<PAGE>

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                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                               ----------------

                                   FORM 10-K

[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
   ACT OF 1934
                   For the fiscal year ended January 1, 2000

                                      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              (Employer Identification No.)
   of Incorporation or Organization)


                                                           60143
     1300 Arlington Heights Road,                       (Zip Code)
           Itasca, Illinois
    (Address of Principal Executive
               Offices)

                                (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
     Common Stock, par value $.001               on Which Registered
    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 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 ((S) 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. [_]

  As of March 10, 2000, the aggregate market value of the Registrant's voting
common equity held by non-affiliates was $368,165,264 (based on closing sale
price of $23.94 on March 10, 2000, as reported for the New York Stock
Exchange-Composite Transactions).

  The number of shares of the Registrant's Common Stock, $.001 par value per
share, outstanding as of March 10, 2000 was 15,724,762.

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<PAGE>

                               TABLE OF CONTENTS

<TABLE>

 <C>  <S>                                                                  <C>
 PART I

  1.  Business...........................................................    1

  2.  Properties.........................................................    6

  3.  Legal Proceedings..................................................    6

  4.  Submission of Matters to a Vote of Security Holders................    6

 PART II

            Market for Registrant's Common Equity and Related Stockholder
  5.  Matters............................................................    7

  6.  Selected Financial Data............................................    7

          Management's Discussion and Analysis of Financial Condition and
  7.  Results of Operations..............................................    8

  7A. Quantitative and Qualitative Disclosures About Market Risk.........   13

  8.  Financial Statements and Supplementary Data........................   14

          Changes in and Disagreements with Accountants on Accounting and
  9.  Financial Disclosure...............................................   14

 PART III

 10.  Directors and Executive Officers of the Registrant.................   15

 11.  Executive Compensation.............................................   16

 12.  Security Ownership of Certain Beneficial Owners and Management.....   16

 13.  Certain Relationships and Related Transactions.....................   16

 PART IV

 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K...   16

 Exhibit Index............................................................  17

 Signatures...............................................................  18
</TABLE>
<PAGE>

                                    PART I

Item 1. Business

Background

  Midas, Inc. ("Midas" or the "Company") was incorporated under the laws of
the State of Delaware on August 29, 1997. At the time of its incorporation,
the Company was a wholly-owned subsidiary of Whitman Corporation, a Delaware
Corporation ("Whitman").

  On January 30, 1998 (the "Distribution Date"), Whitman distributed (the
"Distribution" or "Spin-off") all of the issued and outstanding shares of
common stock, par value $.001 per share, of the Company (the "Midas Common
Stock") to the shareholders of record of Whitman's common stock as of January
16, 1998. The Distribution was made pursuant to the terms of a Distribution
and Indemnity Agreement (the "Distribution Agreement") dated as of December
31, 1997 by and among Whitman, the Company and Midas International
Corporation, a Delaware corporation ("Midas International") a wholly-owned
subsidiary of the Company.

  Pursuant to the Distribution Agreement and prior to the Distribution Date,
the Company and Whitman executed a series of steps in order to separate from
Whitman any assets related to the business of Midas. Such steps involved,
among other things, the transfer to Midas from Whitman of Midas International
and all of the non-U.S. businesses conducted by Midas International which were
previously held by a Netherlands company owned by Whitman. As a result of the
Distribution, Midas became an independent public company.

  Midas has been engaged in the retail automotive exhaust business since 1954,
and has granted franchises for and operated Midas shops since 1956. Midas
International Corporation was incorporated in Delaware in 1959. Midas'
principal executive offices are located at 1300 Arlington Heights Road,
Itasca, Illinois 60143 and its telephone number is (630) 438-3000.

Overview

  Midas, its franchisees and licensees provide services in the U.S., Canada,
France and other locations in Europe, Australia, the Middle East, Latin
America and the Caribbean. Midas shops offer exhaust, brake, suspension, air
conditioning and maintenance services. Midas brand products are sold at
wholesale to franchised Midas shops and at retail by company-operated shops.
IPC brand exhaust products are sold to distributors. Midas also manufactures
and sells shop equipment under the Huth trademark. Midas Realty Corporation, a
Midas subsidiary ("Midas Realty"), selects, leases, acquires and constructs
sites for Midas shops.

  Midas manufactures and sells Midas brand products for resale at Midas shops.
Midas also manufactures exhaust products under the IPC brand name for sale to
distributors. Domestic manufacturing plants produce approximately 1,800
different types of mufflers, and approximately 200 specialty exhaust pipes to
service over 1,000 makes and models of automobiles. As used herein, the term
"company-operated shop" means a shop operated by Midas and excludes shops
operated by franchisees or licensees.

  As of January 1, 2000, there were 2,711 Midas shops worldwide, of which
2,075 were located in the U.S. and Canada (hereinafter referred to as "North
America").

Market Overview

  Increased technological complexity and durability of vehicles have been the
dominant forces in the evolution of the automotive repair industry since the
1970s. As a result, the types of service providers, as well as the type and
frequency of repairs being performed, have changed. The total number of
service outlets in the U.S. has been declining over the past 15 years. The
largest decrease is attributable to a reduction in the number of local service
stations offering automotive repair. As the number of service stations
offering automotive repair has decreased, more sophisticated service providers
have emerged. The number of independent maintenance and

                                       1
<PAGE>

repair shops and large automotive repair chains has increased slightly. In
addition, certain automobile companies and dealers have announced their
intention to pursue more repair business by separating repair shops from
showrooms and offering more convenient service.

  The technological sophistication of modern automobiles has also affected the
types of service needed over the lifetime of a vehicle. In general, the
automotive aftermarket has grown as the number of vehicles in operation, the
average age of these vehicles and the annual number of miles driven per
vehicle have increased. This aftermarket growth is limited by improved vehicle
durability. Vehicles are now assembled with more durable parts, such as
stainless steel exhaust systems, and suspension parts such as shock absorbers
and struts are now more technologically advanced. As a result, the services
performed over the lifetime of today's vehicles are more likely to be
maintenance services and light repair work.

  Beginning in 1996 and carrying forward into 1997, the Company began to
experience declines in earnings and returns on assets and equity. These trends
were due to a combination of slow growth, increasing operating expenses and an
expanding asset base. The Company also began to experience declines in sales
and revenues from certain business activities including substantial declines
in exhaust sales at both the retail and wholesale level due to the automobile
manufacturers use of non-corrosive stainless steel exhaust systems. These
trends, coupled with an expected substantial increase in the Company's long-
term debt as a result of the Spin-off of Midas as an independent company by
Whitman Corporation, led management to conduct an in-depth review of
strategies and potential alternative strategies to reverse these trends.

  Forthcoming from this strategic review was a business strategy to: focus the
Company's management and financial resources on expanding the North American
and European franchise network by adding new shops, improving relationships
with franchisees, improving the efficiency of the wholesale replacement part
distribution system, reducing operating expenses and redeploying assets by
franchising company-operated shops. The strategy also called for the
introduction of new Midas products and services at the retail level to offset
the declines in the exhaust business.

  In 1998, the Company reached an agreement with Magneti Marelli, S.p.A., a
member of the Fiat Group, to form a strategic alliance to accelerate the
development of the Midas system in Europe and South America. Midas management
concluded that Magneti Marelli had the financial and human resources to
accelerate the development of the Midas business in Europe and South America
at a much faster pace than the Company. Midas management also concluded that
the proceeds from a transaction with Magneti Marelli could provide the Company
with additional financial resources which would enable the Company to
accelerate the execution of its strategy to transform and grow the North
American franchise network.

  Accordingly, Midas sold its interests in Europe and South America to Magneti
Marelli for $100 million in October 1998, and entered into a licensing
agreement for the Midas trademarks and know-how as a part of the transaction.

  As a result of the foregoing, the Company's business strategy was further
modified to the current strategy, which is to become a focused and efficient
operator of a North American franchise, a wholesale parts distribution network
and a licensor of Midas trademarks outside of North America.

  The business transformation process and the resulting costs associated with
this strategy are discussed in Item 7. "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and in Note 3 to the
Financial Statements.

Franchises and the Midas System

  Midas has developed a system for the establishment and operation of Midas
shops that is used in franchised and licensed shops worldwide. This system
includes site selection, shop construction and layout, equipment selection and
installation, purchasing and inventory control methods, accounting methods,
merchandising,

                                       2
<PAGE>

advertising, sales and promotional techniques, installation techniques,
personnel training and other matters relating to the efficient and successful
operation of Midas shops and the maintenance of high standards of quality.

  Midas identifies and qualifies franchisees through a well-organized
recruitment program in each region of the world in which it operates.
Franchisees are qualified based primarily upon a candidate's financial
suitability and operational experience, among other criteria. Midas also
considers a franchisee's ability to work within the Midas franchise system.
Each franchisee enters into a standard franchise and trademark agreement with
Midas. The franchise and trademark agreement varies by country but these
variances do not substantially alter the franchise arrangement. The following
summarizes portions of the franchise and trademark agreement used in the U.S.
(the "U.S. Franchise Agreement").

  Term and Fees; Estimated Costs; Royalty Payments. The initial term of the
U.S. Franchise Agreement, as well as most Midas franchise and trademark
agreements throughout the world, is twenty years. The U.S. Franchise Agreement
may be terminated by the franchisee upon thirty days written notice. In most
instances in the U.S., Midas 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 and trademark
agreement in order to assure that the site may continue to be operated as a
Midas shop.

  An initial franchise fee is charged upon execution of a franchise and
trademark agreement. In opening a Midas shop, a franchisee makes additional
expenditures relating to fixtures, machinery and equipment and initial product
inventory. None of the fees and expenses is financed by Midas and, with the
exception of a portion of the initial franchise fee, none is refundable.

  Franchisees pay Midas monthly royalties based on a percentage of sales. As
described more fully below, in most countries in which Midas does business, it
is obligated to use one-half of the royalty payments it receives for
advertising.

  Realty Agreements. Since the mid-1970s, Midas has required each U.S.
franchisee to enter into an agreement with Midas Realty giving Midas Realty
the ability to occupy a site in the event of a termination of the related
franchise and trademark agreement in order to ensure that the site may
continue to be operated as a Midas shop if Midas chooses. The agreement with
Midas Realty remains in effect throughout the term of the related franchise
and trademark agreement. 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 with real estate control through one
of two alternative means. The first alternative provides for the lease by the
franchisee to Midas Realty of the premises, which 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 which grants Midas Realty the
option to lease the premises in the event that the related franchise agreement
is terminated. If the franchisee leases real estate from a third-party upon
which the Midas shop is located, Midas requires that the franchisee grant to
Midas Realty a conditional assignment of the lease to take effect upon the
termination of the related franchise and trademark agreement. Approximately
80% of existing North American franchised Midas shops are subject to various
forms of agreements with Midas. See Note 11 to the Financial Statements of
Midas included in this annual report.

  Sites and Site Selection. Midas assists franchisee candidates by identifying
and developing a site on which a Midas shop will be constructed. Midas may
also approve or disapprove of a site located by the candidate. Midas approves
a particular site based upon a review of the demographic characteristics of
the site, traffic counts and patterns, population patterns, income statistics,
parking, competition, proximity of other businesses and other commercial
criteria.


                                       3
<PAGE>

  Training. Franchisees are required to complete the Midas initial training
program. The first part of the program includes a minimum of three weeks
observing a franchised Midas shop in operation as well as completion of a
self-training program. The second part of the initial training program is held
at a Midas training center and lasts at least three weeks. Supplemental
training sessions are also offered by Midas at certain regional facilities.
Midas also makes training materials available and conducts training seminars
in the field.

  Machinery, Fixtures, Inventory and Other Goods. Midas recommends sources for
machinery, equipment, furniture and fixtures necessary to outfit a Midas shop
for operation. In North America, franchisees are required to purchase from
Midas a sufficient quantity of genuine Midas products, principally mufflers,
shock absorbers, struts and brake pads and shoes, adequate to meet the public
demand for genuine Midas products and to promptly fill customers' requests for
replacement under the terms of various Midas warranties. Midas is the sole
supplier of these products. Other products, which are not warranteed, such as
pipe and brake parts, are sold by Midas, but may be purchased by franchised
shops from other sources. Shop equipment, such as lifts, alignment equipment,
lathes, racking and tools may also be purchased through Midas or from other
sources.

  Warranty Program. An important feature of the Midas system is the
requirement that the retail customer be provided a written warranty from Midas
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 as issued from time to time by Midas.

  Advertising. Midas is obligated to use one-half of the royalty payments it
receives from franchisees for advertising placed during the calendar year the
royalties are received or during the following calendar year. Midas directs
all use of advertising funds, and all decisions regarding the creative
concepts and materials used, whether national, regional or local advertising
will be used, the particular media and advertising content, and the
advertising agencies to be used are controlled by Midas. Midas administers
cooperative advertising programs for its franchisees. In addition, Midas
incurs advertising costs that are included in its selling, general and
administrative expenses.

  International Midas Dealers Association. The International Midas Dealers
Association (the "IMDA") is an independent association of Midas franchisees.
Approximately 84% of the Midas franchisees in North America belong to the
IMDA. Midas' management communicates on a regular basis with IMDA
representatives and various IMDA committees to solicit franchisee input.

Proprietary Information

  Midas holds various patents, trademarks, trade names and copyrights, none of
which, other than the Midas name, are considered by Midas to be material to
its financial condition and results of operations. Midas vigorously defends
the Midas name throughout the world and the name is registered as a trademark
in more than 80 countries in addition to the U.S. Midas also owns certain
trade secrets including product catalogs, price lists, training manuals and
inventory systems.

Manufacturing and Resale Operations

  Midas manufactures and resells parts for the North American automotive
aftermarket. These products include mufflers and specialty exhaust pipes
manufactured by Midas at its Hartford, Wisconsin facility, and shock
absorbers, brakes, suspension, steering and front-end parts resold by Midas.
Due to the overall decline in exhaust market demand, Midas closed its exhaust
and tube manufacturing plant in Bedford Park, Illinois on October 1, 1999 and
formed a strategic alliance with Arvin Industries to allocate the Bedford Park
production between Arvin and Midas' Hartford plant.

  The automotive aftermarket parts are sold at wholesale to Midas franchised
shops and are required to be s tocked by Midas franchisees in order to serve
the demand for genuine Midas parts. Midas IPC and Huth brand

                                       4
<PAGE>

products are also manufactured at its Hartford facilities. Midas manufacturing
facilities have limited backlogs of unprocessed orders.

  Midas purchases the raw materials for the products it manufactures,
primarily steel and packaging, from various suppliers through both long-term
and short-term contracts, depending upon anticipated market conditions. Midas
purchases products for resale from various suppliers through contracts that
generally range from one to three years in duration. These raw materials and
products are available from multiple suppliers, and Midas has not experienced
any significant shortages. Midas believes it enjoys good relationships with
its suppliers.

Competition

  The automotive repair industry is highly competitive and fragmented, and the
number, size and strength of competitors vary from region to region. Midas'
primary competitors include national 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. Midas
believes that competition in the industry is primarily based on customer
service and reputation, shop location, name awareness and price. Midas
believes that it generally has a favorable competitive position with respect
to each of these variables.

Customers

  The Midas business is not dependent upon a single customer or small group of
customers.

Seasonality

  Midas experiences the greatest demand for its services in the second and
third quarters of the year, with approximately 54% of annual sales and
revenues occurring during that period in fiscal 1999, 1998 and 1997,
respectively. Excluding the effects of business transformation costs and the
fiscal 1998 gain on the sale of the Company's European operations, second and
third quarter net income represented 64% of the annual net income in fiscal
1999 compared to 70% in fiscal 1998 and 81% in fiscal 1997. The Company
expects the seasonality of its quarterly earnings will continue to moderate.

Regulatory Compliance

  Franchising Matters. Midas 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. Midas deals with franchisees in good faith and seeks to
comply with regulatory requirements. From time to time Midas and one or more
franchisees may become involved in a dispute regarding the franchise
relationship, including, among other things, payment of royalties, location of
shops, advertising, purchase of Midas products by franchisees, compliance with
Midas 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. Midas
has instituted procedures, including uniform standards of service to be
followed by all Midas shops, to improve customer satisfaction, which also aids
in regulatory compliance.

  Environmental and Occupational Safety Matters. Midas shops handle used
automotive oils and certain solvents that are disposed of by licensed third-
party contractors. As a result, Midas is subject to a number of

                                       5
<PAGE>

federal, state and local laws designed to protect the environment. Midas,
through its company-operated shops, is also subject to regulation regarding
the installation of catalytic converters. In addition to environmental laws,
Midas is subject to the Federal Occupational Safety and Health Act and other
laws regulating safety and health. Midas maintains a program 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 1, 2000 Midas had approximately 1,060 employees, including
approximately 440 who were covered by collective bargaining agreements. Labor
contracts with respect to approximately 112, 30, and 298 employees expire in
2000, 2001 and 2002, respectively. Midas considers its relationships with
employees to be generally satisfactory. Midas franchisees hire their own
employees. As a result of the shortage of qualified mechanics in the
automotive industry, individual franchisees may have difficulty hiring
qualified personnel.

Item 2. Properties

  Midas owns one manufacturing facility (200,000 square feet) and leases an
additional 20,000 square feet of space in Hartford, Wisconsin. The Company
closed its manufacturing facility in Bedford Park, Illinois (180,000 square
feet) in October, 1999 and anticipates the sale of that facility during the
first half of fiscal 2000. In addition, Midas leases office space in Itasca,
Illinois, where its corporate headquarters are located, and owns two and
leases seven warehouses in North America.

  As discussed in Note 3 to the Financial Statements, Midas relocated its
corporate headquarters to Itasca, Illinois in fiscal 1999 and subleased its
former headquarters in Chicago. The Company also closed 3 warehouses during
fiscal 1999 and will be continuing the consolidation of its North American
distribution network during fiscal 2000.

  Midas owns and leases real estate in various communities thoughout the
United States that it leases and sub-leases to franchisees. As of January 1,
2000, the Company owned and leased a total of 692 sites.

Item 3. Legal Proceedings

  Neither Midas nor any of its subsidiaries are currently involved in any
material legal proceedings. Midas 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 Midas counsel, the ultimate liability will not
materially affect the financial position or results of operations of Midas.

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

  None.

                                       6
<PAGE>

                                    PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

  The Midas Common Stock is listed on the New York Stock Exchange ("NYSE")
under the symbol "MDS". As of March 10, 2000, there were 7,955 holders of
record of the Common Stock.

  "When issued" trading of the Midas Common Stock commenced on the NYSE on
January 20, 1998. Prior to that date, the Common Stock was not listed or
quoted on any securities exchange or quotation system.

<TABLE>
<CAPTION>
                                                                       Dividends
                                                          High   Low   Declared
                                                         ------ ------ ---------
<S>                                                      <C>    <C>    <C>
Fiscal 1999
  1st Quarter........................................... $35.54 $29.28   $.02
  2nd Quarter...........................................  35.16  24.96    .02
  3rd Quarter...........................................  29.32  21.73    .02
  4th Quarter...........................................  24.10  17.98    .02
Fiscal 1998
  1st Quarter........................................... $21.00 $15.25   $--
  2nd Quarter...........................................  22.00  18.06    .02
  3rd Quarter...........................................  26.00  19.75    .02
  4th Quarter...........................................  32.63  22.88    .02
</TABLE>

Item 6. Selected Financial Data

                             SUMMARY OF OPERATIONS

  The following table presents selected historical financial information of
Midas. 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 Midas and the notes thereto. The
operating results data set forth below for fiscal years 1999, 1998 and 1997
and the balance sheet data as of the end of fiscal 1999 and 1998 are derived
from, and are qualified by reference to, the audited financial statements of
Midas, and should be read in conjunction with those financial statements and
the notes thereto. The operating results data for fiscal years 1996 and 1995
and the balance sheet data as of the end of fiscal 1997, 1996 and 1995 are
derived from audited financial statements of Midas not included herein.

  The historical financial information presented below may not necessarily
reflect future results of operations or financial position of Midas or what
the results of operations or financial position of Midas would actually have
been had Midas operated as an independent company during the periods prior to
its Spin-off on January 30, 1998.

<TABLE>
<CAPTION>
Fiscal Year                             1999    1998    1997    1996    1995
-----------                            ------  ------  ------  ------  ------
                                        (In millions, except share data)
<S>                                    <C>     <C>     <C>     <C>     <C>
Operating results data:
Sales and revenues.................... $355.5  $513.8  $591.0  $598.9  $570.7
Operating income before business
 transformation costs(a)..............   68.2    69.6    66.8    78.0    82.5
Operating margin before business
 transformation costs(a)..............   19.2%   13.5%   11.3%   13.0%   14.5%
Operating income (loss)............... $ 68.4  $ 13.9  $ (0.8) $ 78.0  $ 82.5
Income (loss) before income taxes.....   62.9    40.0   (27.1)   51.6    55.9
Net income (loss).....................   38.4    28.2   (23.5)   30.4    31.7
Earnings (loss) per share--diluted
 (pro forma in 1997)(b)............... $ 2.28  $ 1.63  $(1.21)
</TABLE>

                                       7
<PAGE>

<TABLE>
<CAPTION>
Fiscal Year                            1999    1998    1997     1996    1995
-----------                           ------  ------  ------   ------  ------
                                       (In millions, except share data)
<S>                                   <C>     <C>     <C>      <C>     <C>
Balance sheet data:
Total assets......................... $305.9  $325.3  $443.1   $482.7  $451.4
Obligations under capital leases and
 long-term debt......................  112.1   114.6    19.9     14.4    17.3
Loans and advances from Whitman......    --      --     55.5     77.2    70.3
Total shareholders' equity...........  114.6   123.4   234.1    277.1   258.5
Return on average shareholders'
 equity..............................   32.1%   23.0%   (8.8)%   11.4%   13.0%
</TABLE>
--------
(a) Business transformation costs are described in Note 3 to the Financial
    Statements.
(b) Earnings per share information is presented for fiscal 1999 and 1998 only
    because the Spin-off from Whitman occurred in early 1998. In accordance
    with Securities and Exchange Commission regulations, pro forma earnings
    per share information is presented for the year preceding the Spin-off;
    such information is based on the assumption that the 17.0 million shares
    distributed in the Spin-off had been outstanding throughout 1997.

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.

<TABLE>
<CAPTION>
                                                            Percentage of
                                                              Sales and
                                                              Revenues
                                                          -------------------
Fiscal Year                                               1999   1998   1997
-----------                                               -----  -----  -----
<S>                                                       <C>    <C>    <C>
Replacement parts sales..................................  65.9%  48.5%  45.5%
Company-operated shop retail sales.......................   3.0   28.6   35.6
Royalties................................................  19.2   14.3   11.5
Real estate rental revenues..............................  11.3    7.3    6.0
Other....................................................   0.6    1.3    1.4
                                                          -----  -----  -----
  Sales and revenues..................................... 100.0  100.0  100.0
Cost of sales and revenues...............................  53.8   46.7   44.1
Selling, general and administrative expenses.............  27.0   39.8   44.6
                                                          -----  -----  -----
Operating income before business transformation costs....  19.2   13.5   11.3
Business transformation costs............................   --    10.8   11.4
                                                          -----  -----  -----
Operating income (loss)..................................  19.2    2.7   (0.1)
Other income (expense), net..............................   0.9    7.6   (3.2)
Interest expense.........................................  (2.4)  (2.5)  (1.3)
                                                          -----  -----  -----
Income (loss) before income taxes........................  17.7    7.8   (4.6)
Income taxes.............................................  (6.9)  (2.3)   0.6
                                                          -----  -----  -----
  Net income (loss)......................................  10.8%   5.5%  (4.0)%
                                                          =====  =====  =====
</TABLE>

Introduction

  Beginning in 1996 and carrying forward into 1997, the Company began to
experience declines in earnings and returns on assets and equity. These trends
were due to a combination of slow growth, increasing operating expenses and an
expanding asset base. The Company also began to experience declines in sales
and revenues from certain business activities including substantial declines
in exhaust sales at both the retail and wholesale level due to the automobile
manufacturers use of non-corrosive stainless steel exhaust systems. These
trends, coupled with an expected substantial increase in the Company's long-
term debt as a result of the Spin-off of

                                       8
<PAGE>

Midas as an independent company by Whitman Corporation, led management to
conduct an in-depth review of current strategies and potential alternative
strategies to reverse these trends.

  Forthcoming from this strategic review was a business strategy to: focus the
Company's management and financial resources on expanding the North American
and European franchise network by adding new shops, improving relationships
with franchisees, improving the efficiency of the wholesale replacement part
distribution system, reducing operating expenses and redeploying assets by
franchising company-operated shops. The strategy also called for the
introduction of new Midas products and services at the retail level to offset
the declines in the exhaust business.

  In 1998, the Company reached an agreement with Magneti Marelli, S.p.A., a
member of the Fiat Group, to form a strategic alliance to accelerate the
development of the Midas system in Europe and South America. Midas management
concluded that Magneti Marelli had the financial and human resources to
accelerate the development of the Midas business in Europe and South America
at a much faster pace than the Company. Midas management also concluded that
the proceeds from a transaction with Magneti Marelli could provide the Company
with additional financial resources which would enable the Company to
accelerate the execution of its strategy to transform and grow the North
American franchise network.

  Accordingly, Midas sold its interests in Europe and South America to Magneti
Marelli for $100 million in October 1998, and entered into a licensing
agreement for the Midas trademarks and know-how as a part of the transaction.

  As a result of the foregoing, the Company's business strategy was further
modified to the current strategy, which is to become a focused and efficient
operator of a North American franchise, a wholesale parts distribution network
and a licensor of Midas trademarks outside of North America.

  The business transformation process resulted in costs which are summarized
in the following table (in millions).

<TABLE>
<CAPTION>
Fiscal Year                                              1999    1998    1997
-----------                                              -----  ------  ------
<S>                                                      <C>    <C>     <C>
Franchisee incentive payments........................... $ --   $ 32.3  $  --
Disposition of company-operated shops...................  (0.1)    2.1    35.5
Corporate office relocation.............................   --      7.0     --
Integration of Canadian administration function.........   --      4.0     --
Consolidation of North American distribution system.....  (1.2)    4.1     --
Special one-time return program.........................   --      --      7.8
Changes to U.S. franchisee advertising program..........   --      --      4.4
Asset write-downs to recognize impairments..............   --      4.2    12.5
Severance and other costs...............................   1.1     2.0     7.4
                                                         -----  ------  ------
  Business transformation costs before taxes............  (0.2)   55.7    67.6
Income taxes (benefit)..................................   0.1   (20.9)  (21.4)
                                                         -----  ------  ------
  Business transformation costs, net of taxes........... $(0.1) $ 34.8  $ 46.2
                                                         =====  ======  ======
</TABLE>

  Additional information regarding each of the business transformation costs
listed in the above summary is presented in Note 3 to the Financial
Statements.

  Because of changes in the Company's business strategy, the type of
operational, legal and financial control of the Midas shops changed
substantially in 1998. The method of operation of the shops in operation at
the end of fiscal 1999, 1998 and 1997, is presented below.

                                       9
<PAGE>

Midas Retail Shops

<TABLE>
<CAPTION>
   Fiscal Year End                                             1999  1998  1997
   ---------------                                             ----- ----- -----
   <S>                                                         <C>   <C>   <C>
   Franchised and licensed.................................... 2,698 2,674 2,341
   Company-operated...........................................    13    58   377
                                                               ----- ----- -----
     Total.................................................... 2,711 2,732 2,718
                                                               ===== ===== =====
</TABLE>

  Although the total number of shops in operation remained relatively constant
over the past 3 years, the number of shops operated by the Company declined by
364 shops since the end of fiscal 1997, and the number of shops operating
under a franchise or license agreement increased by 357 shops. This shift in
the type of shop operation reflects the sale of Midas Europe and the strategy
to focus on franchising.

  The approximately 2,700 Midas shops currently in operation worldwide offer
some or all of the following services: exhaust, brake, suspension, air
conditioning, batteries and a number of other routine maintenance services.
The Company's business strategy is to expand these service offerings in the
future.

  The remaining company-operated shops as of January 1, 2000 represents the
Company's Australian operations and a training facility located in Palatine,
Illinois.

  The business strategy of focusing the Company on growing the North American
franchisee network is expected to have a significant impact on the future
sources of revenue for the Company.

Fiscal Reporting Periods

  Fiscal 1999, 1998 and 1997 were each comprised of 53 weeks.

Results of Operations--Fiscal 1999 Compared to Fiscal 1998

  Sales and revenues for fiscal 1999 declined $158.3 million or 30.8% from
fiscal 1998 to $355.5 million. Approximately $146.5 million or 92.5% of the
decrease was due to the sale of the Company's European operations and the
elimination of retail sales from company-operated shops which were franchised,
sold or licensed during fiscal 1999 and fiscal 1998 as part of the Company's
strategy to dispose of company-operated shops. The remainder of the decrease
in fiscal 1999 sales was attributable to a decline in retail demand for
replacement exhaust products due to automobile manufacturers use of non-
corrosive stainless steel exhaust systems, which drove a decline in exhaust
sales at the wholesale level.

  Cost of sales and revenues for fiscal 1999 decreased $48.7 million or 20.3%
versus fiscal 1998 due to a combination of the franchising and licensing of
company-operated shops, lower wholesale exhaust parts sales, and lower
wholesale parts costs. Costs of sales and revenues as a percent of total sales
and revenues increased 7.1 percentage points to 53.8% in fiscal 1999 due
primarily to the reduction in retail sales from company-operated shops which
carried a relatively higher gross margin to cover service and other costs at
the retail level.

  Selling, general and administrative expenses for fiscal 1999 decreased
$108.2 million or 53.0% from fiscal 1998 to $96.1 million. Approximately
$103.8 million of this reduction was related to the sale of the Company's
European operations and the franchising and licensing of company-operated
shops, while the balance was due to the Company's cost reduction program. As a
percentage of total sales and revenues, selling, general and administrative
expenses declined from 39.8% of sales in fiscal 1998 to 27.0% of sales in
fiscal 1999. This decrease was primarily due to the franchising of company-
operated shops which carry a higher operating expense ratio, and the fiscal
1998 cost reduction program.

  The Company recorded business transformation activity in both fiscal 1999
and fiscal 1998. Total charges of $55.7 million were recorded in fiscal 1998,
while fiscal 1999 reflects a net credit of $0.2 million. This activity is
described above under "Introduction" and in Note 3 to the Financial
Statements.

                                      10
<PAGE>

  Operating income was $68.4 million in fiscal 1999 versus $13.9 million in
fiscal 1998. Both years were impacted by business transformation costs as
previously noted. Excluding these costs, operating income remained relatively
constant at $68.2 million in fiscal 1999 versus $69.6 million in fiscal 1998.
Excluding business transformation costs from both years, the operating income
margin improved substantially from 13.5% in fiscal 1998 to 19.2% in fiscal
1999.

  Interest expense declined $4.1 million from $12.7 million in fiscal 1998 to
$8.6 million in fiscal 1999. This reduction is the result of the repayment
during fiscal 1998 of approximately $120 million of the debt that was
outstanding at the time of the Spin-off from Whitman.

  The Company's effective tax rate was 39.0% in fiscal 1999 versus an
effective tax rate of 29.5% in fiscal 1998. The lower rate in fiscal 1998 was
the result of the lower non-U.S. effective tax rate on the sale of the
Company's European operations.

  As a result of the above items, net income increased $10.2 million from
$28.2 million in fiscal 1998 to $38.4 million in fiscal 1999.

Results of Operations--Fiscal 1998 Compared to Fiscal 1997

  Sales and revenues for fiscal 1998 declined $77.2 million or 13.1% from
fiscal 1997 to $513.8 million. Approximately 82% of the decrease was due to
the elimination of retail sales from company-operated shops in fiscal 1998 as
a result of the franchising or sale and licensing of a net 311 shops during
the year. The remainder of the decrease in fiscal 1998 was attributable to
lower replacement parts sales due to: the pass through of negotiated cost
decreases to franchisees in the form of wholesale price decreases, the
elimination of unprofitable wholesale distribution points and programs,
fluctuations in foreign currency exchange rates, and lower retail customer
traffic in certain services which resulted in lower wholesale parts sales.
Partially offsetting these decreases were increased royalty and real estate
rental revenues primarily due to the franchising of former company-operated
shops.

  Cost of sales and revenues for fiscal 1998 decreased $20.9 million or 8.0%
versus fiscal 1997 due to a combination of the franchising of company-operated
shops, lower wholesale parts sales and lower wholesale parts costs. Cost of
sales and revenues as a percent of total sales and revenues increased 2.6
percentage points to 46.7% in fiscal 1998, due primarily to the reduction in
retail sales from company-operated shops in fiscal 1998, which carried a
substantially higher gross margin to cover service and other costs at the
retail level.

  Selling, general and administrative expenses for fiscal 1998 decreased $59.1
million or 22.4% from fiscal 1997 to a total of $204.3 million. Approximately
60% of the decrease in expenses was due to the franchising of company-operated
shops in fiscal 1998. The balance of the decrease was due to a combination of
cost reduction programs across the majority of expense categories and the sale
of Midas operations in Europe. Operating expenses as a percent of total sales
and revenues decreased 4.8 percentage points in fiscal 1998 to 39.8%. The
decrease was primarily due to the franchising of company-operated shops in
fiscal 1998, which carry a relatively higher operating expense ratio and cost
reduction programs across the majority of expense categories.

  In the fourth quarter of fiscal 1998 and the third quarter of fiscal 1997,
Midas recorded charges related to business transformation activities of $55.7
million and $67.6 million, respectively. These charges are described above
under "Introduction" and in Note 3 to the Financial Statements.

  Operating income in fiscal 1998 was $13.9 million versus an operating loss
of $0.8 million in fiscal 1997. Both years were impacted by business
transformation costs as noted previously. Excluding these costs, operating
income in fiscal 1998 increased $2.8 million or 4.2% above the prior year.
Excluding business transformation costs from both years, the operating income
margin in fiscal 1998 was 13.5% or 2.2 percentage points above fiscal 1997.


                                      11
<PAGE>

  Income before income taxes in 1998 was $40.0 million versus a $27.1 million
loss in fiscal 1997. The improvement in fiscal 1998 was due to the combination
of the following: a $38.0 million gain from the sale of the Midas business in
Europe, a sharp reduction in Whitman charges due to the Spin-off in early
1998, and higher operating income. These positive factors were partially
offset by increased interest expense primarily due to the additional debt
incurred by the Company in connection with the Spin-off.

  Net income in fiscal 1998 was $28.2 million versus a loss of $23.5 million
in fiscal 1997.

Liquidity, Financial Condition and Capital Resources

  Following is a summary of the Company's cash flows from operating, investing
and financing activities for fiscal 1999 and 1998, respectively (in millions):

<TABLE>
<CAPTION>
                                                                 Fiscal Year
                                                                ---------------
                                                                 1999    1998
                                                                ------  -------
<S>                                                             <C>     <C>
Net cash provided by operating activities...................... $ 36.7  $  21.3
Net cash provided by (used in) investing activities............   (8.4)   106.1
Net cash used in financing activities..........................  (52.1)  (103.0)
                                                                ------  -------
Net change in cash and cash equivalents........................ $(23.8) $  24.4
                                                                ======  =======
</TABLE>

  Midas has historically funded its operations and capital expenditures
through cash flow from operations. At fiscal year end 1999, the Company had
cash and cash equivalents of $13.1 million and working capital of $84.6
million. At fiscal year end 1998, the Company had cash and cash equivalents of
$36.9 million and working capital of $101.0 million. The $23.8 million
decrease in cash and cash equivalents and the $16.4 million decrease in
working capital are the result of the decision to repurchase 1.9 million
shares of the Company's common stock during fiscal 1999 at a cost of $56.5
million. As of the end of both fiscal years 1999 and 1998, the Company had
outstanding borrowings of $25 million under its $200 million line of credit.

  Net cash provided by operating activities was $36.7 million in fiscal 1999
compared with $21.3 million in fiscal 1998. This increase of $15.4 million was
the result of higher earnings and lower business transformation cash outlays,
which was partially offset by lower depreciation due to the sale of the
Company's European operations and the franchising of company-operated shops,
and higher working capital requirements.

  Net cash used in investing activities was $8.4 million in fiscal 1999
compared with net cash provided of $106.1 million in fiscal 1998. This
decrease of $114.5 was the result of lower asset sales and higher capital
expenditures in fiscal 1999 compared to fiscal 1998. Fiscal 1998 included
proceeds of $86.8 million related to the sale of the Company's European
operation, and $30.3 million of proceeds related to the sale of other property
and equipment (largely attributable to the franchising of company-operated
shops) compared to $10.8 million in fiscal 1999. The increase in capital
expenditures in fiscal 1999 was the result of systems improvements and the
corporate office relocation.

  Net cash used in financing activities was $52.1 million in fiscal 1999
compared with $103.0 million in fiscal 1998. During fiscal 1998, the Company
paid $193.1 million of dividends and loan repayments to Whitman as part of the
Spin-off, which were funded in part by a $98.8 million net increase in long-
term debt. No such payments to Whitman or borrowings were necessary in fiscal
1999, however the Company used $56.5 million of cash to acquire treasury
shares.

  In February 1999, the Company's Board of Directors authorized a share
repurchase plan for up to 3.0 million of the Company's common shares. During
fiscal 1999, the Company repurchased approximately 1.6 million shares at an
aggregate price of approximately $56.5 million. In January 2000, the Board of
Director's approved an increase of 2.0 million shares, bringing the total
authorization to 5.0 million shares. Purchases of the shares are expected to
be made from time to time, depending upon market conditions.

                                      12
<PAGE>

  The Company believes that current cash balances, cash generated from
operations, and availability under its line of credit will be adequate to fund
the growth in working capital and capital expenditures necessary to support
future growth in sales for the foreseeable future, as well as the Company's
share repurchase plan.

Year 2000

  In 1997, the Company instituted a Year 2000 project to evaluate and
remediate Year 2000 issues. The project was divided into three sections:

  .  The Company's computer hardware, hardware operating systems and
     application software.

  .  Franchisee computer hardware and application software, including point
     of sale hardware and software.

  .  Supplier computer systems.

  As of the date of this report, the Company has not experienced any
significant business disruptions as a result of Year 2000 issues. However,
Year 2000 issues may yet arise from factors that currently are not apparent.
The Company will continue to monitor all related Year 2000 issues.

  Total expenses for the Year 2000 project were $4.9 million with $1.3 million
being spent in fiscal 1999.

Impact of New Accounting Standards

  In June, 1998, the FASB issued Statement of Financial Accounting Standards
("SFAS") No. 133, "Accounting For Derivative Instruments and Hedging
Activities," which establishes accounting and reporting for derivative
instruments and hedging activities. In June, 1999, the FASB issued SFAS No.
137, "Accounting For Derivative Instruments and Hedging Activities--Deferral
of the Effective Date of SFAS No. 133--An Amendment of FASB Statement 133."
This statement delays the effective date for this standard until fiscal years
beginning after June 15, 2000. The Company is required to comply with SFAS No.
133 and SFAS No. 137 in fiscal year 2000. The Company estimates that the
adoption of these standards will not have a material effect on its financial
statements.

Forward Looking Statements

  This report contains, and certain of the Company's other public documents
and statements and oral statements contain and will contain, forward-looking
statements that reflect management's current assumptions and estimates of
future performance and economic conditions using information currently
available. Such statements are made in reliance upon the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. The
Company cautions investors that any forward-looking statements are subject to
risks and uncertainties that may cause actual results and future trends to
differ materially from those projected, stated, or implied by the 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; 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; cost and
availability of raw materials; and overall competitive activities. 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. The Company uses a variety of practices to manage these
market risks, including, when considered appropriate, derivative

                                      13
<PAGE>

financial instruments. The Company uses derivative financial instruments only
for risk management and does not use them for trading or speculative purposes.
The Company is exposed to potential gains or losses from foreign currency
fluctuations affecting net investments and earnings denominated in foreign
currencies. The Company's primary exposure is to changes in exchange rates for
the U.S. dollar versus the Canadian dollar.

  Interest rate risk is managed through a combination of fixed rate debt and
variable short-term borrowings with varying maturities. 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.

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.

                                      14
<PAGE>

                                   PART III

Item 10. Directors and Executive Officers of the Registrant

  Information required by this item is set forth under the headings "Proposal
1: Election Of Directors" and "Beneficial Ownership of Common Stock--Section
16 (a) Beneficial Ownership Reporting Compliance" in the Company's proxy
statement (the "2000 Proxy Statement") for the Annual Meeting of Shareholders
to be held on May 11, 2000, and is incorporated herein by reference.

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

<TABLE>
<CAPTION>
Name, Age and Position                     Background and Experience
----------------------                     -------------------------
<S>                       <C>
Wendel H. Province        Mr. Province has served as Chairman and Chief Executive
 (52)...................  Officer of Midas since January 1998. He joined The Pep
 Chairman and             Boys--Manny, Moe & Jack in 1989 as Senior Vice President of
 Chief Executive Officer  Merchandising, eventually becoming Executive Vice President
                          and Chief Operating Officer of Pep Boys. Mr. Province's
                          entire career has been in the automotive service industry,
                          having previously served as Senior Vice President of
                          Whitlock and Vice President of Autozone.
R. Lee Barclay (57).....  Mr. Barclay joined Midas in 1980 as Vice President-
 Executive Vice           Controller. He became Vice President and Chief Financial
 President and Chief      Officer in 1982, and has served in his present position
 Financial Officer        since 1989. He spent eight years with Price Waterhouse in
                          the 1970's.
Ronald J. McEvoy (52)...  Mr. McEvoy has served in his current position since he
 Executive Vice           joined Midas in September 1998. His career in the retail
 President and Chief      industry spans more than 25 years. He has held a variety of
 Information Officer      management and information technology positions at May
                          Department Stores, Carter Hawley Hale, British American
                          Tobacco and Fred Meyer. He most recently served as Senior
                          Vice President and Chief Information Officer at The Pep
                          Boys.
John A. Warzecha (51)...  Mr. Warzecha served as Vice President and General Manager of
 Senior Vice President--  Midas' company-operated shops from 1989 to 1993 and as
 Franchise Operations     Senior Vice President-U.S. Franchise Operations from 1993 to
 and Sales                1997. He joined Midas in 1973.
James D. Hamrick (52)...  Mr. Hamrick has served in his current position since joining
 Senior Vice President--  Midas in March 1998. Mr. Hamrick's career in automotive
 Merchandising            aftermarket and retailing spans more than 25 years. He has
                          held a variety of management and marketing positions at
                          Ameron Automotive Centers, which is a division of Kelly
                          Springfield Tire Co., Western Auto and The Pep Boys. Prior
                          to joining Midas, he held the position of Vice President of
                          Merchandising at The Pep Boys.
D. Bruce Hutchison        Mr. Hutchison joined Midas in August 1998. His 25-year
 (50)...................  marketing career includes launching, building and
 Vice President--         revitalizing national brands such as Mr. Goodwrench,
 Marketing                Pontiac, Cadillac, RCA, ProScan and GE. Mr. Hutchison began
                          at D'Arcy Masius Benton & Bowles advertising in 1974 and
                          rose to Vice President before joining RCA in 1986. He most
                          recently served as Vice President, Advertising and Market
                          Research at Thomson Multimedia (RCA, GE and ProScan).

</TABLE>

                                      15
<PAGE>

<TABLE>
<CAPTION>
Name, Age and Position                     Background and Experience
----------------------                     -------------------------
<S>                       <C>
Carl R. Daniels Jr.       Mr. Daniels joined Midas in February 2000. He most recently
 (46)...................  was Senior Vice President of Logistics at Pamida, Inc., a
 Vice President--         subsidiary of ShopKo. He previously served in senior
 Logistics                logistics management posts at other retail chains, including
                          Boscov's, Associated Dry Goods and Joseph Magnin.
Robert H. Sorensen        Mr. Sorensen joined Midas in 1995. From 1990 to 1995, Mr.
 (53)...................  Sorensen was a partner with the law firm of Kaufman, Chaiken
 Vice President, General  & Sorensen. Prior to 1990, he served as chief legal officer
 Counsel & Secretary      with Rollins, Inc. and Burger King Corporation.
Gerard M. Klaisle (46)..  Mr. Klaisle has served as Senior Vice President-Human
 Senior Vice President--  Resources of Midas since 1997. From 1987 to 1997 he was
 Human Resources          Midas' Vice President-Human Resources for U.S. operations.
                          He joined Midas in 1982.
William M. Guzik (40)...  Mr. Guzik joined Midas in December 1999. From 1995 to 1999,
 Vice President--         Mr. Guzik served as Chief Financial Officer of Delray Farms,
 Controller               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,
                          L.L.P.
Christian C. Pappas       Mr. Pappas joined Midas in 1997. From 1995 to 1997, Mr.
 (40)...................  Pappas served as Assistant Treasurer of U.S. Robotics. From
 Vice President--         1991 to 1995, he served in several positions at Sara Lee
 Treasurer                Corporation, his last position being Director-Domestic
                          Treasury. Prior to 1991, Mr. Pappas served in various
                          financial positions at Premark International, Inc. and
                          Centel Corporation.
</TABLE>

Item 11. Executive Compensation

  Information required by this item is set forth under the headings "Election
of Directors--Compensation of Directors" and "Executive Compensation and Other
Information" (other than "Report on Executive Compensation" and "Performance
Graph") in the 2000 Proxy Statement, and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management

  Information required by this item is set forth under the heading "Beneficial
Ownership of Common Stock" in the 2000 Proxy Statement, and is incorporated
herein by reference.

Item 13. Certain Relationships and Related Transactions

  Information required by this item is set forth under the heading "Certain
Transactions" in the 2000 Proxy Statement, and is incorporated herein by
reference.

                                    PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

  (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.

                                      16
<PAGE>

  (b) Reports on Form 8-K

    No Report on Form 8-K was filed by the Registrant during the quarter
  ended January 1, 2000.

  (c) Exhibits

<TABLE>
<CAPTION>
   Exhibit No.                            Description
   -----------                            -----------
   <C>         <S>
    3(i).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(i).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(ii)      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        Rights Agreement, dated as of December 31, 1997, between Midas,
               Inc. and First Chicago Trust Company of New York (incorporated
               by reference to Exhibit 4.5 to the RSP Form S-8).
    4.3        Midas' Canadian operations revolving credit agreement, dated
               June 29, 1998 with the ABN-AMRO Bank.
   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")).
   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**      Stock Incentive Plan (incorporated by reference to Exhibit 4.4
               to Midas, Inc. Registration Statement on Form S-8 relating to
               its Stock Incentive Plan (Registration No. 333-44797)).
   10.4**      Form of Option Agreement
   10.5**      Form of Restricted Stock Award (incorporated by reference to
               Exhibit 10.5 to the Midas, Inc. Annual Report on Form 10-K for
               the year ended December 20, 1997 (File No. 01-13409)).
   10.6**      Form of Change in Control Agreement (incorporated by reference
               to Exhibit 10.5 to the Midas, Inc.'s Registration Statement on
               Form 10/A No.1 (Commission File No. 01-13409)).
   10.7**      Agreement with former Chief Executive Officer (incorporated by
               reference to Exhibit 10.7 to the Midas, Inc. Annual Report on
               Form 10-K for the year ended December 20, 1997 (File No.
               01-13409)).
   10.8**      Form of Restricted Stock Agreement and promissory note.
   21          Subsidiaries of Midas, Inc.
   23*         Consent of KPMG LLP.
   27*         Financial Data Schedule.
</TABLE>
--------
*  Filed herewith
** Management Compensatory Plan or Contract

                                       17
<PAGE>

                                  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 27th day of
March 2000.

                                          Midas, Inc.

                                                   /s/ R. Lee Barclay
                                          By: _________________________________
                                                       R. Lee Barclay
                                                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 27th day of March 2000.

<TABLE>
<CAPTION>
              Signature                                   Title
              ---------                                   -----

<S>                                    <C>
      /s/ Wendel H. Province           Chairman and Chief Executive Officer and
______________________________________  Director (principal executive officer)
          Wendel H. Province

        /s/ R. Lee Barclay             Executive Vice President and Chief
______________________________________  Financial Officer (principal financial
            R. Lee Barclay              officer)

       /s/ William M. Guzik            Vice President--Controller (principal
______________________________________  accounting officer)
           William M. Guzik

       /s/ Herbert M. Baum             Director
______________________________________
           Herbert M. Baum

      /s/ Thomas L. Bindley            Director
______________________________________
          Thomas L. Bindley

       /s/ Archie R. Dykes             Director
______________________________________
           Archie R. Dykes

     /s/ Jarobin Gilbert, Jr.          Director
______________________________________
         Jarobin Gilbert, Jr.

     /s/ Robert R. Schoeberl           Director
______________________________________
         Robert R. Schoeberl
</TABLE>

                                      18
<PAGE>

                                     MIDAS

                         INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S>                                                                        <C>
Report of Management...................................................... F-2
Independent Auditors' Report.............................................. F-3
Statements of Operations for fiscal years 1999, 1998 and 1997............. F-4
Balance Sheets as of fiscal year end 1999 and 1998........................ F-5
Statements of Cash Flows for fiscal years 1999, 1998 and 1997............. F-6
Statements of Changes in Shareholders' Equity for fiscal years 1999, 1998
 and 1997................................................................. F-7
Notes to the Financial Statements......................................... F-8
</TABLE>

  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
<PAGE>

                             REPORT OF MANAGEMENT

  Midas management has prepared the accompanying financial statements and
related information included herein for fiscal years 1999, 1998, and 1997. The
report of KPMG LLP, the Company's independent auditors, on those financial
statements is included herein. The primary responsibility for the integrity of
the financial information included in this annual report rests with
management. Such information was prepared in accordance with generally
accepted accounting principles appropriate in the circumstances based on our
best estimates and judgements.

  Midas maintains internal accounting control systems which are adequate to
provide reasonable assurance that assets are safeguarded from loss or
unauthorized use and which produce records adequate for preparation of
financial information. The system and controls and compliance therewith are
reviewed by a program of internal audits and by our independent auditors.
There are limits inherent in all systems of internal accounting control based
on the recognition that the cost of such a system should not exceed the
benefits to be derived. We believe the Company's system provides this
appropriate balance.

  The Audit Committee of the Board of Directors is responsible for reviewing
and monitoring the Company's financial reports and accounting practices to
ascertain that they are within acceptable limits of sound practice in such
matters. The membership of the Committee consists of independent Directors. At
periodic meetings, the Audit Committee discusses audit and financial reporting
matters and the internal audit function with representatives of financial
management and with representatives from KPMG LLP.

R. Lee Barclay
Executive Vice President & Chief Financial Officer
February 17, 2000

                                      F-2
<PAGE>

                         INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
 Midas, Inc.

  We have audited the accompanying balance sheets of Midas as of fiscal year
end 1999 and 1998 and the related statements of operations, cash flows, and
changes in shareholders' equity for each of the fiscal years 1999, 1998, and
1997. These financial statements are the responsibility of Midas' management.
Our responsibility is to express an opinion on these financial statements
based on our audits.

  We conducted our audits in accordance with generally accepted auditing
standards. 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 financial statements referred to above present fairly,
in all material respects, the financial position of Midas as of fiscal year
end 1999 and 1998, and the results of operations and cash flows for fiscal
years 1999, 1998, and 1997 in conformity with generally accepted accounting
principles.

KPMG LLP

Chicago, Illinois
February 17, 2000

                                      F-3
<PAGE>

                                     MIDAS

                            STATEMENTS OF OPERATIONS
           (In millions, except for earnings and dividends per share)

<TABLE>
<CAPTION>
Fiscal Year                                              1999    1998    1997
-----------                                             ------  ------  ------
<S>                                                     <C>     <C>     <C>
Sales and revenues..................................... $355.5  $513.8  $591.0
Cost of sales and revenues.............................  191.2   239.9   260.8
Selling, general, and administrative expenses..........   96.1   204.3   263.4
Business transformation costs..........................   (0.2)   55.7    67.6
                                                        ------  ------  ------
  Operating income (loss)..............................   68.4    13.9    (0.8)
                                                        ------  ------  ------
Gain on sale of European operations....................    --     38.0     --
                                                        ------  ------  ------
Whitman charges........................................    --     (1.1)  (18.1)
                                                        ------  ------  ------
Interest expense:
  Whitman..............................................    --     (0.5)   (6.8)
  Other................................................   (8.6)  (12.2)   (2.3)
                                                        ------  ------  ------
    Total interest expense.............................   (8.6)  (12.7)   (9.1)
                                                        ------  ------  ------
Other income, net......................................    3.1     1.9     0.9
                                                        ------  ------  ------
  Income (loss) before income taxes....................   62.9    40.0   (27.1)
Income taxes (benefit).................................   24.5    11.8    (3.6)
                                                        ------  ------  ------
  Net income (loss).................................... $ 38.4  $ 28.2  $(23.5)
                                                        ======  ======  ======

Earnings (loss) per share:
  Basic................................................ $ 2.33  $ 1.67
                                                        ======  ======
  Diluted.............................................. $ 2.28  $ 1.63
                                                        ======  ======
  Pro forma basic and diluted..........................                 $(1.21)
                                                                        ======

Dividends per common share............................. $  .08  $  .06
                                                        ======  ======

Average number of shares
  Common shares outstanding............................   16.4    16.9
  Equivalent shares on outstanding stock options.......    0.4     0.4
                                                        ------  ------
  Shares applicable to diluted earnings................   16.8    17.3
                                                        ======  ======
  Pro forma common shares outstanding..................                   17.0
                                                                        ======
</TABLE>

                See accompanying notes to financial statements.

                                      F-4
<PAGE>

                                     MIDAS

                                 BALANCE SHEETS
                                 (In millions)

<TABLE>
<CAPTION>
Fiscal Year End                                                  1999    1998
---------------                                                 ------  ------
<S>                                                             <C>     <C>
Assets:
Current assets:
  Cash and cash equivalents.................................... $ 13.1  $ 36.9
  Receivables, net.............................................   43.5    39.4
  Inventories..................................................   63.5    63.2
  Other current assets.........................................   20.7    24.8
                                                                ------  ------
    Total current assets.......................................  140.8   164.3
Property and equipment, net....................................  140.5   142.8
Other assets...................................................   24.6    18.2
                                                                ------  ------
    Total assets............................................... $305.9  $325.3
                                                                ======  ======
Liabilities and equity:
Current liabilities:
  Short-term debt.............................................. $  1.8  $  1.6
  Accounts and dividends payable...............................   26.4    19.5
  Income taxes payable.........................................    1.6     --
  Accrued expenses.............................................   26.4    42.2
                                                                ------  ------
    Total current liabilities..................................   56.2    63.3
Long-term debt.................................................  101.0   102.2
Obligations under capital leases...............................    9.3    10.8
Deferred income taxes and other liabilities....................   24.8    25.6
                                                                ------  ------
    Total liabilities..........................................  191.3   201.9
                                                                ------  ------
Shareholders' equity:
  Common stock ($.001 par value, 100 million shares authorized;
   17.3 million and 17.0 million shares issued) and paid-in
   capital.....................................................   26.8    27.1
  Treasury stock, at cost (1.6 million shares and .2 million
   shares).....................................................  (44.9)   (4.2)
  Notes receivable from common stock sold to officers..........   (6.1)    --
  Retained income..............................................  144.0   106.9
  Cumulative other comprehensive income (loss).................   (5.2)   (6.4)
                                                                ------  ------
    Total shareholders' equity.................................  114.6   123.4
                                                                ------  ------
    Total liabilities and equity............................... $305.9  $325.3
                                                                ======  ======
</TABLE>

                See accompanying notes to financial statements.

                                      F-5
<PAGE>

                                     MIDAS

                            STATEMENTS OF CASH FLOWS
                                 (In millions)

<TABLE>
<CAPTION>
Fiscal Year                                             1999    1998     1997
-----------                                            ------  -------  ------
<S>                                                    <C>     <C>      <C>
Cash flows from operating activities:
Net income...........................................  $ 38.4  $  28.2  $(23.5)
Adjustments reconciling net income to net cash
 provided by operating activities:
  Depreciation and amortization......................    10.4     17.0    21.3
  Business transformation costs......................    (0.2)    55.7    67.6
  Cash outlays for business transformation costs.....   (13.2)   (58.4)   (1.9)
  Gain on sale of European operations................     --     (38.0)    --
  Deferred income taxes..............................     5.3     (0.2)  (13.8)
  Changes in assets and liabilities, exclusive of
   effects of dispositions:
    Receivables......................................    (4.1)     4.8     6.5
    Inventories......................................    (0.3)    (2.0)    9.8
    Accounts and dividends payable...................     6.9      4.2   (15.3)
    Accrued expenses.................................    (8.2)     5.8    10.4
    Income taxes payable.............................     1.6      0.6   (10.8)
    Other............................................     0.1      3.6     3.8
                                                       ------  -------  ------
Net cash provided by operating activities............    36.7     21.3    54.1
                                                       ------  -------  ------
Cash flows from investing activities:
Capital investments..................................   (19.2)   (11.0)  (29.4)
Proceeds from sale of European operations, net of
 cash of $13.2 million in operations sold............     --      86.8     --
Proceeds from sales of property and equipment........    10.8     30.3     5.2
                                                       ------  -------  ------
Net cash provided by (used in) investing activities..    (8.4)   106.1   (24.2)
                                                       ------  -------  ------
Cash flows from financing activities:
Net decrease in short-term debt......................     --       --     (2.5)
Payment of obligations under capital leases..........    (0.6)    (1.8)   (0.8)
Long-term debt incurred..............................     --     291.4     3.5
Long-term debt repayments............................    (0.9)  (192.6)    --
Cash received for common stock.......................     7.2      3.8     --
Cash paid for treasury shares........................   (56.5)    (9.8)    --
Net decrease in loans and advances from Whitman......     --     (55.5)  (20.8)
Dividends to Whitman.................................     --    (137.6)  (14.0)
Dividends to shareholders............................    (1.3)    (0.9)    --
                                                       ------  -------  ------
Net cash used in financing activities................   (52.1)  (103.0)  (34.6)
                                                       ------  -------  ------
Effect of exchange rate changes on cash and cash
 equivalents.........................................     --       --     (1.0)
                                                       ------  -------  ------
Net change in cash and cash equivalents..............   (23.8)    24.4    (5.7)
Cash and cash equivalents at beginning of period.....    36.9     12.5    18.2
                                                       ------  -------  ------
Cash and cash equivalents at end of period...........  $ 13.1  $  36.9  $ 12.5
                                                       ======  =======  ======
</TABLE>

                See accompanying notes to financial statements.

                                      F-6
<PAGE>

                                     MIDAS

                 STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                 (In millions)

<TABLE>
<CAPTION>
                                Combined
                                 Capital             Comprehensive Income
                               Accounts of Retained  ------------------------
                                 Whitman   Earnings  Current      Cumulative
                               ----------- --------  ----------   -----------
<S>                            <C>         <C>       <C>          <C>
Fiscal year end 1996.........     $24.3    $ 254.8                  $     (2.0)
Net income...................       --       (23.5)  $    (23.5)           --
Other comprehensive income--
 foreign currency translation
 adjustments.................       --         --          (7.8)          (7.8)
Capital contribution from
 Whitman.....................       2.3        --           --             --
                                                     ----------
Comprehensive income.........       --         --    $    (31.3)           --
                                                     ==========
Dividends to Whitman.........       --       (14.0)                        --
                                  -----    -------                  ----------
Fiscal year end 1997.........      26.6      217.3                        (9.8)
Net income...................       --         0.4   $      0.4            --
Other comprehensive income--
 foreign currency translation
 adjustments.................       --         --          (1.3)          (1.3)
Capital contribution from
 Whitman.....................       0.6        --           --             --
Dividends to Whitman.........       --      (137.6)         --             --
                                  -----    -------   ----------     ----------
Balances prior to Spin-off...     $27.2    $  80.1   $     (0.9)    $    (11.1)
                                  =====    =======   ==========     ==========
</TABLE>

<TABLE>
<CAPTION>
                                                         Notes
                         Common Stock                  Receivable
                              and                         From
                            Paid-in       Treasury       Common
                            Capital         Stock      Stock Sold          Comprehensive Income
                         -------------  -------------      to     Retained -----------------------
                         Shares Amount  Shares Amount   Officers  Earnings Current     Cumulative
                         ------ ------  ------ ------  ---------- -------- ---------   -----------
<S>                      <C>    <C>     <C>    <C>     <C>        <C>      <C>         <C>
Initial capitalization
 of Midas...............  17.0  $27.2     --   $  --     $ --      $ 80.1   $    (0.9)   $    (11.1)
Purchase of treasury
 shares.................   --     --     (0.4)   (9.8)     --         --          --            --
Stock option
 transactions...........   --    (0.1)    0.2     5.6      --         --          --            --
Net income..............   --     --      --      --       --        27.8        27.8           --
Other comprehensive
 income-- foreign
 currency translation
 adjustments............   --     --      --      --       --         --          4.7           4.7
                                                                            ---------
Comprehensive income....   --     --      --      --       --         --    $    31.6           --
                                                                            =========
Dividends to
 shareholders...........   --     --      --      --       --        (1.0)                      --
                          ----  -----    ----  ------    -----     ------                ----------
Fiscal year end 1998....  17.0   27.1    (0.2)   (4.2)     --       106.9                      (6.4)
Common shares issued
 under management stock
 incentive plan.........   0.3    6.1     --      --      (6.1)       --          --            --
Purchase of treasury
 shares.................   --     --     (1.9)  (56.5)     --         --          --            --
Stock option
 transactions...........   --    (6.4)    0.5    15.8      --         --          --            --
Net income..............   --     --      --      --       --        38.4   $    38.4           --
Other comprehensive
 income-- foreign
 currency translation
 adjustments............   --     --      --      --       --         --          1.2           1.2
                                                                            ---------
Comprehensive income....   --     --      --      --       --         --    $    39.6           --
                                                                            =========
Dividends to
 shareholders...........   --     --      --      --       --        (1.3)                      --
                          ----  -----    ----  ------    -----     ------                ----------
Fiscal year end 1999....  17.3  $26.8    (1.6) $(44.9)   $(6.1)    $144.0                $     (5.2)
                          ====  =====    ====  ======    =====     ======                ==========
</TABLE>

                See accompanying notes to financial statements.

                                      F-7
<PAGE>

                                     MIDAS

                         NOTES TO FINANCIAL STATEMENTS

(1) Introduction

 Basis of Presentation

  Midas, Inc. became an independent, publicly held company on January 30, 1998
as a result of its spin-off ("Spin-off") from Whitman Corporation ("Whitman").
Prior to that time, the companies that comprise Midas, Inc. were direct or
indirect wholly-owned subsidiaries of Whitman. For periods prior to the Spin-
off, the financial statements are presented on a combined basis; for
subsequent periods, they are presented on a consolidated basis. As required by
the context, "Midas" or the "Company" refers to Midas, Inc. and subsidiaries
or to the group of companies that became wholly-owned subsidiaries of Midas,
Inc. in conjunction with the Spin-off.

 Common Stock and Paid-in Capital at Spin-off Date

  The combined capital accounts of Whitman were recorded as common stock and
paid-in capital of Midas as of the date of the Spin-off.

 Pro Forma Basic and Diluted Earnings (Loss) Per Share (Unaudited)

  Pro forma basic and diluted earnings (loss) per share have been calculated
on the assumption that the 17.0 million shares of Midas Common Stock that were
distributed in the Spin-off had been outstanding since the beginning of 1997.
Pro forma adjustments have been made to give effect to increases or decreases
in costs that would have been incurred by Midas as an independent, publicly
held company, rather than a subsidiary of Whitman. The fiscal 1997 pro forma
adjustments are summarized as follows (in millions):

<TABLE>
   <S>                                                                <C>
   Incremental administrative expenses of an independent, publicly
    held company..................................................... $ (2.8)
   Elimination of Whitman charges....................................   18.1
   Elimination of interest paid to Whitman ..........................    6.8
   Incremental interest expense of an independently-capitalized
    company..........................................................  (17.2)
   Incremental income tax provision..................................   (1.9)
                                                                      ------
     Pro forma reduction of net loss................................. $  3.0
                                                                      ======
</TABLE>

(2) Summary of Significant Accounting Policies

 Nature of Business

  Midas provides retail automotive services principally through franchised or
licensed shops in the U.S., Canada, Europe and other countries. Midas also
manufactures exhaust system components and purchases other automotive
aftermarket replacement parts for distribution to North American franchisees
and other automotive aftermarket customers.

 Fiscal Periods

  The 1999, 1998, and 1997 fiscal years ended on January 1, 2000, December 26,
1998 and December 20, 1997. The fiscal years each consisted of 53 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

                                      F-8
<PAGE>

                                     MIDAS

                  NOTES TO FINANCIAL STATEMENTS--(Continued)

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 which are unrestricted as to withdrawal or use, and which have an
original maturity of three months or less.

 Fair Value of Financial Instruments

  Midas' financial instruments include cash and cash equivalents, receivables,
short-term debt, accounts payable, and long-term debt. The carrying value of
the long-term debt exceeded its fair value by approximately $2.3 million as of
fiscal year end 1999. The fair value of the long-term debt exceeded its
carrying value by approximately $3.4 million as of fiscal year end 1998. The
carrying amounts of the other assets and liabilities approximate fair values
because of the short maturities of those instruments.

 Inventories

  Inventories are valued at the lower of cost, determined using the first-in,
first-out method, or net realizable value.

 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 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. The
approximate ranges of annual deprecation rates are 2% to 10% for buildings and
improvements, 8% to 20% for machinery and equipment, and 20% to 33% for
computer software and hardware.

 Carrying Values of Long-lived Assets

  Midas evaluates the carrying values of its long-lived assets to be held and
used in the business by reviewing undiscounted cash flows by operating unit.
Such evaluations are performed whenever events and circumstances indicate that
the carrying amount of an asset may not be recoverable. 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 the differences between the fair values and the carrying
values.

 Revenue Recognition

  Product sales are recognized as revenues at the time products are shipped,
at which time provision is made for estimated product returns. Sales and
revenues of company-operated shops were recognized when customer vehicles are
repaired or serviced.

  Revenues derived from initial franchise fees are recognized when the
franchised shop opens. Costs related to securing initial franchise agreements
and performing the required services under such agreements are charged to
expense as incurred. Franchise renewal fees are recognized when the renewal
period commences. Royalties are recognized in the periods that correspond to
the periods when retail sales and revenues are recognized by franchisees.

                                      F-9
<PAGE>

                                     MIDAS

                  NOTES TO FINANCIAL STATEMENTS--(Continued)


  Selected products carry warranties ranging from one year to the lifetime of
a vehicle, so long as the original retail customer owns the vehicle. Midas
estimates and records the net costs related to its warranty program as
required, in the period the sales are reported, based on its historical
experience.

 Stock-Based Compensation

  The company uses the intrinsic value method of accounting for its stock-
based compensation plans.

 Advertising

  Advertising costs are expensed as incurred.

 Restatements

  Certain reclassifications have been made to the previously reported fiscal
1998 and 1997 financial statements in order to provide consistency with the
fiscal 1999 results. These reclassifications did not affect previously
reported operating income, net income or earnings per share.

 Use of Estimates

  Management has made a number of estimates and assumptions relating to the
reporting of assets and liabilities and disclosures of contingencies to
prepare the financial statements in conformity with generally accepted
accounting principles. Actual results could differ from these estimates.

(3) Business Transformation

 The Business Transformation Process

  The Company is transforming itself from a worldwide operator of both
franchised and company-operated shops to a focused and efficient operator of a
North American franchise and wholesale parts distribution network and a
licensor of Midas trademarks and know-how outside of North America. Within
North America the business transformation process includes: changing consumer
perceptions about Midas and the products and services offered, improving
relationships with franchisees and redeploying assets to improve returns.

 Business Transformation Costs

  The costs associated with the business transformation process are summarized
as follows (in millions):

<TABLE>
<CAPTION>
   Fiscal Year                 1999    1998    1997
   -----------                 -----  ------  ------
   <S>                         <C>    <C>     <C>
   Franchisee incentive
    payments.................  $ --   $ 32.3  $  --
   Disposition of company-
    operated shops...........   (0.1)    2.1    35.5
   Corporate office
    relocation...............    --      7.0     --
   Integration of Canadian
    administration function..    --      4.0     --
   Consolidation of North
    American distribution
    system...................   (1.2)    4.1     --
   Special one-time return
    program..................    --      --      7.8
   Changes to U.S. franchisee
    advertising program......    --      --      4.4
   Asset write-downs to
    recognize impairments....    --      4.2    12.5
   Severance and other
    costs....................    1.1     2.0     7.4
                               -----  ------  ------
     Business transformation
      costs before taxes.....   (0.2)   55.7    67.6
   Income taxes (benefit)....    0.1   (20.9)  (21.4)
                               -----  ------  ------
     Business transformation
      costs, net of taxes....  $(0.1) $ 34.8  $ 46.2
                               =====  ======  ======
</TABLE>


                                     F-10
<PAGE>

                                     MIDAS

                  NOTES TO FINANCIAL STATEMENTS--(Continued)

 Franchisee Incentive Payments

  During 1998, Midas launched a new image and consumer perception program. The
program is directed at "freshening" the Midas image with consumers and
changing their perceptions about the scope of product and service offerings.
To launch the program, Midas made up-front cash incentive payments to
franchisees that have agreed to modify existing shops and enhance information
systems. The planned modifications include installing new signs and making
improvements to building exteriors and customer service areas. Franchisees
that wish to expand their product and service offerings may also need to
enhance their information systems. The incentive payments, which were
disbursed in lump sum amounts based on the number of shops operated by each
participating franchisee, were recorded as expenses as the disbursements were
made. The incentive payments, together with other costs associated with the
program launch (principally costs of special regional meetings attended by the
franchisees), were recorded as expenses in the fourth quarter of fiscal 1998.
Midas continues to monitor franchisee performance to ensure compliance with
the program and has not received any refunds of incentive payments. The
incentive payments cover approximately 99% of the franchised shops located in
the U.S. and Canada.

 Disposition of Company-operated Shops

  During the third quarter of fiscal 1997, management adopted a plan for the
disposition of substantially all of its 150 company-operated shops in the
United States. Under the 1997 plan, 119 shops were expected to be franchised
and 16 shops closed. By the end of December 1998, substantially all aspects of
the 1997 disposition program had been completed. In the fourth quarter of
fiscal 1998, management decided to franchise the remaining company-operated
shops in the United States, and all company-operated shops in Canada. These
programs were finalized in fiscal 1999, at a savings of approximately $0.1
million. The estimated losses and costs associated with the program are
summarized as follows (in millions):

<TABLE>
<CAPTION>
   Fiscal Year                                                1999   1998 1997
   -----------                                                -----  ---- -----
   <S>                                                        <C>    <C>  <C>
   Asset write-downs......................................... $ --   $1.3 $21.5
   Non-recoverable lease costs...............................   --    --    7.7
   Severance and other costs.................................  (0.1)  0.8   6.3
                                                              -----  ---- -----
                                                              $(0.1) $2.1 $35.5
                                                              =====  ==== =====
</TABLE>

  Asset Write-downs. The assets of the U.S. company-operated shops to be
disposed were written down to net realizable values, based on estimated
proceeds (net of transaction costs) from sales of tangible and intangible
assets of shops to be franchised and from sales or recoveries of tangible
assets of shops to be closed.

  Non-recoverable Lease Costs. Certain U.S. company-operated shops occupied
leased facilities. Management estimated that $7.7 million of costs under such
leases would not be recovered through future operations due to shop closings
or because subleases in connection with franchising transactions were not
expected to result in full recovery of the related lease payments.

  Severance and Other Costs. Severance and other costs recorded in fiscal 1997
include $4.7 million of termination benefits for 202 employees and other costs
of $1.6 million. Severance and other costs recorded in fiscal 1998 included
$0.5 million of termination benefits for employees. Cash expenditures relating
to employee severance costs were incurred as the shops were closed or sold and
amounted to $1.8 million during fiscal 1999, $3.1 million during fiscal 1998
and $0.2 million in fiscal 1997.

 Corporate Office Relocation

  In December 1998, Midas determined that it would relocate its corporate
headquarters and entered into a lease for a new facility. Relocation costs
recorded in fiscal 1998 include: (a) estimated costs of $5.7 million

                                     F-11
<PAGE>

                                     MIDAS

                  NOTES TO FINANCIAL STATEMENTS--(Continued)

related to subleasing the former headquarters after the relocation, based on
the differential between the amounts due under the existing noncancellable
lease and estimated proceeds from subleasing; and (b) the write-down ($1.3
million) of leasehold improvements and equipment that were not used in the new
facility, based on the estimated net realizable value of the assets at the
time of relocation.

  The relocation and subleasing of the former headquarters were completed in
fiscal 1999. The existing accruals are adequate to cover the losses to be
incurred during the remaining term of the former headquarters lease. Cash
outlays during fiscal 1999 were $2.0 million. There were no cash outlays in
fiscal 1998.

 Integration of Canadian Administration Function

  During the fourth quarter of fiscal 1998, management adopted a plan to
integrate the administration of the Canadian franchising operations into the
U.S. worldwide headquarters. Costs included $0.5 million in asset write-downs
to net realizable values, $2.1 million of termination benefits for 61
employees, $0.5 million of lease termination costs, and other costs of $0.9
million. The integration will be completed in the first half of 2000. There
were no cash outlays during fiscal 1998 and $1.1 million in cash outlays in
fiscal 1999.

 Consolidation of North American Distribution System

  During the fourth quarter fiscal 1998, management adopted a plan to
consolidate the North American distribution system by reducing the number of
distribution centers. Costs include $1.2 million of termination benefits for
78 employees, and other costs of $2.9 million. Three distribution centers were
closed in fiscal 1999, with the remaining closures scheduled for fiscal 2000.
No cash outlays were made in fiscal 1998 and approximately $0.3 million in
cash outlays were made in fiscal 1999. During fiscal 1999, the Company decided
to retain one of the distribution centers that had been scheduled for closing.
As the result of that decision, business transformation costs were reduced by
$1.2 million in 1999.

 Special One-time Product Return Program

  Midas policies restrict the level of excess products that may be returned by
franchisees. A special one-time program was adopted in fiscal 1997, under
which franchisees were permitted to return products in excess of the amounts
that would have been permitted under those policies. The $7.8 million charge
covered the costs associated with returns of products sold to franchisees in
prior periods.

 Changes in U.S. Franchisee Advertising Program

  Under the terms of its franchising agreements, Midas is obligated to use
one-half of the royalty payments received from franchisees for advertising
expenditures. Advertising expenditures in fiscal 1997 under the U.S. program
exceeded the amounts received from franchisees. Although it is not obligated
to do so under the franchising agreements, Midas provided a one-time
supplement to the program amounting to $4.4 million.

 Asset Write-downs to Recognize Impairments

  Asset write-downs in fiscal 1997 to recognize impairments included: $5.5
million related to company-owned real estate and improvements, which are
leased to franchisees under leases that are not expected to result in full
recovery of the investments in such assets; $5.3 million related to impaired
goodwill of certain non-U.S. operating units, based on past and projected
operating results; and $1.2 million related to computer hardware deemed
obsolete due to changes in operating procedures. Asset write-downs in fiscal
1998 of $4.2 million were related to the Company's investment in its
Australian subsidiary, which is expected to be disposed of in fiscal 2000.


                                     F-12
<PAGE>

                                     MIDAS

                  NOTES TO FINANCIAL STATEMENTS--(Continued)

 Severance and Other Costs

  Severance and other costs in fiscal 1997 included $4.4 million of
termination benefits for 61 employees resulting from staff reductions and $3.0
million of other non-recurring costs. The staff reductions occurred in early
1998. Severance payments were $1.4 million in fiscal 1999, $1.9 million in
fiscal 1998, and $1.1 million in fiscal 1997. Other costs of $0.6 million were
paid in fiscal 1997.

  Severance and other costs in fiscal 1998 of $2.0 million include $0.7
million of estimated termination benefits for employees in Midas' Australian
and Asia-Pacific operations and $0.5 million of disposition costs associated
with those operations. Total severance payments were $0.4 million in 1999 and
the remaining $0.3 million was recognized as income in fiscal 1999 as part of
severance and other costs.

  During fiscal 1999, the Company continued its transformation process by
closing one of its manufacturing facilities. A charge of $2.8 million for
termination benefits for 195 employees and other closing costs was recorded.
Cash outlays of approximately $2.4 million were made in fiscal 1999 with the
balance to be paid in fiscal 2000. During fiscal 1999, the Company also
recorded a $1.4 million reduction of severance and other costs as part of a
pension curtailment gain related to the 1999 and 1998 staff reductions.

 Other Information

  In the aggregate, business transformation costs have resulted in asset
write-downs of $30.0 million in fiscal 1997 and $9.5 million in fiscal 1998.
Cash outlays were $1.9 million in fiscal 1997, $58.4 million in fiscal 1998
and $13.2 million in fiscal 1999. Remaining short-term business transformation
liabilities of $5.7 million are classified in accrued expenses while the
remaining long-term liabilities of $9.7 million are classified in other
liabilities.

(4) Strategic Alliance

  Midas, Inc. and Magneti Marelli, S.p.A., a member of the Fiat Group, formed
a strategic alliance to develop the Midas program in the business of fast auto
service repair in Europe and South America.

  As part of the alliance, Midas sold its interests in its European operations
to Magneti Marelli on October 30, 1998 and entered into a long-term license
agreement for which Midas received $100 million. Midas will also receive on-
going royalties throughout the term of the license agreement, as the
automotive service shops in Europe that were sold will continue to operate
using the Midas name.

  The fiscal 1998 gain on sale of the European operations was $38.0 million
before taxes or $28.1 million after taxes.

(5) Debt Agreements

  Long-term debt consisted of the following (in millions):

<TABLE>
<CAPTION>
   Fiscal Year End                                                 1999   1998
   ---------------                                                ------ ------
   <S>                                                            <C>    <C>
   Unsecured credit facility..................................... $ 25.0 $ 25.0
   Unsecured debt................................................   75.0   75.0
   Notes payable, due 2000 and 2002, 9.5% interest rate..........    2.1    3.1
                                                                  ------ ------
     Total debt..................................................  102.1  103.1
     Less amounts due within one year............................    1.1    0.9
                                                                  ------ ------
     Long-term debt.............................................. $101.0 $102.2
                                                                  ====== ======
</TABLE>


                                     F-13
<PAGE>

                                     MIDAS

                  NOTES TO FINANCIAL STATEMENTS--(Continued)

  The Company has entered into a five-year, unsecured revolving credit
facility with a syndicate of commercial banks and financial institutions that
enable the Company to borrow funds at variable interest rates on a revolving
credit basis up to an aggregate principal amount of $200 million. This
facility expires in January 2003. In March 1998, Midas entered into an
interest rate swap agreement that fixed the first $25 million of variable rate
borrowings under the revolving credit facility at a rate of 5.79% with an all-
in cost of 6.24% over a two year period. The counterparty to the swap
transaction is a commercial bank.

  The $75 million in unsecured debt is at a fixed rate of 6.89% with an
investment grade (BBB) rating. The maturity date of the debt is April 15,
2005.

  The Company's debt agreements require maintenance of certain financial
covenants including minimum net worth.

(6) Transactions with Whitman

 Cash Management and Advances

  Whitman managed the cash not considered necessary for current operating
requirements of certain of its subsidiaries, including the U.S. operations of
Midas. Cash not needed for current operations was advanced to Whitman at the
then-current commercial bank prime lending rate; cash was advanced by Whitman
on the same basis. Interest income and expense on such advances are included
in interest expense--Whitman in the statements of operations.

 Whitman Charges

  Whitman allocated portions of its corporate office general and
administrative expenses and interest expense to its subsidiaries. Midas' share
of such costs amounted to $1.1 million in fiscal 1998 and $18.1 million in
fiscal 1997.

 Dividends and Capital Contributions

  Midas paid dividends to Whitman and received capital contributions from
Whitman, as summarized in the statements of changes in shareholders' equity.
In January 1998, Midas settled its Whitman obligations of $210 million, which
consisted of a $137.6 million dividend and $72.4 million of intercompany loans
and advances.

(7) Supplemental Balance Sheet and Cash Flow Information

 Receivables

  Receivables are stated net of allowance for doubtful accounts of $1.8
million at fiscal year end 1999 and $1.5 million at fiscal year end 1998.

 Inventories

  Inventories consisted of the following (in millions):

<TABLE>
<CAPTION>
   Fiscal Year End                                                  1999  1998
   ---------------                                                  ----- -----
   <S>                                                              <C>   <C>
   Raw materials and work in process............................... $ 4.5 $ 3.7
   Finished goods..................................................  59.0  59.5
                                                                    ----- -----
                                                                    $63.5 $63.2
                                                                    ===== =====
</TABLE>


                                     F-14
<PAGE>

                                     MIDAS

                  NOTES TO FINANCIAL STATEMENTS--(Continued)

 Other Current Assets

  Other current assets consisted of the following (in millions):

<TABLE>
<CAPTION>
   Fiscal Year End                                               1999    1998
   ---------------                                              ------  -------
   <S>                                                          <C>     <C>
   Income taxes receivable..................................... $  2.7  $   1.7
   Deferred income taxes.......................................    9.2     13.2
   Other.......................................................    8.8      9.9
                                                                ------  -------
                                                                $ 20.7  $  24.8
                                                                ======  =======

 Property and Equipment

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

<CAPTION>
   Fiscal Year End                                               1999    1998
   ---------------                                              ------  -------
   <S>                                                          <C>     <C>
   Land........................................................ $ 47.8  $  50.4
   Buildings and improvements..................................  113.4    115.8
   Machinery and equipment.....................................   70.9     87.8
                                                                ------  -------
     Total property and equipment..............................  232.1    254.0
   Accumulated depreciation....................................  (91.6)  (111.2)
                                                                ------  -------
     Property and equipment, net............................... $140.5  $ 142.8
                                                                ======  =======

 Accrued Expenses

  Accrued expenses consisted of the following (in millions):

<CAPTION>
   Fiscal Year End                                               1999    1998
   ---------------                                              ------  -------
   <S>                                                          <C>     <C>
   Salaries and wages.......................................... $  1.9  $   5.3
   Taxes other than income taxes...............................    2.8      3.3
   Advertising.................................................    5.2      4.4
   Accrued business transformation costs.......................    5.7     14.4
   Sales return allowance......................................    5.0      5.0
   Other expenses and interest.................................    5.8      9.8
                                                                ------  -------
                                                                $ 26.4  $  42.2
                                                                ======  =======
</TABLE>

 Supplemental Cash Flow Information

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

<TABLE>
<CAPTION>
   Fiscal Year                                                 1999 1998  1997
   -----------                                                 ---- ----- -----
   <S>                                                         <C>  <C>   <C>
   Interest paid--Whitman..................................... $--  $ 0.5 $ 6.8
   Interest paid--other.......................................  8.6  10.9   2.3
   Income taxes paid.......................................... 16.4  11.0  21.9
</TABLE>

(8) Advertising

  Under the terms of its franchise agreements, Midas is obligated to use one-
half of the royalty payments received from franchisees for advertising
expenditures. Amounts received from franchisees are recorded as

                                     F-15
<PAGE>

                                     MIDAS

                  NOTES TO FINANCIAL STATEMENTS--(Continued)

liabilities until disbursed. Midas also administers cooperative advertising
programs under which amounts received from franchisees are recorded as
liabilities until they are disbursed. Aggregate expenditures under these
programs by Midas' North American operations amounted to $62.2 million, $58.9
million, and $61.3 million in fiscal 1999, 1998, and 1997, respectively.

  Midas also incurs certain advertising costs that are included in selling,
general and administrative expenses, which amounted to $3.4 million, $13.6
million, and $21.3 million in fiscal 1999, 1998, and 1997, respectively.

(9) Income Taxes

  The income tax expense (benefit) consisted of (in millions):

<TABLE>
<CAPTION>
   Fiscal Year                                            1999   1998    1997
   -----------                                            -----  -----  ------
   <S>                                                    <C>    <C>    <C>
   Current:
     U.S. Federal........................................ $13.2  $ 6.5  $  4.9
     Non-U.S.............................................   1.6    4.1     4.3
     U.S. state and local................................   4.4    1.4     1.0
                                                          -----  -----  ------
       Total current.....................................  19.2   12.0    10.2
                                                          -----  -----  ------
   Deferred:
     U.S. Federal........................................   5.7   (0.4)  (11.8)
     Non-U.S.............................................   1.2   (1.3)   (0.3)
     U.S. state and local................................  (1.6)   1.5    (1.7)
                                                          -----  -----  ------
       Total deferred....................................   5.3   (0.2)  (13.8)
                                                          -----  -----  ------
       Income taxes (benefit)............................ $24.5  $11.8  $ (3.6)
                                                          =====  =====  ======
</TABLE>

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

<TABLE>
<CAPTION>
   Fiscal Year                                             1999  1998   1997
   -----------                                             ----  -----  -----
   <S>                                                     <C>   <C>    <C>
   Income tax expense (benefit) 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 benefits.........................................   2.9    4.7   (1.8)
   Higher non-U.S. effective tax rates...................   1.9    2.5    6.6
   Lower non-U.S. effective tax rates on sale of European
    operations...........................................   --   (12.2)   --
   Non-deductible write-offs of intangible assets........   --     --    10.3
   Non-deductible expenses...............................   0.2   (2.0)   3.7
   Other items, net......................................  (1.0)   1.5    2.9
                                                           ----  -----  -----
     Income taxes (benefit)..............................  39.0%  29.5% (13.3)%
                                                           ====  =====  =====
</TABLE>

  Pretax income from non-U.S. operations amounted to $4.5 million, $18.2
million, and $6.3 million in fiscal 1999, 1998 and 1997, respectively.
Historically, Midas' practice has been to reinvest its earnings in its non-
U.S. subsidiaries. For the sale of its European operations, the Company
repatriated the earnings associated with those operations in 1999. The Company
has not recognized U.S. income taxes on the unremitted earnings of its
Canadian operations, since foreign tax credits for Canadian income taxes will
significantly reduce or eliminate any U.S. tax liability.


                                     F-16
<PAGE>

                                     MIDAS

                  NOTES TO 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):

<TABLE>
<CAPTION>
   Fiscal Year End                                              1999    1998
   ---------------                                             ------  ------
   <S>                                                         <C>     <C>
   Deferred tax assets attributable to:
     Employee benefits and vacation accruals.................. $  3.7  $  4.0
     Capitalized leases.......................................    1.1     1.0
     Business transformation costs............................    7.0    10.3
     Other items..............................................    7.6     6.3
                                                               ------  ------
   Total deferred tax assets..................................   19.4    21.6
                                                               ------  ------
   Deferred tax liabilities attributable to:
     Depreciation and amortization............................   (5.0)   (2.6)
     Pension plan expense.....................................   (4.2)   (3.0)
     Undistributed non-U.S. earnings, net of non-U.S. taxes
      withheld................................................    --     (1.4)
     Other items..............................................   (5.0)   (4.5)
                                                               ------  ------
   Total deferred tax liabilities.............................  (14.2)  (11.5)
                                                               ------  ------
   Net deferred tax assets.................................... $  5.2  $ 10.1
                                                               ======  ======
   Net deferred tax assets included in:
     Other current assets..................................... $  9.2  $ 13.2
     Deferred income taxes and other liabilities..............   (4.0)   (3.1)
                                                               ------  ------
   Net deferred tax assets.................................... $  5.2  $ 10.1
                                                               ======  ======
</TABLE>

  Management believes it is more likely than not that all deferred tax assets
will be realized and, accordingly, no valuation allowance has been recorded.

(10) Franchise Agreements

  Midas' franchise agreements generally cover a 20-year period and provide for
renewals. A franchise agreement can be canceled by Midas 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.

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

<TABLE>
<CAPTION>
   Fiscal Year End                                             1999  1998  1997
   ---------------                                             ----- ----- -----
   <S>                                                         <C>   <C>   <C>
   Franchised and licensed.................................... 2,698 2,674 2,341
   Company-operated...........................................    13    58   377
                                                               ----- ----- -----
     Total.................................................... 2,711 2,732 2,718
                                                               ===== ===== =====
</TABLE>

(11) Leases

  Control of the real estate used by Midas shops is a fundamental strength of
the Midas program. Midas employs a number of methods to ensure continued
dedication of the real estate to the Midas program. Midas leases real estate
that is subleased to franchisees and owns real estate in the U.S. that is
leased to franchisees. Midas has also entered into contingent operating lease
agreements that are described below. At fiscal year end

                                     F-17
<PAGE>

                                     MIDAS

                  NOTES TO FINANCIAL STATEMENTS--(Continued)

1999, approximately 80% percent of real estate associated with North American
shops was controlled by Midas, using one of these methods.

 Leased Real Estate

  Gross rent expense applicable to operating leases relates to rentals of
shops, distribution facilities, corporate administration facilities and other
miscellaneous items. Gross rent expense, the sublease rental income from
franchisees that reduced gross rent expense, and the resulting net rent
expense for fiscal 1999, 1998 and 1997 are presented below (in millions):

<TABLE>
<CAPTION>
   Fiscal Year                                                 1999  1998  1997
   -----------                                                 ----- ----- -----
   <S>                                                         <C>   <C>   <C>
   Gross rent expense......................................... $22.6 $27.2 $37.1
   Sublease rental income.....................................  22.4  20.7  22.6
                                                               ----- ----- -----
     Net rent expense......................................... $ 0.2 $ 6.5 $14.5
                                                               ===== ===== =====
</TABLE>

  Substantially all of Midas' operating leases provide that Midas pay taxes,
maintenance, insurance, and certain other operating expenses. The subleases
with franchisees contain provisions for Midas to recover such costs.

  At January 1, 2000, annual minimum rental payments due under capital and
operating leases that have initial or remaining noncancelable terms in excess
of one year, along with sublease rental income on real estate due under
noncancelable subleases were as follows (in millions):

<TABLE>
<CAPTION>
                                              Capital Operating Sublease
                                              Leases   Leases   Rentals   Total
                                              ------- --------- --------  -----
   <S>                                        <C>     <C>       <C>       <C>
   2000......................................  $ 1.6   $ 25.0   $ (20.8)  $ 5.8
   2001......................................    1.6     23.6     (19.7)    5.5
   2002......................................    1.6     22.6     (18.8)    5.4
   2003......................................    1.6     20.6     (16.8)    5.4
   2004......................................    1.5     18.9     (15.0)    5.4
   Thereafter................................    8.5     81.7     (62.7)   27.5
                                               -----   ------   -------   -----
   Total minimum lease payments..............   16.4   $192.4   $(153.8)  $55.0
                                                       ======   =======   =====
   Less imputed interest.....................    6.4
                                               -----
   Present value of minimum lease payments...   10.0
   Less current portion included in short-
    term debt................................    0.7
                                               -----
     Obligations under capital leases-
      noncurrent.............................  $ 9.3
                                               =====
</TABLE>

  At fiscal year end 1999 and 1998, the net book value of property under
capital leases included in the balance sheets amounted to $7.2 million and
$8.7 million, respectively.

 Real Estate Owned by Midas and Leased to Franchisees

  Midas owns real estate located in various communities throughout the U.S.
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.


                                     F-18
<PAGE>

                                     MIDAS

                  NOTES TO FINANCIAL STATEMENTS--(Continued)

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

<TABLE>
<CAPTION>
   Fiscal Year End                                                1999    1998
   ---------------                                               ------  ------
   <S>                                                           <C>     <C>
   Land......................................................... $ 45.9  $ 44.8
   Buildings and improvements...................................   82.2    88.7
                                                                 ------  ------
     Total property and equipment...............................  128.1   133.5
   Accumulated depreciation.....................................  (30.3)  (30.5)
                                                                 ------  ------
     Property and equipment, net................................ $ 97.8  $103.0
                                                                 ======  ======
</TABLE>

  Rental income for fiscal 1999 was $17.0 million, compared to $17.4 million
in fiscal 1998 and $15.6 million in fiscal 1997. Minimum future lease payments
to be received are as follows (in millions):

<TABLE>
   <S>                                                                    <C>
   2000.................................................................. $ 15.5
   2001..................................................................   13.7
   2002..................................................................   12.2
   2003..................................................................   10.7
   2004..................................................................    9.5
   Thereafter............................................................   65.8
                                                                          ------
                                                                          $127.4
                                                                          ======
</TABLE>

 Contingent Operating Lease Agreements

  Midas 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 1, 2000, 121 shops were covered by these contingent operating
lease agreements, under which Midas could be required, under certain limited
circumstances, to begin making rental payments with respect to individual shop
locations. The average annual shop rental is $42 thousand with an average
remaining term of approximately 8 years.

  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 Midas.

(12) Pension and Postretirement Plans

 Defined Benefit Pension Plans and Other Postretirement Plans

  Substantially all North American employees are covered under various defined
benefit pension plans sponsored and funded by Midas. 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.

  In addition, Midas provides substantially all former U.S. salaried employees
who retired prior to July 1989 and selected other employees in the U.S. and
Canada with certain life and health care benefits.


                                     F-19
<PAGE>

                                     MIDAS

                  NOTES TO FINANCIAL STATEMENTS--(Continued)

  Net periodic pension and postretirement cost for fiscal 1999, 1998 and 1997
are presented in the following table (in millions):

<TABLE>
<CAPTION>
                                                             Postretirement
                                       Pension Benefits         Benefits
                                       -------------------  ------------------
                                       1999   1998   1997   1999   1998   1997
                                       -----  -----  -----  -----  -----  ----
   <S>                                 <C>    <C>    <C>    <C>    <C>    <C>
   Service cost benefits.............  $ 1.7  $ 1.8  $ 1.6  $ --   $ --   $--
   Interest cost on projected benefit
    obligation.......................    2.7    2.7    2.5    0.1    0.2   0.2
   Actual return on assets...........   (4.7)  (4.4)  (3.9)   --     --    --
   Net amortization and deferral.....    --     0.1    0.1   (0.3)  (0.3) (0.2)
                                       -----  -----  -----  -----  -----  ----
     Total net periodic cost
      (credit).......................  $(0.3) $ 0.2  $ 0.3  $(0.2) $(0.1) $--
                                       =====  =====  =====  =====  =====  ====
</TABLE>

  The principal economic assumptions used in the determination of net periodic
pension and postretirement cost included the following:

<TABLE>
<CAPTION>
                                                               1999  1998  1997
                                                               ----  ----  ----
   <S>                                                         <C>   <C>   <C>
   Discount rate.............................................. 6.5%  7.0%  7.5%
   Expected long-term rate of return on assets................ 9.5%  9.5%  9.5%
   Rate of increase in compensation levels.................... 4.0%  4.5%  5.0%
</TABLE>

  The changes in the projected benefit obligations for fiscal 1999 and fiscal
1998 were as follows:

<TABLE>
<CAPTION>
                                                             Postretirement
                                         Pension Benefits       Benefits
                                         ------------------  ----------------
                                           1999      1998     1999     1998
                                         --------  --------  -------  -------
   <S>                                   <C>       <C>       <C>      <C>
   Benefit obligations as of the
    beginning of the year............... $   45.3  $   39.8  $   2.3  $   2.9
   Change in foreign currency exchange
    rates...............................      0.4      (0.4)     --       --
   Service cost.........................      1.8       1.8      --       --
   Interest cost........................      2.7       2.7      0.1      0.1
   Participants' contributions..........      --        --       0.1      --
   Plan amendments......................      --        0.1      --       0.1
   Actuarial (gain) loss................     (5.5)      3.9     (0.3)    (0.7)
   Business transformation
    divestitures........................     (2.4)      --       --       --
   Benefits paid and expenses...........     (2.1)     (2.6)    (0.2)    (0.1)
                                         --------  --------  -------  -------
     Benefit obligations as of the end
      of the year....................... $   40.2  $   45.3  $   2.0  $   2.3
                                         ========  ========  =======  =======
</TABLE>

  The health care cost trend rate used to measure the cost in fiscal 1999 for
health care benefits was 8.2%, which is graded down to an ultimate trend rate
of 5.5% to be achieved in the year 2006. The effect of a one-percentage point
change in the assumed health care cost trend rates for future years would
result in a $0.1 million increase or decrease in the accumulated
postretirement benefit obligation as of fiscal year end 1999. The effect of
this change on the aggregate of the service and interest cost components of
the net periodic postretirement benefit costs would not be material.


                                     F-20
<PAGE>

                                     MIDAS

                  NOTES TO FINANCIAL STATEMENTS--(Continued)

  The changes in the fair market value of the plan assets for fiscal 1999 and
fiscal 1998 were as follows:

<TABLE>
<CAPTION>
                                                             Postretirement
                                         Pension Benefits       Benefits
                                         ------------------  ----------------
                                           1999      1998     1999     1998
                                         --------  --------  -------  -------
   <S>                                   <C>       <C>       <C>      <C>
   Fair value of assets as of the
    beginning of the year............... $   54.3  $   55.5  $   --   $   --
   Change in foreign currency exchange
    rates...............................      0.4      (0.6)     --       --
   Actual return on plan assets.........     10.1       0.9      --       --
   Employer contributions...............      0.2       1.1      0.1      0.1
   Participant's contributions..........      --        --       0.1      --
   Benefits paid and expenses...........     (2.1)     (2.6)    (0.2)    (0.1)
                                         --------  --------  -------  -------
     Fair value of assets as of the end
      of the year....................... $   62.9  $   54.3  $   --   $   --
                                         ========  ========  =======  =======
</TABLE>

  Pension costs are funded in amounts not less than minimum levels required by
regulation. The following table reconciles the pension plans and
postretirement plans funded status to the amounts recognized in other
noncurrent assets (liabilities) in Midas' balance sheets as of fiscal year end
1999 and 1998 (in millions):

<TABLE>
<CAPTION>
                                                Pension      Postretirement
                                               Benefits         Benefits
                                             --------------  ----------------
                                              1999    1998    1999     1998
                                             ------  ------  -------  -------
<S>                                          <C>     <C>     <C>      <C>
Actuarial present value of benefit
 obligation (measured as of September 30):
  Projected benefit obligation.............. $(40.2) $(45.3) $  (2.0) $  (2.3)
  Plan assets at fair market value (measured
   as of September 30)......................   62.9    54.3      --       --
                                             ------  ------  -------  -------
Plan assets in excess of (less than)
 projected benefit obligation...............   22.7     9.0     (2.0)    (2.3)
Unrecognized net asset at transition........   (0.8)   (1.1)     --       --
Unrecognized prior service costs............    1.5     2.8      --       --
Unrecognized net gain.......................  (12.9)   (2.1)    (4.6)    (4.6)
                                             ------  ------  -------  -------
  Prepaid (accrued) recognized on balance
   sheets................................... $ 10.5  $  8.6  $  (6.6) $  (6.9)
                                             ======  ======  =======  =======
</TABLE>

  The principal economic assumptions used in determining the above benefit
obligations were discount rates of 7.5% in fiscal 1999 and 6.5% in fiscal
1998, and rates of increase in future compensation levels of 5.0% in fiscal
1999 and 4.5% in fiscal 1998.

 Defined Contribution Plans

  Substantially all U.S. salaried employees, certain U.S. hourly employees,
and certain Australian and Canadian employees participate in voluntary,
contributory defined contribution plans to which Midas makes full or partial
matching contributions. Midas' matching contributions to these plans amounted
to $1.4 million, $1.7 million, and $2.0 million in fiscal 1999, 1998 and 1997,
respectively. Midas' cost for the associated nonqualified plan was $0.2
million in fiscal 1999, $0.1 million in fiscal 1998 and $0.7 million in fiscal
1997.

 Multi-employer Pension Plan

  Midas participates in a multi-employer pension plan, which provides benefits
to certain unionized employees. Amounts contributed to this plan totaled $0.2
million in fiscal 1999 and $0.3 million for both fiscal 1998 and 1997.


                                     F-21
<PAGE>

                                     MIDAS

                  NOTES TO FINANCIAL STATEMENTS--(Continued)

(13) Stock-Based Compensation

 Stock Options

  In connection with the Spin-off, Midas adopted, and Whitman, as then sole
shareholder of Midas, Inc., approved the Midas 1998 Stock Incentive Plan (the
"Plan"). The Plan authorizes the issuance of up to 3,106,886 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. In addition, Midas reserved 10,000
shares for issuance upon the grant of stock awards.

  On the date of the Spin-off, outstanding stock options granted under the
Whitman stock option plan were replaced with non-qualified Midas, Inc. stock
options of equivalent value, with necessary adjustments being made to the
number and exercise price of the Midas options to preserve the economic spread
of the prior Whitman options. Options granted pursuant to the Plan are
generally exercisable over a period of three or five years commencing one year
after the date of grant. The following table summarizes information regarding
the outstanding stock options as of January 1, 2000.

<TABLE>
<CAPTION>
                    Options Outstanding                              Options Exercisable
                 --------------------------                  -----------------------------------
                           Weighted-Average
   Range of                 Remaining Life  Weighted-Average                    Weighted-Average
Exercise Prices   Shares      (in years)     Exercise Price  Exercisable Shares  Exercise Price
---------------  --------- ---------------- ---------------- ------------------ ----------------
<S>              <C>       <C>              <C>              <C>                <C>
$ 9.81 - $14.42    360,566       6.4             $14.02           238,365            $13.81
 15.65 -  18.50    650,784       7.1              16.15           383,521             15.99
 20.38 -  24.95    470,000       8.2              22.53            97,997             22.48
 25.95 -  34.66    322,500       9.4              26.57             7,500             28.00
                 ---------                                        -------
                 1,803,850                                        727,383
                 =========                                        =======
</TABLE>

  The stock option activity since the Spin-off is summarized as follows:

<TABLE>
<CAPTION>
                                                        Number of  Option Price
                                                         Shares       Ranges
                                                        ---------  -------------
   <S>                                                  <C>        <C>
   Outstanding at Spin-off............................. 2,106,886  $ 7.35-$16.39
   Granted.............................................   784,774   15.65- 28.00
   Exercised...........................................  (288,086)   7.35- 15.83
   Cancelled and forfeited.............................  (359,073)  11.41- 15.83
                                                        ---------
   Outstanding at December 26, 1998.................... 2,244,501    7.35- 28.00
   Granted.............................................   370,000   24.95- 34.66
   Exercised...........................................  (757,923)   7.35- 20.25
   Cancelled and forfeited.............................   (52,728)  14.42- 25.95
                                                        ---------
   Outstanding at January 1, 2000...................... 1,803,850    9.81- 34.66
                                                        =========
</TABLE>

 Restricted Stock

  During fiscal 1998, the Company granted options to purchase 276,565 shares
of restricted stock to certain of its officers. The options were granted at
the market price of the stock on the date of the grant, and are reflected in
the above table. During fiscal 1999, all 276,565 options were exercised at a
combined price of approximately $6.1 million. In connection with the purchase
of these shares and in accordance with the terms of the grant, the holders of
the restricted stock became indebted to Midas in the aggregate amount of $6.1
million. Such loans

                                     F-22
<PAGE>

                                     MIDAS

                  NOTES TO FINANCIAL STATEMENTS--(Continued)

bear interest at 6.0% per annum, and have a four-year term that is accelerated
no later than one month after termination of employment. The Company has
agreed to waive interest that accrues while Midas employs the borrower. The
notes receivable are reflected as a reduction of shareholders' equity in the
accompanying balance sheet as of fiscal year end 1999.

  Restricted shares of Whitman common stock issued to certain Midas officers
were forfeited on January 30, 1998 and replaced with restricted shares of
Midas common stock of equal value. At fiscal year end 1999, there were 4,418
restricted shares of Midas common stock outstanding. The restricted shares
vest at various times over a three-year period commencing one year from the
original date of grant.

 Other

  The Company accounts for its stock-based compensation plans using the
intrinsic value method of accounting. An alternative to the intrinsic value
method is the fair value method. Had the Company used the fair value method,
pro forma net income and earnings per share would have been:

<TABLE>
<CAPTION>
   Fiscal Year                                                      1999  1998
   -----------                                                      ----- -----
   <S>                                                              <C>   <C>
   Net income (in millions)
     As reported................................................... $38.4 $28.2
     Pro forma.....................................................  37.0  27.4
   Basic earnings per share
     As reported................................................... $2.33 $1.67
     Pro forma.....................................................  2.25  1.62
   Diluted earnings per share
     As reported................................................... $2.28 $1.63
     Pro forma.....................................................  2.25  1.62
</TABLE>

  The weighted average estimated fair value of the options granted in fiscal
1999 and 1988 was $13.93 and $11.82, respectively, based on the Black-Scholes
valuation model using the following assumptions:

<TABLE>
<CAPTION>
   Fiscal Year                                                     1999   1998
   -----------                                                     -----  -----
   <S>                                                             <C>    <C>
   Risk-free interest rate........................................   6.5%   6.5%
   Dividend yield.................................................   0.0%   0.0%
   Expected volatility............................................ 33.25% 33.25%
   Expected life in years.........................................     8      8
</TABLE>

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

  In fiscal 1997, Midas adopted a Rights Agreement providing for the issuance
of one Preferred Stock Purchase Right (a "Right") with each share of Midas
common stock. Each Right entitles the registered holder to purchase from Midas
one one-hundredth of a share of Series A Junior Participating Preferred Stock
(a "Preferred Share") at a price of $150 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 13% or more of the Midas common stock (an "Acquired 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 13% or more
of the outstanding shares of Midas common stock.

                                     F-23
<PAGE>

                                     MIDAS

                  NOTES TO FINANCIAL STATEMENTS--(Continued)


  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 Midas common stock having a market value of two times the
exercise price of the Right. If Midas 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, Midas can redeem all the Rights for one cent per Right at any
time until 10 days following the first public announcement that a person has
become an Acquiring Person. The Midas Board of Directors, without the consent
of the holders of the Rights, is also authorized to reduce the stock ownership
thresholds to 10 percent or increase them to not more than 20 percent. The
Rights will expire on December 31, 2007. 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.

  Each Preferred Share will be entitled to a minimum preferential quarterly
dividend payment of $1.00 per share, but will be entitled to an aggregate
dividend of 100 times the dividend declared per share of Midas common stock.
Each Preferred Share will have 100 votes, voting together with the Midas
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 Midas 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.

(15) Contingencies

  In connection with the disposition of U.S. company-operated shops, certain
franchises entered into 94 financing agreements with a third party lender. If
the franchisees fail to make required payments, Midas is contingently liable
for a portion of the losses that would be incurred by the lender. As of
January 1, 2000, Midas' maximum loss exposure is approximately $5.5 million;
no losses were incurred by Midas in fiscal 1999 or 1998.

  Midas 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
Midas' counsel, the ultimate liability will not materially affect the
financial position or results of operations of Midas.

(16) Business Segment Information

  Midas operates in a single business segment and provides retail automotive
services principally through franchised shops located in North America (United
States and Canada) and through franchised and licensed shops in international
markets. During fiscal 1999, the Company completed its disposition of company-
operated shops, primarily through the franchising activities in the United
States and Canada described in Note 3 and the sale of the European operations
described in Note 4. Foreign currency gains and losses were not significant.
Sales to any single customer were less than five percent of sales and revenues
in each of the years presented. Midas' U.S. operations export products to and
receive royalties from franchisees located in Central America. Such sales and
revenues amounted to less than one percent of U.S. sales and revenues in each
of the fiscal years presented.


                                     F-24
<PAGE>

                                     MIDAS

                   NOTES TO FINANCIAL STATEMENTS--(Continued)

  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.

<TABLE>
<CAPTION>
                                                            Sales and Revenues
                                                           --------------------
   Fiscal Year                                              1999   1998   1997
   -----------                                             ------ ------ ------
   <S>                                                     <C>    <C>    <C>
   North American Operations:
     U.S.................................................. $301.8 $354.7 $411.7
     Canada...............................................   40.7   47.9   57.3
                                                           ------ ------ ------
     Total North America..................................  342.5  402.6  469.0
   International Operations...............................   13.0  111.2  122.0
                                                           ------ ------ ------
   Total.................................................. $355.5 $513.8 $591.0
                                                           ====== ====== ======
</TABLE>

<TABLE>
<CAPTION>
                                                           Identifiable Assets
                                                           --------------------
   Fiscal Year End                                          1999   1998   1997
   ---------------                                         ------ ------ ------
   <S>                                                     <C>    <C>    <C>
   North American Operations:
     U.S.................................................. $277.0 $298.7 $317.4
     Canada...............................................   28.3   23.6   34.3
                                                           ------ ------ ------
     Total North America..................................  305.3  322.3  351.7
                                                           ------ ------ ------
   International Operations...............................    0.6    3.0   91.4
                                                           ------ ------ ------
     Total................................................ $305.9 $325.3 $443.1
                                                           ====== ====== ======
</TABLE>

(17) Selected Quarterly Financial Data (Unaudited)

<TABLE>
<CAPTION>
                                           First  Second   Third  Fourth    Full
                                          Quarter Quarter Quarter Quarter   Year
                                          ------- ------- ------- -------  ------
<S>                                       <C>     <C>     <C>     <C>      <C>
Fiscal 1999
  Sales and revenues..................... $ 84.7  $ 98.5  $ 92.4  $ 79.9   $355.5
  Net income.............................    6.5    12.3    12.2     7.4     38.4
  Earnings per share diluted............. $  .37  $  .72  $  .73  $  .46   $ 2.28
Fiscal 1998
  Sales and revenues..................... $129.9  $140.4  $137.2  $106.3   $513.8
  Net income (loss)......................    4.2    11.2    13.1    (0.3)    28.2
  Earnings (loss) per share diluted...... $  .24  $  .65  $  .76  $ (.02)  $ 1.63
</TABLE>


                                      F-25