and expires between 2023 and 2024. The Company generated approximately $11.9 million in Federal taxable income in fiscal 2008 and
$9.3 million in fiscal 2007. The Company believes that it will generate sufficient additional Federal taxable income in future years to fully utilize the $66.5 million net operating loss carry forward before it begins to expire in 2023.

The Canadian net operating loss is approximately $6.8 million and expires between 2010 and 2027. The Companys Canadian operation generated
taxable income of $1.2 million in fiscal 2008 and a taxable loss of $0.3 million in fiscal 2007. Fiscal year 2007 taxable income was lower than historical levels because of one-time expenses that are not expected to recur. Therefore, the Company
believes that it will generate sufficient taxable income in Canada in future tax years to fully utilize the $6.8 million Canadian net operating loss carry forward before it expires.



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##### Table of Contents

MIDAS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The Company also has tax credits of approximately $3.3 million available to offset future Federal
income taxes. The tax credits expire between 2011 and 2018.

(7) Franchise Agreements

The Companys franchise agreements generally cover a 15 to 20-year period and provide for renewals. A franchise agreement can be canceled by the
Company only in the event a franchisee fails to comply with the provisions of the agreement. Franchise agreements provide for initial and renewal fees and continuing royalty payments based on a percentage of sales. Midas franchisees pay the Company
monthly royalties based on a percentage of sales. In North America, MDS is obligated to spend an amount equal to one-half of the royalty payments it receives for advertising. SpeeDee franchisees pay advertising fees that are not included in the
royalty payments.

Worldwide MDS shops in operation as of fiscal year end consisted of (unaudited):



|                        |  |       |  |       |  |      
|----------------------- |  | ----- |  | ----- |  | -----
|Midas Shops             |  | 2008  |  | 2007  |  | 2006 
|Franchised and licensed |  | 2,411 |  | 2,464 |  | 2,504
|Company-operated        |  | 98    |  | 91    |  | 66   
|                        |  |       |  |       |  |      
|Total                   |  | 2,509 |  | 2,555 |  | 2,570
|                        |  |       |  |       |  |      
|                        |  |       | 
|SpeeDee Shops           |  |       |  |       |  |      
|Franchised and licensed |  | 171   |  |       |  |      
|Company-operated        |  | 2     |  |       |  |      
|                        |  |       |  |       |  |      
|Total                   |  | 173   |  |       |  |      
|                        |  |       |  |       |  |      

(8) Leases

Control of the real estate used by Midas shops is a fundamental strength of the Midas program. SpeeDee franchise agreements also contain provisions for lease control but up to now such control has not been required.
Going forward, real estate control will be required of all new and renewing SpeeDee franchisees.

MDS employs a number of methods to ensure
continued dedication of the real estate to the franchise program. MDS leases real estate that is subleased to franchisees and owns real estate in the U.S. and Canada that is leased to franchisees. MDS has also entered into contingent operating lease
agreements that are described below. At fiscal year end 2008, approximately 85% of real estate associated with North American Midas shops was controlled by Midas, using one of these methods.

Leased Real Estate and Equipment

Gross rent expense applicable to operating leases relates to rentals of shops, corporate administration facilities and other miscellaneous facilities. Gross rent expense, the sublease rental income from franchisees and other third parties
that reduced gross rent expense, and the resulting net rent expense (income) for fiscal 2008, 2007 and 2006 are presented below (in millions):



|                          |  |      |      |      |   |      |  |   |      |  
|------------------------- |  | ---- | ---- | ---- | - | ---- |  | - | ---- | -
|Fiscal Year               |  | 2008 |      | 2007 |   | 2006 | 
|Gross rent expense        |  | $    | 27.6 |      | $ | 26.6 |  | $ | 27.4 |  
|Sublease rental income    |  |      | 25.6 |      |   | 24.8 |  |   | 27.9 |  
|                          |  |      |      |      |   |      |  |   |      |  
|Net rent expense (income) |  | $    | 2.0  |      | $ | 1.8  |  | $ | (0.5 | )
|                          |  |      |      |      |   |      |  |   |      |  



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##### Table of Contents

MIDAS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Substantially all of the Companys operating leases provide that MDS pay taxes, maintenance,
insurance, and certain other operating expenses. The subleases with franchisees contain provisions for MDS to recover such costs. Real estate expenses are recognized using the straight-line method.

Real Estate Sale and Leaseback Transaction

MDS owns retail properties throughout the United States and Canada that are leased to franchisees and operated as Midas shops. During fiscal 2002, the Company sold 77 of these properties to Realty Income Corporation, a publicly traded real
estate investment trust (REIT), and realized approximately $39.6 million in net proceeds. Simultaneous to that sale, MDS leased these properties from Realty Income Corporation and the sites continue to be leased to Midas franchisees under existing
leases. Because these properties will continue to generate rents to MDS, the Company recorded a finance lease obligation pursuant to Statement of Financial Accounting Standards No. 98 Accounting for Leases on the balance sheet of
$39.6 million, equal to the net sale price of the properties, and no gain on the sale was recognized. The properties remain on the balance sheet at their historic cost and continue to be depreciated over their remaining useful lives. Annual lease
payments (shown below) will be made through the expiration of the lease in 2022.

Minimum Annual Rental Payments

At fiscal year end 2008, annual minimum rental payments due under capital, finance and operating leases that have initial or remaining non-cancelable
terms in excess of one year, along with sublease rental income on real estate due under non-cancelable subleases were as follows (in millions):



|                                                                   |  |               |     |               |   |                 |  |                 |       |  |       |        |   |  |   |     
|------------------------------------------------------------------ |  | ------------- | --- | ------------- | - | --------------- |  | --------------- | ----- |  | ----- | ------ | - |  | - | ----
|                                                                   |  | CapitalLeases |     | FinanceLeases |   | OperatingLeases |  | SubleaseRentals |       |  | Total
|2009                                                               |  | $             | 0.5 |               | $ | 4.6             |  | $               | 25.2  |  | $     | (21.4  | ) |  | $ | 8.9 
|2010                                                               |  |               | 0.4 |               |   | 4.6             |  |                 | 22.9  |  |       | (19.1  | ) |  |   | 8.8 
|2011                                                               |  |               | 0.4 |               |   | 4.7             |  |                 | 20.5  |  |       | (17.2  | ) |  |   | 8.4 
|2012                                                               |  |               | 0.4 |               |   | 4.7             |  |                 | 17.4  |  |       | (14.5  | ) |  |   | 8.0 
|2013                                                               |  |               | 0.4 |               |   | 4.7             |  |                 | 13.0  |  |       | (10.6  | ) |  |   | 7.5 
|Thereafter                                                         |  |               | 0.9 |               |   | 39.2            |  |                 | 44.8  |  |       | (36.9  | ) |  |   | 48.0
|                                                                   |  |               |     |               |   |                 |  |                 |       |  |       |        |   |  |   |     
|Total minimum lease payments                                       |  |               | 3.0 |               |   | 62.5            |  | $               | 143.8 |  | $     | (119.7 | ) |  | $ | 89.6
|                                                                   |  |               |     |               |   |                 |  |                 |       |  |       |        |   |  |   |     
|Less imputed interest                                              |  |               | 0.8 |               |   | 29.7            |  |                 |       |  |       |        |   |  |   |     
|                                                                   |  |               |     |               |   |                 |  |                 |       |  |       |        |   |  |   |     
|Present value of minimum lease payments                            |  |               | 2.2 |               |   | 32.8            |  |                 |       |  |       |        |   |  |   |     
|Less current portion                                               |  |               | 0.4 |               |   | 1.1             |  |                 |       |  |       |        |   |  |   |     
|                                                                   |  |               |     |               |   |                 |  |                 |       |  |       |        |   |  |   |     
|Obligations under capital and finance lease obligationsnoncurrent |  | $             | 1.8 |               | $ | 31.7            |  |                 |       |  |       |        |   |  |   |     
|                                                                   |  |               |     |               |   |                 |  |                 |       |  |       |        |   |  |   |     

At fiscal year end 2008 and 2007, the net book value of property under capital leases included in
the balance sheets amounted to $1.4 million and $1.8 million, respectively. At fiscal year end 2008 and 2007, the net book value of property under finance leases included in the balance sheets amounted to $25.2 million and $25.8 million,
respectively.

Real Estate Owned by Midas and Leased to Franchisees

MDS owns real estate located in various communities throughout the United States and Canada that is leased to franchisees under operating lease
agreements. Substantially all leases are for initial terms of 20 years and provide for minimum and contingent rentals.



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##### Table of Contents

MIDAS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Real estate leased to franchisees and included in the balance sheets consisted of (in millions):



|                             |  |      |       |   |      |   |       |  
|---------------------------- |  | ---- | ----- | - | ---- | - | ----- | -
|Fiscal Year End              |  | 2008 |       |   | 2007 |  
|Land                         |  | $    | 24.9  |   |      | $ | 25.9  |  
|Buildings and improvements   |  |      | 52.9  |   |      |   | 52.7  |  
|                             |  |      |       |   |      |   |       |  
|Total property and equipment |  |      | 77.8  |   |      |   | 78.6  |  
|Accumulated depreciation     |  |      | (37.5 | ) |      |   | (35.6 | )
|                             |  |      |       |   |      |   |       |  
|Property and equipment, net  |  | $    | 40.3  |   |      | $ | 43.0  |  
|                             |  |      |       |   |      |   |       |  

Rental revenue on owned real estate for fiscal 2008 was $9.0 million, compared to $9.5 million in
fiscal 2007 and $9.8 million in fiscal 2006. Minimum future lease payments to be received are as follows (in millions):



|           |  |   |      
|---------- |  | - | -----
|2009       |  | $ | 8.6  
|2010       |  |   | 8.4  
|2011       |  |   | 7.6  
|2012       |  |   | 7.1  
|2013       |  |   | 7.0  
|Thereafter |  |   | 61.5 
|           |  |   |      
|Total      |  | $ | 100.2
|           |  |   |      

Certain sub-leases on owned real estate contain a clause whereby future minimum rental income is
contingent upon future retail sales at the location. As a result of this contingency, minimum future lease payments to be received, based upon retail sales, have not been included in the table above. The estimated future lease payments to be
received by the Company under these lease agreements, based on the last fixed minimum rent, are as follows (in millions):



|           |  |   |     
|---------- |  | - | ----
|2009       |  | $ |    
|2010       |  |   | 0.1 
|2011       |  |   | 1.0 
|2012       |  |   | 1.4 
|2013       |  |   | 1.6 
|Thereafter |  |   | 12.8
|           |  |   |     
|Total      |  | $ | 16.9
|           |  |   |     

Contingent Operating Lease Agreements

MDS has entered into contingent operating lease agreements covering real estate that is leased by U.S. and Canadian franchisees from parties that are
directly or indirectly related to the franchisees. At January 3, 2009, 68 Midas and 17 SpeeDee shops were covered by these contingent operating lease agreements, under which MDS could be required, under certain limited circumstances, to begin
making rental payments with respect to individual shop locations. For the contingent Midas shop leases, the average annual shop rental is $54 thousand with an average remaining term of approximately six years. For the contingent SpeeDee shop leases,
the average shop rental is $68 thousand with an average remaining term of approximately fourteen years.



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##### Table of Contents

MIDAS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Management believes that, individually and in the aggregate, any potential difference that might
arise under these contingent lease agreements between the rental expense and the rental income from future subleases would not materially affect the financial position or results of operations of MDS.

(9) Pension Plans

Defined Benefit Pension Plans
and Other Postretirement Plans

Effective December 29, 2007 (fiscal year 2007), MDS adopted FASB Statement No. 158,
Employers Accounting for Defined Benefit Pension and Other Postretirement Plans. The provisions of the statement require that the funded status of pension plans and other postretirement benefit plans be recognized on the balance
sheet. FASB Statement No. 158 also requires the measurement date for plan assets and liabilities to coincide with the sponsors year end beginning with fiscal year 2008. Prior to the adoption of FASB Statement No. 158 MDS
measured the plan assets and benefit obligations annually as of September 30.

Certain MDS employees in the U.S. and Canada are
covered under various defined benefit pension plans sponsored and funded by MDS. Plans covering salaried employees provide pension benefits based on years of service, and generally are limited to a maximum of 20% of the employees average
annual compensation during the five years preceding retirement. Plans covering hourly employees generally provide benefits of stated amounts for each year of service. Plan assets are invested primarily in common stocks, corporate bonds, and
government securities. The cost of these plans is being funded currently.

Net periodic pension cost for fiscal 2008, 2007 and 2006 are
presented in the following table (in millions):



|                                              |  |      |      |   |      |   |      |      |  |   |      |  
|--------------------------------------------- |  | ---- | ---- | - | ---- | - | ---- | ---- |  | - | ---- | -
|Fiscal Year                                   |  | 2008 |      |   | 2007 |   |      | 2006 | 
|Service cost                                  |  | $    | 0.9  |   |      | $ | 1.2  |      |  | $ | 1.4  |  
|Interest cost on projected benefit obligation |  |      | 3.6  |   |      |   | 3.4  |      |  |   | 3.3  |  
|Expected return on assets                     |  |      | (5.0 | ) |      |   | (4.9 | )    |  |   | (4.8 | )
|Net amortization and deferral                 |  |      | 0.6  |   |      |   | 0.5  |      |  |   | 0.6  |  
|                                              |  |      |      |   |      |   |      |      |  |   |      |  
|Total net periodic cost                       |  | $    | 0.1  |   |      | $ | 0.2  |      |  | $ | 0.5  |  
|                                              |  |      |      |   |      |   |      |      |  |   |      |  

The principal economic assumptions used in the determination of net periodic pension cost of the
U.S. Defined Benefits Plan included the following:



|                                                 |  |       |   |  |      |   |  |      |  
|------------------------------------------------ |  | ----- | - |  | ---- | - |  | ---- | -
|Fiscal Year                                      |  | 2008  |   |  | 2007 |   |  | 2006 |  
|Discount rate                                    |  | 6.125 | % |  | 6.25 | % |  | 5.75 | %
|Expected long-term rate of return on plan assets |  | 8.25  | % |  | 8.50 | % |  | 8.50 | %
|Rate of increase in compensation levels          |  | 3.25  | % |  | 3.25 | % |  | 3.25 | %

The Company used the Citigroup pension index as the basis for determining the 2008 and 2007
discount rates. The Company used the Moodys corporate bond index as the basis for determining the 2006 discount rate. Such indices are long term in nature, which reflects the future timing of the expected cash flows for the pension plans.



F-23



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##### Table of Contents

MIDAS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The Company believes the assumed long-term rate of return on pension plan assets is appropriate given
the Companys target long-term asset allocation. The Company believes its target asset allocation is appropriate given the expected timing and amount of expenses for the plan. The Companys target asset allocation and actual asset
allocation for fiscal 2008 and fiscal 2007 were as follows for the U.S. Defined Benefit Plan:



|                                     |  |        |   |  |      |   |  |      |  
|------------------------------------ |  | ------ | - |  | ---- | - |  | ---- | -
|Fiscal Year                          |  | Target |   |  | 2008 |   |  | 2007 |  
|Large cap domestic equity securities |  | 30     | % |  | 27   | % |  | 32   | %
|Mid cap domestic equity securities   |  | 10     |   |  | 8    |   |  | 10   |  
|Small cap domestic equity securities |  | 15     |   |  | 14   |   |  | 14   |  
|International equity securities      |  | 15     |   |  | 12   |   |  | 18   |  
|Domestic fixed income and cash       |  | 30     |   |  | 39   |   |  | 27   |  
|                                     |  |        |   |  |      |   |  |      |  
|Total                                |  | 100    | % |  | 100  | % |  | 100  | %
|                                     |  |        |   |  |      |   |  |      |  

The Canadian Hourly Defined Benefit Plan and the Canadian Salary Defined Benefit Plan assets are
allocated 100% to cash and cash equivalents as these plans are either in process of being fully wound up or are significantly over-funded. The fair value of the Canadian plan assets is approximately $5.2 million as of January 3, 2009.

The following table presents estimated future benefits payments over the next 10 years, including expected future service, as appropriate
as of January 3, 2009 (in millions):



|            |  |   |     
|----------- |  | - | ----
|Fiscal Year |  |  
|2009        |  | $ | 4.5 
|2010        |  |   | 3.3 
|2011        |  |   | 3.3 
|2012        |  |   | 3.4 
|2013        |  |   | 3.6 
|2014  2018 |  |   | 20.8

Estimated payments in fiscal 2009 include special payouts associated with the 2003 partial wind-up
of the Canadian Salary Defined Benefit Plan of approximately $1.2 million.

The changes in the projected benefit obligations for fiscal
2008 and fiscal 2007 were as follows (in millions):



|                                                    |  |      |      |   |      |   |      |  
|--------------------------------------------------- |  | ---- | ---- | - | ---- | - | ---- | -
|Fiscal Year                                         |  | 2008 |      |   | 2007 |  
|Benefit obligations as of the beginning of the year |  | $    | 61.7 |   |      | $ | 62.0 |  
|Change in foreign currency exchange rates           |  |      | (0.7 | ) |      |   | 0.6  |  
|Service cost                                        |  |      | 1.1  |   |      |   | 1.2  |  
|Interest cost                                       |  |      | 4.3  |   |      |   | 3.2  |  
|Actuarial (gain) loss                               |  |      | 2.0  |   |      |   | (0.6 | )
|Benefits paid and plan expenses                     |  |      | (4.6 | ) |      |   | (4.7 | )
|                                                    |  |      |      |   |      |   |      |  
|Benefit obligations as of the end of the year       |  | $    | 63.8 |   |      | $ | 61.7 |  
|                                                    |  |      |      |   |      |   |      |  



F-24



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##### Table of Contents

MIDAS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The changes in the fair market value of the plan assets for fiscal 2008 and fiscal 2007 were as
follows (in millions):



|                                                     |  |      |       |   |      |   |      |  
|---------------------------------------------------- |  | ---- | ----- | - | ---- | - | ---- | -
|Fiscal Year                                          |  | 2008 |       |   | 2007 |  
|Fair value of assets as of the beginning of the year |  | $    | 65.3  |   |      | $ | 61.5 |  
|Change in foreign currency exchange rates            |  |      | (1.3  | ) |      |   | 1.1  |  
|Actual return on plan assets                         |  |      | (14.6 | ) |      |   | 7.4  |  
|Benefits paid and plan expenses                      |  |      | (4.6  | ) |      |   | (4.7 | )
|                                                     |  |      |       |   |      |   |      |  
|Fair value of assets as of the end of the year       |  | $    | 44.8  |   |      | $ | 65.3 |  
|                                                     |  |      |       |   |      |   |      |  

The Companys policy is to fund the pension plans in accordance with applicable U.S. and
Canadian government regulations and to make additional contributions as required. As of January 3, 2009, the Company has met all regulatory minimum funding requirements. In fiscal year 2008, MDS made no contributions to the Companys
pension plans as per the regulatory minimum funding requirements. As a result of the significant reduction in the fair value of the U.S. plan assets MDS will be required to make a contribution to the U.S. plan in fiscal year 2009. Under the U.S.
Pension Protection Act of 2006 (PPA)MDS would have been expected to contribute approximately $2.9 million to the U.S. pension plan during 2009. New legislation, the Worker, Retiree, Employer Recovery Act of 2008 (WRERA), was passed in
late December 2008 and provides temporary loosening of pension funding requirements. The 2009 funding requirements under WRERA are less than the funding requirements under PPA. Under WRERA, the Company expects to contribute approximately $1.8
million to the U.S. Plan during 2009.

The following table reconciles the pension plans funded status to the amounts recognized in
MDSs balance sheets as of fiscal year end 2008 and 2007 (in millions):



|                                                            |  |      |       |   |      |   |       |  
|----------------------------------------------------------- |  | ---- | ----- | - | ---- | - | ----- | -
|Fiscal Year                                                 |  | 2008 |       |   | 2007 |  
|Actuarial present value of projected benefit obligation     |  | $    | (63.8 | ) |      | $ | (61.7 | )
|Plan assets at fair market value                            |  |      | 44.8  |   |      |   | 65.3  |  
|                                                            |  |      |       |   |      |   |       |  
|Plan assets (below) in excess of benefit obligation         |  |      | (19.0 | ) |      |   | 3.6   |  
|                                                            |  |      |       |   |      |   |       |  
|Prepaid (accrued) pension cost recognized on balance sheets |  | $    | (19.0 | ) |      | $ | 3.6   |  
|                                                            |  |      |       |   |      |   |       |  

Amounts recognized in accumulated other comprehensive loss as of fiscal 2008 and fiscal 2007 were
as follows (in millions):



|                            |  |      |      |      |   |    
|--------------------------- |  | ---- | ---- | ---- | - | ---
|Fiscal Year                 |  | 2008 |      | 2007
|Net actuarial loss          |  | $    | 26.6 |      | $ | 5.0
|Prior service costs         |  |      | 0.1  |      |   | 0.1
|                            |  |      |      |      |   |    
|Total recognized before tax |  | $    | 26.7 |      | $ | 5.1
|                            |  |      |      |      |   |    

The principal economic assumptions used in determining the above benefit obligations were discount
rates of 6.125% in fiscal 2008, 6.25% in fiscal 2007 and 5.75% in fiscal 2006, and rates of increase in future compensation levels of 3.25% in fiscal 2008 and 2007.



F-25



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##### Table of Contents

MIDAS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



As of January 3, 2009, the Company has recorded pension costs as follows (in millions):



|                          |  |      |       |  
|------------------------- |  | ---- | ----- | -
|Fiscal Year               |  | 2008 |      
|Prepaid pension asset     |  | $    | 2.3   |  
|Canadian prepaid reserve  |  |      | (2.3  | )
|Accrued pension liability |  |      | (21.2 | )
|                          |  |      |       |  
|Pension liability         |  | $    | (21.2 | )
|                          |  |      |       |  

The $2.3 million valuation reserve pertains to the partial wind-up of the Canadian Salaried
Defined Benefit Plan. As per provincial laws, the asset balance in excess of the Projected Benefit Obligation is not an asset of the Company.

Defined Contribution Plans

Substantially all U.S. salaried employees, certain U.S. hourly employees, and certain Canadian
employees participate in voluntary, contributory defined contribution plans to which MDS makes full or partial matching contributions. The Companys matching contributions to these plans amounted to $1.0 million, $0.9 million, and $1.0 million
in fiscal 2008, 2007 and 2006, respectively. MDS incurred costs to maintain the non-qualified plans of approximately $0.2 million, $0.1 million and $30 thousand in fiscal 2008, 2007 and 2006, respectively.

(10) Stock-Based Compensation and Other Equity Instruments

In fiscal 2006, the Company adopted the provisions of SFAS No. 123R when accounting for stock compensation expense. As a result, the Company reclassified the remaining deferred compensation of restricted stock
awards of approximately $4.2 million to common stock and paid-in capital. This reclassification did not impact total shareholders equity.



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##### Table of Contents

MIDAS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Stock Options

The Midas Stock Incentive Plan, the Midas Treasury Stock Plan and the Midas Directors Deferred Compensation Plan (the Plans) authorize the issuance of up to 4,806,886 shares of Midas common stock
pursuant to the exercise of incentive stock options, non-qualified stock options and stock appreciation rights and the grant of restricted stock and performance awards. Options granted pursuant to the Plans generally vest over a period of five years
commencing one year after the date of grant. It is the Companys policy to issue shares out of treasury when options are exercised. The following table summarizes information regarding the outstanding stock options as January 3, 2009:



|                                    |  |                 |   |  |                    |             |                              |   |                                                     |  |                                      |  |   |    
|----------------------------------- |  | --------------- | - |  | ------------------ | ----------- | ---------------------------- | - | --------------------------------------------------- |  | ------------------------------------ |  | - | ---
|                                    |  | Number ofShares |   |  | Option PriceRanges |             | WeightedAverageExercisePrice |   | Weighted AverageRemainingContractual Term(in years) |  | AggregateIntrinsicValue(in millions)
|Outstanding at fiscal year end 2005 |  | 1,745,148       |   |  | $                  | 6.77$34.66 |                              | $ | 13.13                                               |  |                                      |  |   |    
|Granted                             |  | 98,000          |   |  |                    | 21.7421.74 |                              |   | 21.74                                               |  |                                      |  |   |    
|Exercised                           |  | (186,429        | ) |  |                    | 7.2018.65  |                              |   | 14.04                                               |  |                                      |  |   |    
|Cancelled and forfeited             |  | (39,352         | ) |  |                    | 8.0922.17  |                              |   | 14.89                                               |  |                                      |  |   |    
|                                    |  |                 |   |  |                    |             |                              |   |                                                     |  |                                      |  |   |    
|Outstanding at fiscal year end 2006 |  | 1,617,367       |   |  |                    | 6.7734.66  |                              |   | 13.51                                               |  |                                      |  |   |    
|Granted                             |  | 168,600         |   |  |                    | 21.5321.53 |                              |   | 21.53                                               |  |                                      |  |   |    
|Exercised                           |  | (187,418        | ) |  |                    | 8.0922.00  |                              |   | 12.69                                               |  |                                      |  |   |    
|Cancelled and forfeited             |  | (47,300         | ) |  |                    | 13.3022.17 |                              |   | 18.47                                               |  |                                      |  |   |    
|                                    |  |                 |   |  |                    |             |                              |   |                                                     |  |                                      |  |   |    
|Outstanding at fiscal year end 2007 |  | 1,551,249       |   |  |                    | 6.7734.66  |                              |   | 14.33                                               |  |                                      |  |   |    
|Granted                             |  | 230,000         |   |  |                    | 15.2215.22 |                              |   | 15.22                                               |  |                                      |  |   |    
|Exercised                           |  | (14,088         | ) |  |                    | 8.0915.65  |                              |   | 14.04                                               |  |                                      |  |   |    
|Cancelled and forfeited             |  | (89,608         | ) |  |                    | 15.6522.17 |                              |   | 21.40                                               |  |                                      |  |   |    
|                                    |  |                 |   |  |                    |             |                              |   |                                                     |  |                                      |  |   |    
|Outstanding at fiscal year end 2008 |  | 1,677,553       |   |  |                    | 6.7734.66  |                              |   | 14.08                                               |  | 5.5                                  |  | $ | 2.3
|                                    |  |                 |   |  |                    |             |                              |   |                                                     |  |                                      |  |   |    
|Exercisable at fiscal year end 2008 |  | 1,152,873       |   |  |                    | 6.7734.66  |                              |   | 12.00                                               |  | 4.3                                  |  |   | 2.3
|                                    |  |                 |   |  |                    |             |                              |   |                                                     |  |                                      |  |   |    

Additional information pertaining to option activity during fiscal 2008, 2007 and 2006 was as
follows (in millions):



|                                           |  |      |      |   |      |   |      |      |  |   |    
|------------------------------------------ |  | ---- | ---- | - | ---- | - | ---- | ---- |  | - | ---
|                                           |  | 2008 |      |   | 2007 |   |      | 2006
|Weighted average grant-date fair value of: |  |      |      |   |      |   |      |      |  |   |    
|Stock options granted                      |  | $    | 1.3  |   |      | $ | 1.4  |      |  | $ | 0.9
|Stock options exercised                    |  |      | 0.1  |   |      |   | 1.2  |      |  |   | 1.2
|Stock options vested                       |  |      | 2.3  |   |      |   | 1.3  |      |  |   | 1.3
|Stock options forfeited                    |  |      | (1.1 | ) |      |   | (0.9 | )    |  |   |   

The weighted average estimated fair value of the options granted in fiscal 2008, 2007 and 2006 was
$5.82, $8.45 and $9.04, respectively, based on the Black-Scholes valuation model using the following assumptions:



|                        |  |       |   |  |       |   |  |       |  
|----------------------- |  | ----- | - |  | ----- | - |  | ----- | -
|Fiscal Year             |  | 2008  |   |  | 2007  |   |  | 2006  |  
|Risk-free interest rate |  | 3.06  | % |  | 4.61  | % |  | 5.02  | %
|Dividend yield          |  | 0.0   | % |  | 0.0   | % |  | 0.0   | %
|Expected volatility     |  | 32.50 | % |  | 28.01 | % |  | 29.78 | %
|Expected life in years  |  | 6.25  |   |  | 6.50  |   |  | 6.50  |  



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



As of January 3, 2009, there was $4.0 million in stock option compensation expense related to
unvested awards not yet recognized, which is expected to be recognized over a weighted average period of 1.8 years.

Restricted Stock

From time to time the Company grants shares of restricted stock to certain of its employees, officers and directors. Certain restricted
stock vests at the five or seven year anniversary, with provisions for accelerated vesting upon the occurrence of certain pre-determined events (cliff-vesting shares), while other restricted stock vests equally over periods of three to
five-years or only upon the occurrence of certain pre-determined events (the latter being referred to as performance shares). The fair value of all but the performance share grants is equal to the stock price on the date of the grant.
The fair value of the performance share grants is based on their derived service period calculated using either a Monte Carlo simulation model or managements expectations of achieving the objectives. Activity for restricted shares for the
prior three years, including the non-vested restricted shares outstanding and the weighted average grant-date fair value of those restricted shares is shown in the table below:



|                                           |  |                           |   |  |                                      |      
|------------------------------------------ |  | ------------------------- | - |  | ------------------------------------ | -----
|                                           |  | Number ofRestrictedShares |   |  | Weighted AverageGrant-DateFair
Value
|Non-vested balance at fiscal year end 2005 |  | 293,411                   |   |  | $                                    | 17.88
|Granted                                    |  | 218,500                   |   |  |                                      | 21.74
|Vested                                     |  | (10,250                   | ) |  |                                      | 9.10 
|Forfeited                                  |  | (6,333                    | ) |  |                                      | 21.43
|                                           |  |                           |   |  |                                      |      
|Non-vested balance at fiscal year end 2006 |  | 495,328                   |   |  |                                      | 19.72
|Granted                                    |  | 116,800                   |   |  |                                      | 15.57
|Vested                                     |  | (10,250                   | ) |  |                                      | 9.07 
|Forfeited                                  |  | (31,833                   | ) |  |                                      | 21.49
|                                           |  |                           |   |  |                                      |      
|Non-vested balance at fiscal year end 2007 |  | 570,045                   |   |  |                                      | 15.75
|Granted                                    |  | 208,000                   |   |  |                                      | 10.08
|Vested                                     |  | (87,680                   | ) |  |                                      | 12.30
|                                           |  |                           |   |  |                                      |      
|Non-vested balance at fiscal year end 2008 |  | 690,365                   |   |  |                                      | 14.66
|                                           |  |                           |   |  |                                      |      

The performance shares granted in 2008 vest only if certain internal performance measures, all
pertaining to growth of the companys cash flow, are met or exceeded. These conditionally vested grants were valued based on managements estimate of meeting the performance requirement.

The performance shares granted in 2007 vest only if the total return on the Companys stock exceeds the total return on the S&P 500 stock index
as of certain measurement dates. These conditionally vested grants were valued based on the probability of meeting the performance requirement. The derived service period for the conditionally vested grants was calculated using a Monte Carlo
simulation model which utilizes multiple input variables that determine the probability of satisfying each market condition stipulated in the award grant.

For cliff-vesting shares with a stipulated market condition granted in 2006, the derived service period was calculated using a Monte Carlo simulation model. The Monte Carlo simulation model utilizes multiple input
variables that determine the probability of satisfying each market condition stipulated in the award grant. Forfeiture assumptions were applied to all shares granted in 2007 and 2006.

As of January 3, 2009, there was $4.4 million of unamortized restricted stock compensation of which $10.1 million was included as a reduction to
paid-in capital and $5.7 million was included in non-vested restricted



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



stock subject to redemption. The $4.4 million of unamortized restricted stock compensation is expected to be recognized over a weighted average period of 3.0
years.

Restricted stock grants include a change in control provision, which provides for cash redemption of unvested
restricted stock in certain circumstances. Securities and Exchange Commission Accounting Series Release No. 268 (ASR 268), Presentation in Financial Statements of Redeemable Preferred Stocks, requires securities with contingent cash
settlement provisions that are not solely in the control of the issuer, without regard to probability of occurrence, to be classified outside of shareholders equity. While the Company believes the possibility of occurrence of any such change
of control event is remote, the contingent cash settlement of the restricted stock as a result of such event would not be solely in the control of the Company. As such, the Company presents the $5.7 million value of unvested restricted stock as
temporary equity on the consolidated balance sheet. Upon the vesting of the restricted stock the Company reclassifies the value of the restricted stock to permanent equity.

Common Stock Warrants

On
March 27, 2003, the Company issued 1.0 million warrants valued at $5.0 million in connection with its 2003 debt restructuring. On January 5, 2004, 500,000 of these warrants were automatically cancelled because the Company met certain
financial objectives contained in the warrant agreements. As of January 3, 2009, a total of 41,273 warrants remained outstanding. The exercise price of the warrants is $0.01, and the warrants are exercisable at any time up to March 27,
2013. Any warrants that remain unexercised at March 27, 2013 are automatically exercised as of that date.

(11) Shareholder Rights Agreement
and Series A Junior Participating Preferred Stock

In fiscal 2007, MDS adopted a Rights Agreement providing for the issuance of one
Preferred Stock Purchase Right (a Right) with each share of MDS common stock. Each Right entitles the registered holder to purchase from MDS one one-hundredth of a share of Series A Junior Participating Preferred Stock (a Preferred
Share) at a price of $80 per one one-hundredth of a Preferred Share (the Purchase Price), subject to adjustment. The Rights will become exercisable on the Rights Distribution Date, which is the earlier of the tenth day following a
public announcement that a person(s) has acquired beneficial ownership of 20% or more of the MDS common stock (an Acquiring Person), or ten business days after the commencement of a tender offer or exchange offer that would result in a
person(s) acquiring beneficial ownership of 20% or more of the outstanding shares of Midas common stock.

If a person becomes an Acquiring
Person, each Right holder (other than the Acquiring Person) will be entitled to receive, upon exercise of the Right, a number of shares of MDS common stock having a market value of two times the exercise price of the Right. If MDS is acquired in a
merger or other business combination, each Right holder (other than the Acquiring Person) will be entitled to receive, upon exercise of a Right, a number of the acquiring Companys common shares having a market value at that time of two times
the exercise price of the Right.

In general, MDS can redeem all the Rights for one cent per Right at any time until the date that a person
has become an Acquiring Person. The MDS Board of Directors, without the consent of the holders of the Rights, is also authorized to reduce the stock ownership thresholds to not less than 10 percent or increase them to not more than 20 percent. The
Rights will expire on December 31, 2017. Until a Right is exercised, the holder of a Right (merely by being a Right holder) will have no rights as a shareholder of Midas, including voting or dividend rights.



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MIDAS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Each Preferred Share will be entitled to a minimum preferential quarterly dividend payment of $0.01
per share, but will be entitled to an aggregate dividend of 100 times the dividend declared per share of MDS common stock. Each Preferred Share will have 100 votes, voting together with the MDS common stock. In the event of a merger or other
transaction in which shares of common stock of the Company are exchanged, each Preferred Share will be entitled to receive 100 times the amount received per share of MDS common stock.

The Company has 20 million authorized shares of Series A Junior Participating Preferred Stock. There are no Series A Junior Participating Preferred
Stock issued or outstanding.

(12) Contingencies

MDS has certain contingent liabilities arising from various pending claims and litigation related to a number of matters. While the amount of liability that may result from these matters cannot be determined, in the
opinion of the Companys counsel, the ultimate liability will not materially affect the financial position, results of operations or cash flows of MDS.

The Company is currently involved in two potential class action lawsuits. The first suit was filed in California in June 2006 and alleges that certain franchised California Midas shops intentionally issued invoices to
certain brake customers which incorrectly indicated that the customers had received Midas-branded brake products when, in fact, they had received inferior non-Midas brake products. Midas denies the plaintiffs allegations and is vigorously
defending this lawsuit. Midas has thus far been successful in challenging the legal sufficiency of the plaintiffs claims. The plaintiffs third amended complaint has been dismissed. The plaintiffs filed a fourth amended complaint in March
of 2009. The Company continues to believe that the allegations are without merit and that it will ultimately succeed in this litigation.

The second potential class action lawsuit was filed against the Company in Canada by two Canadian Midas franchisees. The plaintiffs allege various violations of the Midas Franchise and Trademark Agreement and are seeking class certification
and monetary damages of approximately $168,000,000. As stated in a previously filed Form 8-K, MDS believes that this lawsuit is completely without merit. The class certification hearing took place in February 2009. To date, the Court has yet to
issue a ruling on class certification.

The Company has entered into a purchase agreement, which could result in the purchase of up to four
shops from a Midas franchisee if the purchase agreements are not assigned to third party buyers prior the expiration of the option periods. The purchase agreements require MDS to purchase four shops for approximately $1.1 million no later than
March 30, 2009. MDS has the right to assign these purchase agreements to an approved third party at any point prior to March 30, 2009. Additionally, the purchase agreements require MDS, or an assigned third party, to purchase land and
buildings for three of the four locations for approximately $1.6 million. The related land and building purchase must coincide with the business purchase and also must be completed prior to March 30, 2009, subject to certain closing conditions.

(13) Derivative Instruments

In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS 157), which defines fair value, establishes guidelines for measuring fair value and expands disclosures regarding fair value measurements. SFAS
157 does not require any new fair value measurements but rather eliminates inconsistencies in guidance found in certain preceding accounting pronouncements. SFAS 157 is effective for fiscal years beginning after November 15, 2007. However, in
December 2007, the FASB issued FASB Staff Position SFAS 157-b (FSP 157-b), which delayed the effective date of SFAS 157 for all non-financial assets and non-financial



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##### Table of Contents

MIDAS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). FSP 157-b also
deferred the effective date of SFAS 157 to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years for items within the scope of FSP 157-b. During the first quarter of 2008, the Company adopted SFAS 157,
except as it applies to those non-financial assets and non-financial liabilities as noted in FSP 157-b. Although the adoption of SFAS 157 did not materially impact its financial condition, results of operations, or cash flow, the Company is now
required to provide additional disclosures as part of its financial statements.

SFAS 157 establishes a three-tier fair value hierarchy,
which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either
directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The Company has market risk exposure to changes in interest rates, principally in the United States. MDS attempts to minimize this risk and fix a portion
of its overall borrowing costs through the utilization of interest rate swaps. MDS hedges variable cash flows resulting from floating-rate debt. Variable cash flows from outstanding debt are converted to fixed-rate cash flows by entering into
receive-variable, pay-fixed interest-rate swaps. Hedge ineffectiveness is eliminated by matching all terms of the hedged item and the hedging derivative at inception and on an ongoing basis. MDS does not exclude any terms from consideration when
applying the matched terms method.

The fair values of the Companys interest rate swaps are estimated using Level 2 inputs, which are
based on model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. The Company also considers counterparty credit-risk and bilateral or own credit risk adjustments in
estimating fair value, in accordance with the requirements of SFAS 157. The Companys adoption of this provision resulted in a $237,000 decrease in long-term swap liability, a $92,000 reduction in deferred income taxes and a $145,000 increase
in accumulated other comprehensive loss through fiscal 2008. The adoption of SFAS 157 had no impact on cash provided by operating activities.

The fair value of derivative instruments is summarized as follows (in millions):



|                                            |  |                        |  |                         |     |                        |                   |           |   |    
|------------------------------------------- |  | ---------------------- |  | ----------------------- | --- | ---------------------- | ----------------- | --------- | - | ---
|                                            |  | As of January 3, 2009  |  | As of December 29, 2007
|                                            |  | Balance Sheet Location |  | FairValue               |     | Balance Sheet Location |                   | FairValue
|Derivatives designed as hedging instruments |  |                        |  |                         |     |                        |                   |           |   |    
|Interest rate contracts                     |  | Other liabilities      |  | $                       | 2.6 |                        | Other liabilities |           | $ | 1.2
|                                            |  |                        |  |                         |     |                        |                   |           |   |    
|Total                                       |  |                        |  | $                       | 2.6 |                        |                   |           | $ | 1.2
|                                            |  |                        |  |                         |     |                        |                   |           |   |    

Because the interest rate contracts have been designated as cash flow hedges and have been
evaluated to be highly effective, there is no impact on the Statement of Operations. The after-tax change in the fair value of these swaps is recorded in accumulated other comprehensive income as a gain or loss on derivative financial instruments.



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MIDAS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(14) Business Segment Information

MDS operates in a single business segment and provides retail automotive services principally through franchised and company-operated shops located in
North America (United States and Canada) and through franchised and licensed shops in international markets. The Companys U.S. operations receive royalties from franchisees located in Central America. Such revenues amounted to less than one
percent of U.S. sales and revenues in each of the fiscal years presented.

No MDS customer accounted for more than 10% of the
Companys total sales and revenues in fiscal 2008 or fiscal 2007.

The following tables present financial information for each of the
principal geographic areas in which the Company operates. Sales and revenues are attributed to geographic areas based on the location of customers.



|                           |  |                     |       |      |   |       |  |   |      
|-------------------------- |  | ------------------- | ----- | ---- | - | ----- |  | - | -----
|                           |  | Sales and Revenues 
|Fiscal Year                |  | 2008                |       | 2007 |   | 2006 
|                           |  | (in millions)      
|North American Operations: |  |                     |       |      |   |       |  |   |      
|U.S.                       |  | $                   | 159.7 |      | $ | 149.4 |  | $ | 147.8
|Canada                     |  |                     | 23.2  |      |   | 19.7  |  |   | 17.2 
|                           |  |                     |       |      |   |       |  |   |      
|Total North America        |  |                     | 182.9 |      |   | 169.1 |  |   | 165.0
|International Operations   |  |                     | 4.5   |      |   | 9.1   |  |   | 9.9  
|                           |  |                     |       |      |   |       |  |   |      
|Total                      |  | $                   | 187.4 |      | $ | 178.2 |  | $ | 174.9
|                           |  |                     |       |      |   |       |  |   |      
|                           | 
|                           |  | Identifiable Assets
|Fiscal Year End            |  | 2008                |       | 2007 |   | 2006 
|                           |  | (in millions)      
|North American Operations: |  |                     |       |      |   |       |  |   |      
|U.S.                       |  | $                   | 223.2 |      | $ | 200.3 |  | $ | 197.0
|Canada                     |  |                     | 11.9  |      |   | 14.6  |  |   | 18.0 
|                           |  |                     |       |      |   |       |  |   |      
|Total North America        |  |                     | 235.1 |      |   | 214.9 |  |   | 215.0
|International Operations   |  |                     | 0.3   |      |   | 0.7   |  |   | 0.7  
|                           |  |                     |       |      |   |       |  |   |      
|Total                      |  | $                   | 235.4 |      | $ | 215.6 |  | $ | 215.7
|                           |  |                     |       |      |   |       |  |   |      



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MIDAS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(15) Selected Quarterly Financial Data (Unaudited)

Each quarter presented in the following table contains 13 weeks except for the fourth quarter of fiscal 2008, which contains 14 weeks.



|                                             |  |                                      |      |   |               |   |      |              |  |   |               |   |  |          |      |   |  |   |       |  
|-------------------------------------------- |  | ------------------------------------ | ---- | - | ------------- | - | ---- | ------------ |  | - | ------------- | - |  | -------- | ---- | - |  | - | ----- | -
|                                             |  | FirstQuarter                         |      |   | SecondQuarter |   |      | ThirdQuarter |  |   | FourthQuarter |   |  | FullYear |     
|                                             |  | (in millions, except per share data) |     
|Fiscal 2008                                  |  |                                      |      |   |               |   |      |              |  |   |               |   |  |          |      |   |  |   |       |  
|Sales and revenues                           |  | $                                    | 44.8 |   |               | $ | 48.8 |              |  | $ | 47.1          |   |  | $        | 46.7 |   |  | $ | 187.4 |  
|Franchised shopsoccupancy expenses          |  |                                      | 5.8  |   |               |   | 5.7  |              |  |   | 5.6           |   |  |          | 5.7  |   |  |   | 22.8  |  
|Company-operated shop costs and expenses     |  |                                      | 15.0 |   |               |   | 16.1 |              |  |   | 15.8          |   |  |          | 16.1 |   |  |   | 63.0  |  
|Replacement part cost of sales               |  |                                      | 6.1  |   |               |   | 6.2  |              |  |   | 6.3           |   |  |          | 7.8  |   |  |   | 26.4  |  
|Warranty expense (benefit)                   |  |                                      | 0.1  |   |               |   | 0.2  |              |  |   | 0.2           |   |  |          | (3.2 | ) |  |   | (2.7  | )
|Selling, general and administrative expenses |  |                                      | 13.3 |   |               |   | 14.1 |              |  |   | 12.9          |   |  |          | 13.8 |   |  |   | 54.1  |  
|Loss on sale of assets, net                  |  |                                      | 0.3  |   |               |   | 0.3  |              |  |   | 0.1           |   |  |          | 0.2  |   |  |   | 0.9   |  
|Business transformation charges              |  |                                      | 0.2  |   |               |   | 0.4  |              |  |   | 0.9           |   |  |          | 0.1  |   |  |   | 1.6   |  
|                                             |  |                                      |      |   |               |   |      |              |  |   |               |   |  |          |      |   |  |   |       |  
|Total operating costs and expenses           |  |                                      | 40.8 |   |               |   | 43.0 |              |  |   | 41.8          |   |  |          | 40.5 |   |  |   | 166.1 |  
|                                             |  |                                      |      |   |               |   |      |              |  |   |               |   |  |          |      |   |  |   |       |  
|Operating income                             |  |                                      | 4.0  |   |               |   | 5.8  |              |  |   | 5.3           |   |  |          | 6.2  |   |  |   | 21.3  |  
|Interest expense                             |  |                                      | (2.2 | ) |               |   | (2.3 | )            |  |   | (2.2          | ) |  |          | (2.4 | ) |  |   | (9.1  | )
|Other income (expense), net                  |  |                                      | 0.2  |   |               |   | 0.2  |              |  |   | (0.1          | ) |  |          | 0.5  |   |  |   | 0.8   |  
|                                             |  |                                      |      |   |               |   |      |              |  |   |               |   |  |          |      |   |  |   |       |  
|Income before taxes                          |  |                                      | 2.0  |   |               |   | 3.7  |              |  |   | 3.0           |   |  |          | 4.3  |   |  |   | 13.0  |  
|Income tax expense                           |  |                                      | 0.8  |   |               |   | 1.5  |              |  |   | 1.3           |   |  |          | 1.6  |   |  |   | 5.2   |  
|                                             |  |                                      |      |   |               |   |      |              |  |   |               |   |  |          |      |   |  |   |       |  
|Net income                                   |  | $                                    | 1.2  |   |               | $ | 2.2  |              |  | $ | 1.7           |   |  | $        | 2.7  |   |  | $ | 7.8   |  
|                                             |  |                                      |      |   |               |   |      |              |  |   |               |   |  |          |      |   |  |   |       |  
|Earnings per sharediluted                   |  | $                                    | 0.09 |   |               | $ | 0.16 |              |  | $ | 0.12          |   |  | $        | 0.20 |   |  | $ | 0.56  |  
|                                             |  |                                      |      |   |               |   |      |              |  |   |               |   |  |          |      |   |  |   |       |  
|Fiscal 2007                                  |  |                                      |      |   |               |   |      |              |  |   |               |   |  |          |      |   |  |   |       |  
|Sales and revenues                           |  | $                                    | 41.3 |   |               | $ | 44.9 |              |  | $ | 45.7          |   |  | $        | 46.3 |   |  | $ | 178.2 |  
|Franchised shopsoccupancy expenses          |  |                                      | 5.5  |   |               |   | 5.4  |              |  |   | 5.5           |   |  |          | 5.7  |   |  |   | 22.1  |  
|Company-operated shop costs and expenses     |  |                                      | 9.3  |   |               |   | 10.2 |              |  |   | 12.5          |   |  |          | 13.6 |   |  |   | 45.6  |  
|Replacement part cost of sales               |  |                                      | 5.5  |   |               |   | 6.9  |              |  |   | 5.8           |   |  |          | 7.8  |   |  |   | 26.0  |  
|Warranty expense (benefit)                   |  |                                      | 1.1  |   |               |   | 1.3  |              |  |   | 1.2           |   |  |          | (7.9 | ) |  |   | (4.3  | )
|Selling, general and administrative expenses |  |                                      | 13.7 |   |               |   | 13.0 |              |  |   | 12.9          |   |  |          | 13.6 |   |  |   | 53.2  |  
|Gain on sale of assets, net                  |  |                                      |     |   |               |   |     |              |  |   | (0.2          | ) |  |          |     |   |  |   | (0.2  | )
|Business transformation charges              |  |                                      | 0.5  |   |               |   | 1.0  |              |  |   | 0.6           |   |  |          | 1.6  |   |  |   | 3.7   |  
|                                             |  |                                      |      |   |               |   |      |              |  |   |               |   |  |          |      |   |  |   |       |  
|Total operating costs and expenses           |  |                                      | 35.6 |   |               |   | 37.8 |              |  |   | 38.3          |   |  |          | 34.4 |   |  |   | 146.1 |  
|                                             |  |                                      |      |   |               |   |      |              |  |   |               |   |  |          |      |   |  |   |       |  
|Operating income                             |  |                                      | 5.7  |   |               |   | 7.1  |              |  |   | 7.4           |   |  |          | 11.9 |   |  |   | 32.1  |  
|Interest expense                             |  |                                      | (2.2 | ) |               |   | (2.3 | )            |  |   | (2.3          | ) |  |          | (2.3 | ) |  |   | (9.1  | )
|Other income, net                            |  |                                      | 0.1  |   |               |   | 0.2  |              |  |   |              |   |  |          | 0.1  |   |  |   | 0.4   |  
|                                             |  |                                      |      |   |               |   |      |              |  |   |               |   |  |          |      |   |  |   |       |  
|Income before taxes                          |  |                                      | 3.6  |   |               |   | 5.0  |              |  |   | 5.1           |   |  |          | 9.7  |   |  |   | 23.4  |  
|Income tax expense                           |  |                                      | 1.5  |   |               |   | 2.1  |              |  |   | 2.2           |   |  |          | 4.6  |   |  |   | 10.4  |  
|                                             |  |                                      |      |   |               |   |      |              |  |   |               |   |  |          |      |   |  |   |       |  
|Net income                                   |  | $                                    | 2.1  |   |               | $ | 2.9  |              |  | $ | 2.9           |   |  | $        | 5.1  |   |  | $ | 13.0  |  
|                                             |  |                                      |      |   |               |   |      |              |  |   |               |   |  |          |      |   |  |   |       |  
|Earnings per sharediluted                   |  | $                                    | 0.14 |   |               | $ | 0.20 |              |  | $ | 0.20          |   |  | $        | 0.36 |   |  | $ | 0.89  |  
|                                             |  |                                      |      |   |               |   |      |              |  |   |               |   |  |          |      |   |  |   |       |  

The sum of earnings per share for the quarters may not equal the full year amount in each year due
to the impact of changes in the average shares outstanding.



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##### Table of Contents

MIDAS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



As a result of changes in the Companys business model over the past five years, including the
exit from exhaust manufacturing and distribution, the outsourcing of parts distribution and the expansion into a broader retail service menu, the seasonality of the Companys sales has been reduced. In fiscal 2008 and fiscal 2007 revenues in
the first and fourth quarters were not significantly different than revenues in the second and third quarters.

Certain factors other than
seasonality have impacted the Companys quarterly net income and earnings per share and these are discussed in greater detail below.

Quarterly VariationsFiscal 2008

Revenues and company-operated shop expenses grew throughout the year due to the
acquisition of 15 shops, partially offset by the re-franchising of seven shops. The Company re-negotiated the lease for its corporate office in Itasca, IL, which resulted in a net reduction of operating expenses of approximately $1.2 million
compared to fiscal 2007. The rent savings were substantially offset by higher legal expenses throughout the year due to two potential class-action lawsuits. Fourth quarter revenues and replacement part cost of sales were higher because of a seasonal
increase in tire sales. Fourth quarter tire sales accounted for 30% of tire sales recorded for the year. In the fourth quarter the Company reduced its warranty liability by $3.4 million. The reduction was the result of the Companys change in
estimate for the warranty reserves.

Revenues, primarily franchise royalties, and operating expenses increased in the last three quarters
due to the purchase of the assets of G.C. & K.B. Investments, Inc. and its affiliated entities that franchise or sub-franchise SpeeDee quick-lube and automotive maintenance shops. SpeeDee operations contributed $1.6 million of operating
income in the most recent three fiscal quarters of fiscal 2008.

The Company recorded business transformation charges of $0.3 million in
the third quarter related to the closure of an unprofitable company-operated shop in Connecticut. The remaining business transformation charges relate primarily to the Companys partial funding of the rollout of a new shop image for Midas
shops.

Quarterly VariationsFiscal 2007

In the second quarter the Company purchased $1.8 million of products from AutoZone and subsequently sold them to NAPA, at cost, to facilitate the supply chain transition from AutoZone to NAPA, which resulted in higher
revenues and replacement part cost of sales. Revenues and company-operated shop expenses grew in the second through the fourth quarters due to the acquisition of 36 shops partially offset by the re-franchising of 12 shops. In the third quarter the
Company sold its Hartford manufacturing facility, the last remaining asset from the exhaust manufacturing operation, which resulted in a gain of $0.2 million. Fourth quarter revenues and replacement part cost of sales were higher because of a
seasonal increase in tire sales. Fourth quarter tire sales accounted for 33% of tire sales recorded for the year. In the fourth quarter the Company reduced its warranty liability by $8.3 million. The reduction was the result of the Companys
change in estimate for the warranty redemption rates, which resulted in an approximate two percentage point reduction in the expected bake warranty redemption rate and an approximate three percentage point reduction in the expected muffler warranty
redemption rate.

The Company recorded business transformation charges of $0.3 million in the first quarter and $0.7 million in the second
quarter related to the early termination of the Companys supply agreement with AutoZone. In the fourth quarter the Company recorded business transformation charges of $0.3 million in conjunction with the changeover of the US warranty program.
The remaining business transformation charges relate primarily to the Companys partial funding of the rollout of a new shop image for Midas shops.



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##### Table of Contents

MIDAS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The Company recorded an increase in income tax expense in the fourth quarter due to revaluation of
the Canadian deferred tax asset due the reduction of future Canadian income tax rates.

(16) Acquisitions and Divestitures

On March 30, 2008, Midas acquired the assets of G.C. & K.B. Investments, Inc. and its affiliated entities that franchise or sub-franchise
SpeeDee quick-lube and automotive maintenance shops. The purchase price was $21.0 million. SpeeDee is based in New Orleans and was founded in 1980. SpeeDee generated system-wide sales of approximately $78 million in 2007 through its network of U.S.
shops, four of which were owned and operated by SpeeDee. As of January 3, 2009, SpeeDee had 116 shop locations in the U.S. in 13 states, and 57 shops in Mexico. Of the U.S. shop locations, two were company-operated and 19 shops were
sub-franchised to a licensee who controls the franchise rights to SpeeDee locations in the New England region.

As a result of this
acquisition, the Company recorded $19.9 million in incremental goodwill and other intangibles, which included $8.7 million of intangible trademark, $3.9 million of intangible franchise agreements and $7.3 million of goodwill. The $3.9 million of
intangible franchise agreements will be amortized over a period of 22 years. The intangible trademark and goodwill have indefinite lives and, therefore, are not amortized, but are tested annually for impairment in the fourth quarter. All of the
acquired intangible assets are deductible for tax purposes. Supplemental pro forma financial information for this acquisition is not presented as it is not material.

During fiscal 2008, the Company acquired 15 shops to be run as company-operated shops, including 14 shops acquired from Midas franchisees and one shop acquired from a non-Midas operator, and acquired five shops, which
were immediately re-franchised to Midas franchisees. Of the 15 shops acquired for the company-operated shop business, nine were in the Indianapolis area, three were in Ottawa, Canada, two were in New Jersey and one was in California. The purchase
price of the 20 acquired shops was approximately $4.5 million, which consisted of $3.5 million paid in cash and $1.0 million used to settle accounts receivable from the selling Midas franchisees. These acquisitions resulted in $3.4 million of
incremental goodwill and other intangibles. The re-franchising of certain company-operated shops generated $1.0 million in cash and a loss on sale of assets of $0.9 million.

During fiscal 2007, the Company acquired 36 shops and other assets from Midas franchisees to be run as company-operated shops, and acquired two shops to
be franchised. Also in fiscal 2007 the Company re-franchised 12 company-operated shops to Midas franchisees. Of the shops acquired for the company-operated shop business, 12 were in California, 15 were in the northeast region of the U.S. and six
were in Vancouver, Canada, while 10 of the 12 re-franchised shops were in Florida. The purchase price of the acquired shops was approximately $16.4 million, which consisted of $13.7 million paid in cash and $2.7 million used to settle accounts
receivable from selling franchisees. These acquisitions resulted in $13.1 million of incremental goodwill and other intangibles. The re-franchising of 12 company-operated shops generated $1.5 million in cash proceeds and the retirement of $0.3
million of goodwill and other intangibles.

In September of fiscal 2007, the Company sold its former manufacturing plant in Hartford, WI.
The sale generated $1.1 million in net cash proceeds and resulted in the retirement of $0.9 million of net property and equipment.



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