SECURITIES AND EXCHANGE
COMMISSION

WASHINGTON, D.C. 20549





FORM 10-Q







|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the quarterly period ended April 2, 2011

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | -----------------------------------------------------------------------------------------

For the transition period from  to

Commission File Number: 01-13409





MIDAS, INC.

(Exact Name of Registrant as Specified in its Charter)







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

(630)
438-3000

(Registrants telephone number, including area code)





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 whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).    YES   ̈    NO   ̈

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer, as defined
in Rule 12b-2 of the Exchange Act.



|                        |  |   |  |                           |  |  
|----------------------- |  | - |  | ------------------------- |  | -
|Large Accelerated Filer |  |  ̈ |  | Accelerated Filer         |  | x
|                        |  |   | 
|Non-Accelerated Filer   |  |  ̈ |  | Smaller Reporting Company |  |  ̈

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

The number of shares of the Registrants Common Stock, $.001 par value per share, outstanding as of May 2, 2011 was 14,195,434.









---

PART I. FINANCIAL INFORMATION

Item 1: Condensed Financial Statements

MIDAS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(In millions, except for earnings per share)



|                                                             |  |                                   |      |   |            |   |      |  
|------------------------------------------------------------ |  | --------------------------------- | ---- | - | ---------- | - | ---- | -
|                                                             |  | For the
quarterended fiscal March |     
|                                                             |  | 2011                              |      |   | 2010       |  
|                                                             |  | (13 weeks)                        |      |   | (13 weeks) |  
|                                                             |  |                                  
|Sales and revenues:                                          |  |                                   |      |   |            |   |      |  
|Franchise royalties and license fees                         |  | $                                 | 13.0 |   |            | $ | 12.9 |  
|Real estate revenues from franchised shops                   |  |                                   | 7.9  |   |            |   | 7.9  |  
|Company-operated shop retail sales                           |  |                                   | 18.0 |   |            |   | 19.8 |  
|Replacement part sales and product royalties                 |  |                                   | 5.2  |   |            |   | 5.4  |  
|Warranty fee revenue                                         |  |                                   | 0.4  |   |            |   | 0.2  |  
|Software sales and maintenance revenue                       |  |                                   | 1.6  |   |            |   | 1.5  |  
|                                                             |  |                                   |      |   |            |   |      |  
|Total sales and revenues                                     |  |                                   | 46.1 |   |            |   | 47.7 |  
|                                                             |  |                                   |      |   |            |   |      |  
|Operating costs and expenses:                                |  |                                   |      |   |            |   |      |  
|Franchised shops  occupancy expenses                        |  |                                   | 5.7  |   |            |   | 5.5  |  
|Company-operated shop parts cost of sales                    |  |                                   | 4.8  |   |            |   | 5.5  |  
|Company-operated shop payroll and employee benefits          |  |                                   | 7.5  |   |            |   | 8.1  |  
|Company-operated shop occupancy and other operating expenses |  |                                   | 5.7  |   |            |   | 6.4  |  
|Replacement part cost of sales                               |  |                                   | 4.8  |   |            |   | 4.9  |  
|Warranty expense                                             |  |                                   | 0.4  |   |            |   | 0.2  |  
|Selling, general, and administrative expenses                |  |                                   | 12.3 |   |            |   | 13.7 |  
|(Gain) loss on sale of assets, net                           |  |                                   | 0.2  |   |            |   | (0.1 | )
|                                                             |  |                                   |      |   |            |   |      |  
|Total operating costs and expenses                           |  |                                   | 41.4 |   |            |   | 44.2 |  
|                                                             |  |                                   |      |   |            |   |      |  
|Operating income                                             |  |                                   | 4.7  |   |            |   | 3.5  |  
|Interest expense                                             |  |                                   | (2.0 | ) |            |   | (2.5 | )
|Other income (expense), net                                  |  |                                   | (1.2 | ) |            |   | 0.2  |  
|                                                             |  |                                   |      |   |            |   |      |  
|Income before income taxes                                   |  |                                   | 1.5  |   |            |   | 1.2  |  
|Income tax expense                                           |  |                                   | 0.6  |   |            |   | 0.5  |  
|                                                             |  |                                   |      |   |            |   |      |  
|Net income                                                   |  | $                                 | 0.9  |   |            | $ | 0.7  |  
|                                                             |  |                                   |      |   |            |   |      |  
|                                                             |  |                                  
|Earnings per share:                                          |  |                                   |      |   |            |   |      |  
|Basic                                                        |  | $                                 | 0.07 |   |            | $ | 0.05 |  
|                                                             |  |                                   |      |   |            |   |      |  
|Diluted                                                      |  | $                                 | 0.07 |   |            | $ | 0.05 |  
|                                                             |  |                                   |      |   |            |   |      |  
|                                                             |  |                                  
|Average number of shares:                                    |  |                                   |      |   |            |   |      |  
|Common shares outstanding                                    |  |                                   | 13.8 |   |            |   | 13.8 |  
|Common stock warrants                                        |  |                                   | 0.1  |   |            |   | 0.1  |  
|                                                             |  |                                   |      |   |            |   |      |  
|Shares applicable to basic earnings                          |  |                                   | 13.9 |   |            |   | 13.9 |  
|Equivalent shares on outstanding stock awards                |  |                                   | 0.2  |   |            |   |     |  
|                                                             |  |                                   |      |   |            |   |      |  
|Shares applicable to diluted earnings                        |  |                                   | 14.1 |   |            |   | 13.9 |  
|                                                             |  |                                   |      |   |            |   |      |  

See notes to condensed consolidated financial statements.



1



---

MIDAS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except per share
data)



|                                                                                                              |  |                 |       |   |                    |   |       |  
|------------------------------------------------------------------------------------------------------------- |  | --------------- | ----- | - | ------------------ | - | ----- | -
|                                                                                                              |  | FiscalMarch2011 |       |   | FiscalDecember2010 |  
|                                                                                                              |  | (Unaudited)     |       |   |                    |  
|                                                                                                              |  |                
|Assets:                                                                                                       |  |                 |       |   |                    |   |       |  
|Current assets:                                                                                               |  |                 |       |   |                    |   |       |  
|Cash and cash equivalents                                                                                     |  | $               | 1.0   |   |                    | $ | 0.6   |  
|Receivables, net                                                                                              |  |                 | 29.4  |   |                    |   | 29.5  |  
|Inventories                                                                                                   |  |                 | 5.5   |   |                    |   | 5.0   |  
|Deferred income taxes                                                                                         |  |                 | 16.6  |   |                    |   | 18.0  |  
|Prepaid assets                                                                                                |  |                 | 4.1   |   |                    |   | 4.1   |  
|Other current assets                                                                                          |  |                 | 2.1   |   |                    |   | 3.0   |  
|                                                                                                              |  |                 |       |   |                    |   |       |  
|Total current assets                                                                                          |  |                 | 58.7  |   |                    |   | 60.2  |  
|Property and equipment, net                                                                                   |  |                 | 78.9  |   |                    |   | 81.1  |  
|Goodwill and other intangible assets, net                                                                     |  |                 | 40.8  |   |                    |   | 41.0  |  
|Deferred income taxes                                                                                         |  |                 | 44.7  |   |                    |   | 43.9  |  
|Other assets                                                                                                  |  |                 | 3.4   |   |                    |   | 3.5   |  
|                                                                                                              |  |                 |       |   |                    |   |       |  
|Total assets                                                                                                  |  | $               | 226.5 |   |                    | $ | 229.7 |  
|                                                                                                              |  |                 |       |   |                    |   |       |  
|                                                                                                              |  |                
|Liabilities and equity:                                                                                       |  |                 |       |   |                    |   |       |  
|Current liabilities:                                                                                          |  |                 |       |   |                    |   |       |  
|Current portion of long-term obligations                                                                      |  | $               | 1.7   |   |                    | $ | 1.7   |  
|Current portion of accrued warranty                                                                           |  |                 | 1.7   |   |                    |   | 1.7   |  
|Accounts payable                                                                                              |  |                 | 16.4  |   |                    |   | 21.1  |  
|Accrued expenses                                                                                              |  |                 | 19.8  |   |                    |   | 20.5  |  
|Accrued European arbitration settlement                                                                       |  |                 | 27.1  |   |                    |   | 25.5  |  
|                                                                                                              |  |                 |       |   |                    |   |       |  
|Total current liabilities                                                                                     |  |                 | 66.7  |   |                    |   | 70.5  |  
|Long-term debt                                                                                                |  |                 | 62.0  |   |                    |   | 62.7  |  
|Obligations under capital leases                                                                              |  |                 | 1.3   |   |                    |   | 1.3   |  
|Finance lease obligation                                                                                      |  |                 | 28.7  |   |                    |   | 29.1  |  
|Pension liability                                                                                             |  |                 | 22.3  |   |                    |   | 22.5  |  
|Accrued warranty                                                                                              |  |                 | 8.8   |   |                    |   | 9.1   |  
|Deferred warranty obligation                                                                                  |  |                 | 7.1   |   |                    |   | 6.8   |  
|Other liabilities                                                                                             |  |                 | 6.5   |   |                    |   | 6.7   |  
|                                                                                                              |  |                 |       |   |                    |   |       |  
|Total liabilities                                                                                             |  |                 | 203.4 |   |                    |   | 208.7 |  
|                                                                                                              |  |                 |       |   |                    |   |       |  
|                                                                                                              |  |                
|Temporary equity:                                                                                             |  |                 |       |   |                    |   |       |  
|Non-vested restricted stock subject to redemption                                                             |  |                 | 4.2   |   |                    |   | 3.8   |  
|                                                                                                              |  |                
|Shareholders equity:                                                                                         |  |                 |       |   |                    |   |       |  
|Common stock ($.001 par value, 100 million shares authorized, 17.7 million shares issued) and paid-in
capital |  |                 | 9.1   |   |                    |   | 8.9   |  
|Treasury stock, at cost (3.5 million shares)                                                                  |  |                 | (71.8 | ) |                    |   | (71.8 | )
|Retained income                                                                                               |  |                 | 98.5  |   |                    |   | 97.6  |  
|Accumulated other comprehensive loss                                                                          |  |                 | (16.9 | ) |                    |   | (17.5 | )
|                                                                                                              |  |                 |       |   |                    |   |       |  
|Total shareholders equity                                                                                    |  |                 | 18.9  |   |                    |   | 17.2  |  
|                                                                                                              |  |                 |       |   |                    |   |       |  
|Total liabilities and shareholders equity                                                                    |  | $               | 226.5 |   |                    | $ | 229.7 |  
|                                                                                                              |  |                 |       |   |                    |   |       |  

See notes to condensed consolidated financial statements.



2



---

MIDAS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In
millions)



|                                                                                         |  |                                         |      |   |      |   |      |  
|---------------------------------------------------------------------------------------- |  | --------------------------------------- | ---- | - | ---- | - | ---- | -
|                                                                                         |  | For the three monthsended 
fiscal March |     
|                                                                                         |  | 2011                                    |      |   | 2010 |  
|                                                                                         |  |                                        
|Cash flows from operating activities:                                                    |  |                                         |      |   |      |   |      |  
|Net income                                                                               |  | $                                       | 0.9  |   |      | $ | 0.7  |  
|Adjustments reconciling net income to net cash provided by operating activities:         |  |                                         |      |   |      |   |      |  
|Depreciation and amortization                                                            |  |                                         | 2.1  |   |      |   | 2.3  |  
|Stock-based compensation                                                                 |  |                                         | 0.5  |   |      |   | 0.7  |  
|Amortization of financing fees                                                           |  |                                         | 0.1  |   |      |   | 0.1  |  
|Deferred income taxes                                                                    |  |                                         | 0.6  |   |      |   | 0.3  |  
|(Gain) loss on sale of assets                                                            |  |                                         | 0.2  |   |      |   | (0.1 | )
|Changes in assets and liabilities, exclusive of effects of acquisitions and dispositions |  |                                         | (1.8 | ) |      |   | (1.4 | )
|                                                                                         |  |                                         |      |   |      |   |      |  
|Net cash provided by operating activities                                                |  |                                         | 2.6  |   |      |   | 2.6  |  
|                                                                                         |  |                                         |      |   |      |   |      |  
|                                                                                         |  |                                        
|Cash flows from investing activities:                                                    |  |                                         |      |   |      |   |      |  
|Capital investments                                                                      |  |                                         | (0.5 | ) |      |   | (0.5 | )
|Cash paid for acquired businesses                                                        |  |                                         |     |   |      |   | (3.5 | )
|Proceeds from sales of assets                                                            |  |                                         | 0.3  |   |      |   | 0.4  |  
|                                                                                         |  |                                         |      |   |      |   |      |  
|Net cash used in investing activities                                                    |  |                                         | (0.2 | ) |      |   | (3.6 | )
|                                                                                         |  |                                         |      |   |      |   |      |  
|                                                                                         |  |                                        
|Cash flows from financing activities:                                                    |  |                                         |      |   |      |   |      |  
|Net borrowings (repayments) under revolving lines of credit                              |  |                                         | (0.7 | ) |      |   | 2.5  |  
|Decrease in outstanding checks                                                           |  |                                         | (0.9 | ) |      |   | (0.7 | )
|Payment of principal obligations under capital leases                                    |  |                                         |     |   |      |   | (0.2 | )
|Payment of principal obligations under finance lease                                     |  |                                         | (0.4 | ) |      |   | (0.3 | )
|Borrowings under capital lease arrangements                                              |  |                                         |     |   |      |   | 0.1  |  
|                                                                                         |  |                                         |      |   |      |   |      |  
|Net cash provided by (used in) financing activities                                      |  |                                         | (2.0 | ) |      |   | 1.4  |  
|                                                                                         |  |                                         |      |   |      |   |      |  
|                                                                                         |  |                                        
|Net change in cash and cash equivalents                                                  |  |                                         | 0.4  |   |      |   | 0.4  |  
|Cash and cash equivalents at beginning of period                                         |  |                                         | 0.6  |   |      |   | 0.9  |  
|                                                                                         |  |                                         |      |   |      |   |      |  
|Cash and cash equivalents at end of period                                               |  | $                                       | 1.0  |   |      | $ | 1.3  |  
|                                                                                         |  |                                         |      |   |      |   |      |  

See notes to condensed consolidated financial statements.



3



---

MIDAS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY (Unaudited)

(In millions)



|                                                       |  |                                |      |  |                |   |     |                |  |  |                     |   |  |                                      |       |   |  |   |      |  |  |   |     |  |  |   |       |  
|------------------------------------------------------ |  | ------------------------------ | ---- |  | -------------- | - | --- | -------------- |  |  | ------------------- | - |  | ------------------------------------ | ----- | - |  | - | ---- |  |  | - | --- |  |  | - | ----- | -
|                                                       |  | Common StockAnd Paid InCapital |      |  | Treasury Stock |   |     | RetainedIncome |  |  | ComprehensiveIncome |   |  | Accumulated 
OtherComprehensive Loss |      
|                                                       |  | Shares                         |      |  | Amount         |   |     | Shares         |  |  | Amount              |   |  |                                      |      
|                                                       |  |                                |      |  |                |   |    
|Fiscal year end 2010                                   |  |                                | 17.7 |  |                | $ | 8.9 |                |  |  | (3.5                | ) |  | $                                    | (71.8 | ) |  | $ | 97.6 |  |  |   |     |  |  | $ | (17.5 | )
|                                                       |  |                                |      |  |                |   |    
|Stock option expense                                   |  |                                |     |  |                |   | 0.2 |                |  |  |                    |   |  |                                      |      |   |  |   |     |  |  |   |     |  |  |   |      |  
|                                                       |  |                                |      |  |                |   |    
|Net income                                             |  |                                |     |  |                |   |    |                |  |  |                    |   |  |                                      |      |   |  |   | 0.9  |  |  | $ | 0.9 |  |  |   |      |  
|                                                       |  |                                |      |  |                |   |    
|Other comprehensive income                             |  |                                |      |  |                |   |     |                |  |  |                     |   |  |                                      |       |   |  |   |      |  |  |   |     |  |  |   |       |  
| foreign currency translation                         |  |                                |     |  |                |   |    |                |  |  |                    |   |  |                                      |      |   |  |   |     |  |  |   | 0.2 |  |  |   | 0.2   |  
| unrecognized pension costs, net of tax               |  |                                |     |  |                |   |    |                |  |  |                    |   |  |                                      |      |   |  |   |     |  |  |   | 0.3 |  |  |   | 0.3   |  
| gain on derivative financial instruments, net of tax |  |                                |     |  |                |   |    |                |  |  |                    |   |  |                                      |      |   |  |   |     |  |  |   | 0.1 |  |  |   | 0.1   |  
|                                                       |  |                                |      |  |                |   |     |                |  |  |                     |   |  |                                      |       |   |  |   |      |  |  |   |     |  |  |   |       |  
|Comprehensive income                                   |  |                                |     |  |                |   |    |                |  |  |                    |   |  |                                      |      |   |  |   |     |  |  | $ | 1.5 |  |  |   |      |  
|                                                       |  |                                |      |  |                |   |     |                |  |  |                     |   |  |                                      |       |   |  |   |      |  |  |   |     |  |  |   |       |  
|                                                       |  |                                |      |  |                |   |    
|Fiscal first quarter end 2011                          |  |                                | 17.7 |  |                | $ | 9.1 |                |  |  | (3.5                | ) |  | $                                    | (71.8 | ) |  | $ | 98.5 |  |  |   |     |  |  | $ | (16.9 | )
|                                                       |  |                                |      |  |                |   |     |                |  |  |                     |   |  |                                      |       |   |  |   |      |  |  |   |     |  |  |   |       |  

See notes to condensed consolidated financial statements.



4



---

MIDAS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. Financial Statement
Presentation

As used herein, and except where the context otherwise requires, the terms MDS and the
Company refer to Midas, Inc. and its consolidated subsidiaries. The term Midas refers to the Midas retail system only. The term SpeeDee refers to the SpeeDee retail system.

The unaudited condensed consolidated interim period financial statements presented herein do not include all of the information and
disclosures customarily provided in annual financial statements and they have not been audited, as permitted by the rules and regulations of the Securities and Exchange Commission. The condensed consolidated interim period financial statements
should be read in conjunction with the annual financial statements included in the annual report on Form 10-K for the fiscal year ended January 1, 2011. In the opinion of management, these financial statements have been prepared in conformity
with accounting principles generally accepted in the United States and reflect all adjustments necessary for a fair statement of the results of operations and cash flows for the interim periods ended April 2, 2011 (first quarter fiscal
2011) and April 3, 2010 (first quarter fiscal 2010) and of its financial position as of April 2, 2011. All such adjustments are of a normal recurring nature. The results of operations for the first quarter of fiscal 2011
and 2010 are not necessarily indicative of the results of operations for the full year.

The unaudited condensed consolidated
interim period financial statements present the consolidated financial information for MDS and its wholly-owned subsidiaries. The unaudited condensed consolidated interim period financial statements for the quarters ended April 2, 2011 and
April 3, 2010 both cover a 13-week period. All significant inter-company balances and transactions have been eliminated in consolidation.

Certain reclassifications have been made to the fiscal 2010 first quarter Condensed Consolidated Statement of Operations and Condensed Consolidated Statement of Cash Flows in order to provide
comparability with the fiscal 2011 financial statements. Warranty fee revenue of $0.2 million, which was previously included in replacement part sales and product royalties, is now shown separately. Cash outlays for business transformation charges
of $0.1 million, which were shown separately, are now included in changes in assets and liabilities, exclusive of effects of acquisitions and dispositions.

Potential common share equivalents that could impact basic and diluted earnings per share but were excluded because they would be anti-dilutive were as follows (in millions):



|              |  |                                   |     |  |      |  |     | 
|------------- |  | --------------------------------- | --- |  | ---- |  | --- | 
|              |  | For the quarterended fiscal March |    
|              |  | 2011                              |     |  | 2010 | 
|              |  |                                  
|Stock options |  |                                   | 1.2 |  |      |  | 1.8 | 

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

Cash and cash equivalents consist of deposits with banks and financial institutions and are unrestricted as to withdrawal or use, and credit card receivables, which generally settle within three days or
less.



5



---

New Accounting Pronouncements

There were no new accounting pronouncements adopted during the first quarter of fiscal 2011 which had an impact on the Companys
Condensed Consolidated Financial Statements.

2. Supplemental Cash Flow Activity

Net cash flows from operating activities reflect cash payments for interest and taxes as follows (in millions):



|                  |  |                                        |     |  |      |   |     | 
|----------------- |  | -------------------------------------- | --- |  | ---- | - | --- | 
|                  |  | For the three monthsended fiscal
March |    
|                  |  | 2011                                   |     |  | 2010 |  
|                  |  |                                       
|Interest paid     |  | $                                      | 1.8 |  |      | $ | 2.6 | 
|Income taxes paid |  |                                        | 0.2 |  |      |   | 0.1 | 

The acquisition of
certain previously franchised shops resulted in non-cash reductions of accounts receivable of approximately $0.0 million and $2.5 million during the first three months of fiscal 2011 and 2010, respectively.

3. Debt Agreements

On
December 4, 2009, MDS entered into a three-year extension of its existing unsecured revolving credit facility. The credit agreement was extended through October 27, 2013 with no material changes in existing covenants. The extended facility
is for $125 million and is further expandable to $175 million by the Company with lender approval. The interest rate floats based on the underlying rate of LIBOR and the Companys leverage and was priced at LIBOR plus 3.00% at January 1,
2011. This facility requires maintenance of certain financial covenants including maximum allowable leverage, minimum fixed charge coverage and minimum net worth.

On March 3, 2011 the arbitral tribunal based in Geneva, Switzerland, issued its final ruling in the arbitration between MDS and its European licensee MESA S.p.A. (MESA) and Mobivia Group
S.A. (Mobivia, formerly known as Norauto Groupe SA). MDS recorded a $25.5 million European arbitration award expense in its fiscal 2010 consolidated financial statements, and a corresponding $25.5 million accrued European arbitration
award liability. As a result of the accrual of the $25.5 million European arbitration award in 2010, the Company was in violation of certain financial covenants as of January 1, 2011. On March 16, 2011, the Companys lenders waived
the covenant violations and entered into an amendment to the credit agreement. The amendment provides, among other things, that the $25.5 million arbitration award is excluded from the definition of consolidated adjusted EBITDA as defined in the
credit agreement (Consolidated Adjusted EBITDA) for purposes of the covenant calculations.

As of April 2,
2011, a total of $62.0 million was outstanding under the revolving credit facility. As of January 1, 2011, a total of $62.7 million was outstanding under the revolving credit facility.

In November 2005, $20 million in revolving bank debt was converted from floating rate to fixed rate by locking-in LIBOR at 4.89% for a
five-year period. In addition, in March 2007, MDS entered into an interest rate swap arrangement to convert an additional $25 million in revolving bank debt from floating rate to a fixed rate by locking-in LIBOR at 4.91% through October 2010. Both
of these swap arrangements expired prior to January 1, 2011.

In January 2010, the Company entered into a $40 million
forward starting swap to coincide with the end dates of its existing swaps. As a result of this forward swap transaction, in the period from November 2010 through October 2013 (end of the recently extended bank agreement) the Company has locked-in
LIBOR at 2.71% for $40 million of its $62.0 million in revolving bank debt.



6



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The November 2005, March 2007 and January 2010 swap arrangements have been designated
as cash flow hedges and have been evaluated to be highly effective. As a result, the after-tax change in the fair value of these swaps is recorded in accumulated other comprehensive loss as a gain or loss on derivative financial instruments. See
Note 8 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report.

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



|                                          |  |      |   |  |      |   |   |      |  |   |             |   |  |       |   |  |           |   |      |   |  |   |      | 
|----------------------------------------- |  | ---- | - |  | ---- | - | - | ---- |  | - | ----------- | - |  | ----- | - |  | --------- | - | ---- | - |  | - | ---- | 
|Expected Maturity Date                    |  | 2011 |   |  | 2012 |   |   | 2013 |  |   | There-after |   |  | Total |   |  | FairValue |  
|Long-term debt:                           |  |      |   |  |      |   |   |      |  |   |             |   |  |       |   |  |           |   |      |   |  |   |      | 
|Revolving credit facility (variable rate) |  | $    |  |  |      | $ |  |      |  | $ | 62.0        |   |  | $     |  |  |           | $ | 62.0 |   |  | $ | 62.0 | 
|Average interest rate                     |  |      |   |  |      |   |   |      |  |   | 3.36        | % |  |       |   |  |           |   | 3.36 | % |  |   |      | 

4. Pension Plans

Certain MDS employees are covered under various defined benefit pension plans sponsored and funded by MDS. Plans covering salaried and hourly corporate 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. Plan assets are invested primarily in common stocks, corporate bonds, and government securities.

The components of net periodic pension cost recognized for the interim periods are presented in the following table (in
millions):



|                                              |  |                                  |      |   |      |   |      |  
|--------------------------------------------- |  | -------------------------------- | ---- | - | ---- | - | ---- | -
|                                              |  | For the quarterended fiscalMarch |     
|                                              |  | 2011                             |      |   | 2010 |  
|Service cost                                  |  | $                                | 0.2  |   |      | $ | 0.2  |  
|Interest cost on projected benefit obligation |  |                                  | 0.9  |   |      |   | 0.9  |  
|Expected return on assets                     |  |                                  | (1.0 | ) |      |   | (1.0 | )
|Net amortization and deferral                 |  |                                  | 0.3  |   |      |   | 0.3  |  
|                                              |  |                                  |      |   |      |   |      |  
|Total net periodic pension cost               |  | $                                | 0.4  |   |      | $ | 0.4  |  
|                                              |  |                                  |      |   |      |   |      |  

The Company made cash contributions of approximately $0.2 million to the pension plans during the first
three months of fiscal 2011. The Company expects to make additional cash contributions of approximately $2.9 million to the pension plans during fiscal 2011 in order to maintain minimum statutory funding requirements.

5. Stock-Based Compensation and Other Equity Instruments

Stock Options

The Midas Stock Incentive Plan, the Midas Treasury Stock
Plan and the Midas Directors Deferred Compensation Plan (the Plans) authorize the issuance of up to 4,806,886 shares of Midas common stock pursuant to the exercise of incentive stock options, non-qualified stock options and stock
appreciation rights and the grant of restricted stock and performance awards. Options granted pursuant to the Plans generally vest annually over a period of four to five years commencing one year after the date of grant. It is the Companys
policy to issue shares out of treasury when options are exercised. The following table summarizes information regarding the outstanding stock options as of April 2, 2011:



|                                    |  |                  |           |  |                     |               |                                |   |      |                                                    |  |  |                                       |  |  |   |     | 
|----------------------------------- |  | ---------------- | --------- |  | ------------------- | ------------- | ------------------------------ | - | ---- | -------------------------------------------------- |  |  | ------------------------------------- |  |  | - | --- | 
|                                    |  | Number ofOptions |           |  | Option Price Ranges |               | WeightedAverageExercise 
Price |   |      | WeightedAverageRemainingContractual Term(in years) |  |  | AggregateIntrinsicValue (in millions) | 
|Outstanding at fiscal year end 2010 |  |                  | 1,408,173 |  |                     | $6.77 $22.17 |                                | $ | 8.73 |                                                    |  |  |                                       |  |  |   |     | 
|Outstanding at April 2, 2011        |  |                  | 1,408,173 |  |                     | 6.77 22.17   |                                |   | 8.73 |                                                    |  |  | 4.8                                   |  |  | $ | 0.6 | 
|Exercisable at April 2, 2011        |  |                  | 1,055,135 |  |                     | 6.77 22.17   |                                |   | 8.55 |                                                    |  |  | 3.5                                   |  |  | $ | 0.6 | 



7



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No stock options were granted, vested or forfeited in either the first quarter of fiscal
2011 or the first quarter of fiscal 2010.

As of April 2, 2011, there was $1.5 million in stock option compensation
expense related to unvested awards not yet recognized, which is expected to be recognized over a weighted-average period of 0.9 years.

Restricted Stock

Annually the Company grants shares of restricted stock to
certain employees, officers and directors. Certain restricted stock vests at the five or seven year anniversary of the grant date, with provisions for accelerated vesting upon the occurrence of certain pre-determined events (cliff-vesting
shares), while other restricted stock vests equally over periods of three to five years or only upon the occurrence of certain pre-determined events (the latter being referred to as performance shares). The fair value of all but
the performance share grants is equal to the stock price on the date of the grant. The fair value of the performance share grants is based on their derived service period calculated using either a Monte Carlo simulation model or managements
expectations of achieving the objectives depending on the nature of the performance criteria. As of both April 2, 2011 and January 1, 2011 there were 630,836 non-vested restricted shares outstanding with weighted average grant-date fair
values of $10.37 per share.

As of April 2, 2011, there was $1.9 million of unamortized restricted stock compensation of
which $6.1 million was included as a reduction to paid-in capital and $4.2 million was included in non-vested restricted stock subject to redemption. The $1.9 million of unamortized restricted stock compensation is expected to be recognized over a
weighted average period of 1.2 years.

Restricted stock grants include a change in control provision, which
provides for cash redemption of non-vested restricted stock in certain circumstances. ASC 480 Distinguishing Liabilities from Equity requires securities with contingent cash settlement provisions that are not solely in the control of the issuer,
without regard to probability of occurrence, to be classified outside of shareholders equity. While the Company believes the possibility of occurrence of any such change of control event is remote, the contingent cash settlement of the
restricted stock as a result of such event would not be solely in the control of the Company. As such, the Company presents the $4.2 million value of non-vested restricted stock as temporary equity on the consolidated balance sheet as of
April 2, 2011. Upon the vesting of the restricted stock the Company reclassifies the value of the restricted stock to permanent equity.

Common Stock Warrants

On March 27, 2003, the Company issued
1.0 million warrants valued at $5.0 million in connection with its 2003 debt restructuring. On January 5, 2004, 500,000 of these warrants were automatically cancelled because the Company met certain financial objectives contained in the
warrant agreements. As of April 2, 2011, a total of 41,273 warrants remained outstanding. The exercise price of the warrants is $0.01, and the warrants are exercisable at any time up to March 27, 2013. Any warrants that remain unexercised
at March 27, 2013 are automatically exercised as of that date.

The Company did not record an excess tax benefit in the
first three months of fiscal 2011 or fiscal 2010 related to stock-based compensation plans or equity instruments. The Company was in a net operating loss carry-forward position for the first three months of fiscal 2011 and 2010. As a
result, the excess tax benefit is not recognized until the deduction reduces the Companys income taxes payable, which occurs once the net operating loss has been fully utilized. Therefore, there was no impact on cash flows from operating
activities or cash flows from financing activities in the Condensed Consolidated Statements of Cash Flows.

6. Warranty

Customers are provided a written warranty from MDS on certain Midas products purchased from Midas shops in North America, namely brake
friction, mufflers, shocks and struts. The warranty will be honored at any Midas shop in North America and is valid for the lifetime of the vehicle, but is voided if the vehicle is sold. For warranties issued prior to July 1, 2009 in Canada and
January 1, 2008 in the United States, the Company maintains a warranty accrual to cover the estimated



8



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future liability associated with outstanding warranties. The Company determines the estimated amount of outstanding warranty claims based on: 1) an estimate of the percentage of all warranted
products sold and registered in prior periods at retail that are likely to be redeemed; and 2) an estimate of the cost of redemption of each future warranty claim on a current cost basis. These estimates are computed using actual historical
registration and redemption data as well as actual cost information on current redemptions.

Year-to-date warranty activity
through the first three months of fiscal 2011 is summarized as follows (in millions):



|                                                             |  |   |      |  
|------------------------------------------------------------ |  | - | ---- | -
|Accrued warranty at beginning of period                      |  | $ | 10.8 |  
|Changes in foreign exchange rate                             |  |   | 0.1  |  
|Warranty credit issued to franchisees (warranty claims paid) |  |   | (0.4 | )
|                                                             |  |   |      |  
|Accrued warranty at end of period                            |  |   | 10.5 |  
|Less current portion                                         |  |   | (1.7 | )
|                                                             |  |   |      |  
|Accrued warranty  non-current                               |  | $ | 8.8  |  
|                                                             |  |   |      |  

As of January 1, 2008, the Company changed how the Midas warranty obligations are funded in the United
States. From June 2003 through December 2007, product royalties received from the Companys preferred supply chain vendors were recorded as revenue and substantially offset the cost of warranty claims. Beginning in fiscal 2008, the Midas
warranty program in the United States is funded directly by Midas franchisees. The franchisees are charged a fee for each warranted product sold to customers. The fee is charged when the warranty is registered with the Company. The fee billed to
franchisees is deferred and is recognized as revenue when the actual warranty is redeemed and included in warranty expense. This fee is intended to cover the Companys cost of the new warranty program, thus revenues under this program will
match expenses and the new warranty program will have no net impact on the results of operations. In connection with this change, beginning in 2008 Midas system franchisees in the United States started receiving rebates on their purchases from the
Companys preferred supply chain vendors and MDS no longer receives product royalties on Midas franchisee purchases in the United States. The Companys U.S. supply chain partners are responsible for the warranty of parts during the first
12 months after installation.

As of July 1, 2009, the Company changed how the Midas warranty obligations are funded in
Canada to match the U.S. program. As a result, beginning in July 2009 Midas system franchisees in Canada started receiving rebates on their purchases from the Companys preferred supply chain vendors and MDS no longer receives product royalties
on Midas franchisee purchases in Canada. Because the Companys Canadian supply chain partners are responsible for the warranty of parts during the first 12 months, MDS did not begin to record revenues or expenses under the new Canadian program
until fiscal 2010.

Year-to-date activity through the first three months of fiscal 2011 for the deferred warranty obligation
related to this program is summarized as follows (in millions):



|                                                                |  |   |      |  
|--------------------------------------------------------------- |  | - | ---- | -
|Deferred warranty obligation at beginning of period             |  | $ | 6.8  |  
|Warranty fees charged to franchisees and company-operated shops |  |   | 0.7  |  
|Warranty credits issued to franchisees                          |  |   | (0.4 | )
|                                                                |  |   |      |  
|Deferred warranty obligation at end of period                   |  | $ | 7.1  |  
|                                                                |  |   |      |  

In the first three months of fiscal 2011, the Company recognized $0.4 million of warranty fee revenue and an
equal amount of warranty expense under this program.

7. Acquisitions and Divestitures

The Company re-franchised three company-operated Midas shops in the first three months of fiscal 2011. The re-franchising of these three
company-operated shops resulted in a write-down of $0.1 million of intangible assets and a net loss on sale of assets of approximately $0.2 million.

During the first three months of fiscal 2011, the Company acquired one franchised Midas shop from a Midas franchisee to be run as a company-operated shop for approximately $47,000, which generated
approximately $35,000 of incremental trademark and customer list intangibles.



9



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8. Fair Value Measurements and Derivative Instruments

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

The fair values of the Companys interest rate swaps are estimated
using Level 2 inputs, which are based on model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. The Company also considers counterparty credit-risk and bilateral or own
credit risk adjustments in estimating fair value, in accordance with the requirements of U.S. GAAP.

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



|                                            |  |                        |  |           |                       |  |                        |                   |           |   |     | 
|------------------------------------------- |  | ---------------------- |  | --------- | --------------------- |  | ---------------------- | ----------------- | --------- | - | --- | 
|                                            |  | As of April 2, 2011    |  |           | As of January 1, 2011 | 
|                                            |  | Balance Sheet Location |  | FairValue |                       |  | Balance Sheet Location |                   | FairValue |  
|Derivatives designed as hedging instruments |  |                        |  |           |                       |  |                        |                   |           |   |     | 
|Interest rate contracts                     |  | Other liabilities      |  | $         | 1.7                   |  |                        | Other liabilities |           | $ | 1.8 | 

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

9. Contingencies

As previously disclosed in the Companys 10-K for the year ended January 1, 2011, the Company is currently involved in a class action lawsuit
filed in the Superior Court of California for the County of Los Angeles in June 2006. In addition, the Company is also involved in a class action lawsuit which was filed against the Company in the Ontario Superior Court of Justice by two Canadian
Midas franchisees. The Company continues to believe that both of these class action lawsuits are without merit.



10



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| | Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
| | ------- | -------------------------------------------------------------------------------------

MDS management is focused on building shareholder value through the profitable growth of the Company. The three main drivers of profit
growth for MDS are the refranchising of company-operated shops, increasing shop count through the opening of additional franchised units and increasing comparable shop sales. These drivers are closely integrated, as the opening of franchises is much
easier in an environment where franchised shop sales and profits are growing.

Refranchising Company-Operated Shops

While many of the company-operated shops are profitable, the company-operated shop business has historically been
unprofitable as a whole. This is because the Company has historically acquired unprofitable shops from certain multi-shop franchisees in order to protect its markets. Most recently, the Company acquired 22 shops in Northern California from a
financially and operationally troubled franchisee in January 2010. The Company acquired the shops in conjunction with a settlement between the franchisee and the California Attorney General and the California Bureau of Automotive Repair. These
Northern California shops generated an operating loss of $0.2 million in the first three months of fiscal 2011. The refranchising of company-operated shops, particularly those that are unprofitable, benefits the Company in a number of ways. First,
the operating losses and capital investment requirements of the shops are replaced by royalty revenue that has minimal associated costs and capital investment. Second, the operational risks associated with running a shop on a day-to-day business are
no longer borne by the Company. Third, the Company is able to reduce corporate overhead in its company-operated shop business and in back-office support functions.

As of April 2, 2011, MDS operated 106 company-operated Midas, SpeeDee and Midas-SpeeDee Co-Branded shops. Most of these shops are currently targeted for re-franchising. The Company refranchised three
company-operated shops in the first three months of fiscal 2011 and acquired two shops from franchisees. The Company expects to refranchise additional shops during 2011 and currently does not anticipate any further acquisitions.

Growing Shop Count

Sales performance among U.S. Midas shops varies dramatically between the top-third performing shops and the bottom-third performing shops. In fiscal 2010, the top-third performing shops reported
comparable shop sales increases of over 17%, including a 9% increase in brake sales, while the bottom-third performing shops experienced a 9% decline in sales, including a 12% decline in brake sales. The Company believes that the disparity in
performance is substantially due to the fact that Midas is an older franchise system and that certain long-term franchisees are struggling with the ongoing changes required to adapt to the current automotive aftermarket. As a result, the Company has
been working diligently to identify those franchisees that cannot or will not adapt to the new environment and has been assisting them in transitioning out of the Midas system in favor of new franchise ownership.

The benefits of transitioning Midas shops to new franchisees can be seen in the performance of these shops. Sales at shops within the
first year after transition have historically far outperformed the sales performance of the broader Midas system. In some cases, the improvement is dramatic with sales rising by more than 100%. In the next several years the Company hopes to
accelerate the number of transitions each year and thereby increase the capacity of the Midas system as a whole to adapt to and succeed in this new business environment. Additionally, the Company hopes to significantly increase the number of
single-shop, owner-operator franchisees. As of January 1, 2011, about 30% of shops in the Midas system were owned by single-shop franchisees compared to 22% in 2005. MDS management strongly believes the automotive service business is often best
managed by single-shop owners who work the business on a daily basis.

In addition to transitions, the Company believes that
the re-opening of previously-operated Midas shops (i.e., available shop inventory) and matching prospective franchisees with sellers of competing automotive repair centers both provide a significant opportunity to grow the North American
franchise system.

As of April 2, 2011, the Companys available shop inventory consisted of 73 shops, 16 of which
were owned by the Company and 57 of which were leased from third parties. During 2010, the Company collected an average annual rent of approximately $60,000 from the locations it leased to franchisees and collected an average of approximately
$29,000 in royalties from each Midas shop in North America. Therefore, the reopening of these previously operated shops has the potential of adding significant revenues and operating profits in the future. The annual base rent obligation on the 57
shops that are leased from third parties is approximately $2.7 million. In addition to franchising these locations, the Company is also now working to sell or sublease certain of these shop properties as a means for accelerating the improvement in
the Companys real estate profitability.



11



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In March 2011, the Company completed the identification of nearly 600 trade areas in North
America eligible for expansion for the Midas or Midas-SpeeDee Co-Brand formats. The Company is targeting growth in these areas through de novo development and reopening of existing closed repair facilities. However, the Company believes that
the acquisition of existing automotive repair shops, as well as the conversion of independent repair facilities to the Midas, SpeeDee or Co-Brand formats, in these trade areas is the most efficient way to grow the MDS system. Furthermore, the
Company believes that the current economic environment will result in an increase in acquisition and conversion opportunities, as competitors struggle to remain viable and aging independent operators seek an exit strategy.

Growing Comparable Shop Sales

The Company believes that the key to growing sales in the Midas system in North America is to grow average daily car count by focusing on those services that are most critical to the regular maintenance
of vehicles; namely, oil and other fluid exchanges, brake replacement and tire replacement. These services are required of all vehicles at periodic intervals and management believes future success in automotive service requires that a service
provider possess expertise, credibility and top-of-mind awareness in all three categories.

As a result, in 2009, the Company
changed its promotional advertising strategy in the U.S. from national television advertising to a more locally-focused advertising approach featuring value-priced oil changes. This change has had a significant impact on average daily car count per
shop, as car count grew by 12% in fiscal 2009 and by an additional 10% in fiscal 2010. The Company believes that this value-priced, locally-focused oil change advertising strategy will provide an opportunity to form broader, longer-term
relationships with these new customers for brake repairs, factory scheduled maintenance and major repairs.

Comparable shop
sales of oil changes in North America have increased in each of the past three years and rose 16% in fiscal 2010. However, revenues from this category still represent less than 10% of U.S. Midas system sales, and the typical Midas shop performs
approximately eight oil changes per day. While oil change revenue and car count have been growing over the past several years, management believes the Midas system has the capacity to significantly increase that number.

With respect to growing brake sales, the Company has been and continues to deliver training that is focused on establishing greater
operating uniformity throughout the Midas system, including phone handling, customer interaction, product stocking and the brake inspection process, as well as the customer follow-up process.

The Company also continues to believe that the sales of tires and related tire services represent a significant opportunity for sales
growth at Midas. Comparable shop sales of tires and related tire services in the U.S. increased significantly in each of the prior four years and were up nearly 8% in fiscal 2010.

Finally, the Company believes that by co-branding Midas and SpeeDee shops by combining into one location Midas expertise in general
repairs and strong brand awareness with SpeeDees strength in executing quick-lube and fluid exchanges, that it has created a powerful new format focused on satisfying the needs of time-pressed consumers seeking value, excellence in service and
a long-term auto service relationship.

The Company began testing this concept by co-branding four franchised SpeeDee shops in
late 2008 and four Midas company-operated shops in early 2009. At the end of first quarter of fiscal 2011, there were 49 co-branded shops, including 17 SpeeDee shops that have added Midas repairs and services and 31 Midas shops that have added
SpeeDee oil change services. One brand-new franchised Midas-SpeeDee shop opened as a co-brand in Texas in late 2009.

The
company-operated Midas shops that have been converted to the co-brand format continue to deliver strong sales increases. In the first quarter of fiscal 2011, co-branded company-operated shops generated a comparable shop sales increase of 8.7%, or
approximately four percentage points higher than the sales increase for the traditional Midas format company-operated shops. This increase was generated on top of a 10.7% comparable shop sales increase in the first quarter of fiscal 2010 for these
co-branded shop locations.

While there are still only six Midas franchised shops that have converted to the co-brand format,
the results in this group have been the most encouraging for all co-brand conversions. In the first quarter of fiscal 2011, these shops generated a comparable shop sales increase of approximately 21%. With so few shops in this group, the results
have not yet meaningfully impacted sales for the overall Midas system. However, these sales results have encouraged numerous Midas franchisees to explore conversion to the co-brand format and as such the Company expects significant growth in the
number of Midas shops converting to co-brand over the next nine months.



12



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MDS management believes that while the current economic environment, and the need to develop
stronger customer relationships and improve operations execution, pose significant challenges for automotive aftermarket service providers, the potential to succeed is significant for those automotive service providers that are willing and able to
adapt.

RESULTS OF OPERATIONS

First Quarter Fiscal 2011 Compared with First Quarter Fiscal 2010

The following is a summary of the Companys sales and revenues for the first quarter of fiscal 2011 and 2010: ($ in millions)



|                                             |  |      |      |  |                 |  |       |      |  |   |                 |  |  |  |       |  
|-------------------------------------------- |  | ---- | ---- |  | --------------- |  | ----- | ---- |  | - | --------------- |  |  |  | ----- | -
|                                             |  | 2011 |      |  | Percentto Total |  |       | 2010 |  |   | Percentto Total | 
|Franchise royalties and license fees         |  | $    | 13.0 |  |                 |  | 28.2  | %    |  | $ | 12.9            |  |  |  | 27.1  | %
|Real estate revenues from franchised shops   |  |      | 7.9  |  |                 |  | 17.1  |      |  |   | 7.9             |  |  |  | 16.6  |  
|Company-operated shop retail sales           |  |      | 18.0 |  |                 |  | 39.0  |      |  |   | 19.8            |  |  |  | 41.5  |  
|Replacement part sales and product royalties |  |      | 5.2  |  |                 |  | 11.3  |      |  |   | 5.4             |  |  |  | 11.3  |  
|Warranty fee revenue                         |  |      | 0.4  |  |                 |  | 0.9   |      |  |   | 0.2             |  |  |  | 0.4   |  
|Software sales and maintenance revenue       |  |      | 1.6  |  |                 |  | 3.5   |      |  |   | 1.5             |  |  |  | 3.1   |  
|                                             |  |      |      |  |                 |  |       |      |  |   |                 |  |  |  |       |  
|Total sales and revenues                     |  | $    | 46.1 |  |                 |  | 100.0 | %    |  | $ | 47.7            |  |  |  | 100.0 | %
|                                             |  |      |      |  |                 |  |       |      |  |   |                 |  |  |  |       |  

Total sales and revenues for the first quarter of fiscal 2011 decreased $1.6 million, or 3.4%, from the
first quarter of fiscal 2010. Within the retail auto service business, royalty revenues and license fees were $13.0 million in the first quarter of fiscal 2011 compared to $12.9 million in first quarter of fiscal 2010. This increase primarily
reflects a comparable shop sales increase of 2.1% in the U.S., a weaker U.S. dollar that increased the value of Canadian royalties and a decline in the company-operated shop portfolio. These positive factors were partially offset by fewer shops in
operation in North America. U.S. average daily car count per shop rose by 4% and U.S. oil change revenues increased by 7% on a comparable shop basis as the Company continues to acquire new customers with value-priced oil changes and greater focus on
local marketing promotions. License fees from the Companys European licensee of approximately $1.0 million for both the first quarter of fiscal 2011 and fiscal 2010 are included in franchise royalties and franchise fees.

Revenues from real estate leases was flat at $7.9 million driven by a 1% net reduction in the number of shops paying rent to MDS due to
shop closures, partially offset by a more favorable Canadian currency exchange rate.

Sales from company-operated shops were
$18.0 million in the first quarter of fiscal 2011 compared to $19.8 million in first quarter of fiscal 2010. The revenue decline primarily reflects a decrease in the shop count from 124 at the end of first quarter of 2010 to 106 at the end of first
quarter of 2011. Sales at the Midas company-operated shops increased by 5.3% on a comparable shop basis. Sales at Midas company-operated shops were helped by an 8.7% increase in comparable shop sales for co-brand locations.

Replacement part sales and product royalties were $5.2 million in the first quarter of fiscal 2011, a decline of $0.2 million from the
first quarter of fiscal 2010, primarily due to lower sales of tires to Midas franchisees. Warranty fee revenue increased $0.2 million to $0.4 million as redemptions from the new warranty program continue to grow as the program matures. Warranty fee
revenue is recognized as redemptions occur and is offset by an equivalent amount of warranty expense. Software sales and maintenance revenue of $1.6 million in the first quarter of fiscal 2011 increased $0.1 million over the first quarter of fiscal
2010.

Total operating costs and expenses of $41.4 million in the first quarter of fiscal 2011 declined 6.3% from $44.2
million in the first quarter of fiscal 2010. Occupancy expenses for franchised shops increased $0.2 million to $5.7 million in the first quarter of fiscal 2011 primarily due to foreign exchange. Company-operated shop costs and expenses declined to
$18.0 million in the first quarter of fiscal 2011 from $20.0 million in the first quarter of fiscal 2010. The decrease in operating expenses was primarily driven by the lower shop count. Payroll and employee benefit costs increased to 41.7% of
company-operated shop sales in fiscal 2011 compared to 40.9% in the same period of the prior year. Company-operated shop occupancy and other expenses as a percentage of company-operated shop sales were 31.7% for the first quarter of fiscal 2011
compared to 32.3% for the same period in the prior year. Company-operated shop cost of sales improved from 27.8% of company-operated shop sales in the first quarter of fiscal 2010 to 26.7% in the first quarter of fiscal 2011, primarily as a result
of increased pricing and lower acquisition costs.



13



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Replacement part cost of sales increased to 92.3% of replacement part sales and product
royalties, from 90.7% in the first quarter of fiscal 2010. Warranty expense in the first quarter of fiscal 2011 was $0.4 million compared to $0.2 million in the first quarter of fiscal 2010. Warranty expense increased due to higher warranty
redemptions as the new U.S. and Canadian warranty programs mature. In the past several years there have been changes in the warranty programs for both countries whereby Midas franchisees are now responsible for directly funding the new warranty
programs. The Companys future warranty expense under the new programs will be exactly offset by warranty fee revenue.

Selling, general and administrative expenses declined to $12.3 million in the first quarter of fiscal 2011 from $13.7 million in the
first quarter of fiscal 2010. The decline in expense was primarily driven by $1.1 million of incremental legal and other costs incurred in the first quarter of fiscal 2010 in connection with the Companys arbitration process with its licensee
in Europe.

During the first quarter of fiscal 2011 the Company recorded net losses on the sale of certain company-operated
shop assets of $0.2 million. In the first quarter of fiscal 2010 the Company recorded net gains on the sale of certain company-operated shop assets of $0.1 million.

As a result of the above changes, operating income increased $1.2 million to $4.7 million in the first quarter of fiscal 2011 from $3.5 million in the first quarter of fiscal 2010. Operating income margin
increased to 10.2% of sales from 7.3% of sales.

Interest expense was $2.0 million in the first quarter of fiscal 2011
compared to $2.5 million in first quarter of fiscal 2010. Interest expense decreased in the first quarter of fiscal 2011 due to a reduction in the Companys average bank debt and the expiration of two interest rate swaps in late 2010. During
the first quarter of fiscal 2010, the Company had two interest rate swaps that locked-in LIBOR at an average of 4.9% on $45 million in bank debt. These arrangements were replaced by a $40 million interest rate swap that fixes LIBOR at 2.71% through
November 2013. The Company will realize a savings on interest expense in the first 10 months of fiscal 2011 as a result of the new lower cost interest rate swap.

The Company recorded other expense of $1.2 million in the first quarter of fiscal 2011 and other income of $0.2 million in fiscal 2010. Other income consists primarily of interest income on overdue
customer accounts and foreign currency exchange gains or losses. MDS recorded a net foreign currency re-measurement loss on the European arbitration award of $1.3 million in first quarter of fiscal 2011, which was included in the $1.2 million other
expense. Excluding this charge, the Company would have generated other income of $0.1 million.

The Companys effective
tax rate was 40.0% in the first quarter of fiscal 2011 compared to 41.4% in the first quarter of fiscal 2010 and the 2011 statutory tax rate of 39.2%. The 2011 variance from the statutory rate was primarily due to certain non-deductable expenses
partially offset by lower Canadian income tax rates.

As a result of the above items, net income increased $0.2 million from
net income of $0.7 million in the first quarter of fiscal 2010 to net income of $0.9 million in the first quarter of fiscal 2011.

LIQUIDITY AND CAPITAL RESOURCES

Following is a summary of the Companys cash flows from operating, investing and financing activities for the first three months of fiscal 2011 and 2010, respectively (in millions):



|                                                                                                 |  |      |      |   |      |   |      |  
|------------------------------------------------------------------------------------------------ |  | ---- | ---- | - | ---- | - | ---- | -
|                                                                                                 |  | 2011 |      |   | 2010 |  
|Cash provided by operating activities before net changes in assets and liabilities               |  | $    | 4.4  |   |      | $ | 4.0  |  
|Net changes in assets and liabilities, exclusive of the effects of acquisitions and dispositions |  |      | (1.8 | ) |      |   | (1.4 | )
|                                                                                                 |  |      |      |   |      |   |      |  
|Net cash provided by operating activities                                                        |  |      | 2.6  |   |      |   | 2.6  |  
|Net cash used in investing activities                                                            |  |      | (0.2 | ) |      |   | (3.6 | )
|Net cash provided by (used in) financing activities                                              |  |      | (2.0 | ) |      |   | 1.4  |  
|                                                                                                 |  |      |      |   |      |   |      |  
|Net change in cash and cash equivalents                                                          |  | $    | 0.4  |   |      | $ | 0.4  |  
|                                                                                                 |  |      |      |   |      |   |      |  

The Companys cash management system permits the Company to make daily borrowings and repayments on its
revolving line of credit, allowing MDS to minimize interest expense and to maintain a low cash balance. The Companys cash and cash equivalents increased $0.4 million in the first three months of fiscal 2011.



14



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The Companys operating activities provided net cash of $2.6 million during the first
three months of fiscal 2011 and fiscal 2010. Excluding changes in assets and liabilities, cash provided by operating activities increased from $4.0 million in the first three months of fiscal 2010 to $4.4 million in the first three months of fiscal
2011, primarily due to the higher net income, higher utilization of deferred tax assets and losses on sale of assets in fiscal 2011 versus gains in fiscal 2010. These amounts were partially offset by lower stock based compensation expense and lower
depreciation and amortization.

Changes in assets and liabilities went from a $1.4 million use of cash in the first three
months of fiscal 2010 to a $1.8 use of cash in the first three months of fiscal 2011. The Company typically experiences a reduction in accounts payable in the first quarter leading to a net use of cash as seasonally high tire purchases in the fourth
quarter are paid in the first quarter.

Investing activities used $0.2 million of cash in the first three months of fiscal
2011 compared to $3.6 million of cash in the first three months of fiscal 2010. Investing activities in the first three months of fiscal 2011 consisted of $0.5 million in capital expenditures and $0.3 million in cash generated as a result of the
sale of three company-operated Midas shops. The $0.5 million in capital expenditures included $0.3 million for company-operated shop equipment additions, $0.1 million for systems development projects and $0.1 million for leasehold improvements.
Investing activities in the first three months of fiscal 2010 consisted of $0.5 million in capital expenditures, $3.5 million paid in conjunction with the acquisition of 22 shops and other assets from a Midas franchisee in Northern California, and
$0.4 million in cash generated as a result of the sale of three company-operated shops. The $0.5 million in capital expenditures included $0.2 million in leasehold improvements, $0.2 million for systems development projects and $0.1 million for
company-operated shop equipment additions.

Net cash used in financing activities was $2.0 million in the first three months
of fiscal 2011, compared to net cash provided of $1.4 million in the first three months of fiscal 2010. During the first three months of fiscal 2011, MDS decreased total debt by $1.1 million and decreased outstanding checks by $0.9 million. During
the first three months of fiscal 2010, MDS increased total debt by $2.1 million and decreased outstanding checks by $0.7 million.

On December 4, 2009, MDS entered into a three-year extension of its existing unsecured revolving credit facility. The credit agreement was extended through October 27, 2013 with no material
changes in existing covenants. The extended facility is for $125 million and is further expandable to $175 million by the Company with lender approval. The interest rate floats based on the underlying rate of LIBOR and the Companys leverage
and was priced at LIBOR plus 3.00% at January 1, 2011. This facility requires maintenance of certain financial covenants including maximum allowable leverage, minimum fixed charge coverage and minimum net worth.

On March 3, 2011 the arbitral tribunal based in Geneva, Switzerland, issued its final ruling in the arbitration between MDS and its
European licensee MESA S.p.A. (MESA) and Mobivia Group S.A. (Mobivia, formerly known as Norauto Groupe SA). MDS recorded a $25.5 million European arbitration award expense in its fiscal 2010 consolidated financial statements,
and a corresponding $25.5 million accrued European arbitration award liability. As a result of the accrual of the $25.5 million European arbitration award in 2010, the Company was in violation of certain financial covenants as of January 1,
2011. On March 16, 2011, the Companys lenders waived the covenant violations and entered into an amendment to the credit agreement. The amendment provides, among other things, that the $25.5 million arbitration award is excluded from the
definition of consolidated adjusted EBITDA as defined in the credit agreement for purposes of the covenant calculations.

The
financial covenants require that the Company maintain a maximum leverage ratio (Leverage Ratio) of Total Debt (defined as outstanding borrowings and letters-of-credit under the revolving credit facility plus the balance of capital leases
but excluding finance leases) to consolidated adjusted EBITDA (Consolidated Adjusted EBITDA) of no more than 3.00 to 1.00. The March 2011 amendment increased this maximum to 3.50 to 1.00 for fiscal year end 2010 and the first two fiscal
quarters of fiscal 2011, being reduced to 3.25 to 1.00 at the end of the third and fourth quarters of fiscal 2011. The allowable leverage ratio then returns to 3.00 to 1.00 for all remaining periods. The Company is required to test this ratio
quarterly on a trailing twelve month basis.

Consolidated Adjusted EBITDA means for the relevant period: consolidated net
income, plus, to the extent deducted from revenues in determining consolidated net income, (i) consolidated interest expense, (ii) expense for income taxes paid or accrued, (iii) depreciation, (iv) amortization of stock based
compensation expenses, (v) corporate restructuring costs not to exceed $2.5 million in the aggregate in fiscal 2010 and 2009, (vi) special charges not to exceed $0.5 million in fiscal 2009 related to the new image and warranty program,
(vii) company-operated shop restructuring costs and losses (net of realized gains upon disposition) of up to $1.0 million in each fiscal year, and, (viii) the $25.5 million European arbitration award expense, and, minus, to the extent
included in consolidated net income, extraordinary gains realized other than in the ordinary course of business.



15



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Consolidated Adjusted EBITDA as of the three most recent measurement periods was as follows
(dollars in millions):



|                                          |  |                 |       |   |                    |   |       |                     |  |   |      | 
|----------------------------------------- |  | --------------- | ----- | - | ------------------ | - | ----- | ------------------- |  | - | ---- | 
|Fiscal Period                             |  | FiscalMarch2011 |       |   | FiscalDecember2010 |   |       | FiscalSeptember2010 | 
|                                          |  |                 |      
|Consolidated net income (loss)            |  | $               | (13.2 | ) |                    | $ | (13.4 | )                   |  | $ | 2.1  | 
|Consolidated interest expense             |  |                 | 8.8   |   |                    |   | 9.3   |                     |  |   | 9.5  | 
|Income tax expense (benefit)              |  |                 | (4.5  | ) |                    |   | (4.6  | )                   |  |   | 2.1  | 
|Depreciation and amortization expense     |  |                 | 9.1   |   |                    |   | 9.3   |                     |  |   | 9.4  | 
|Stock-based compensation expense          |  |                 | 2.6   |   |                    |   | 2.8   |                     |  |   | 3.0  | 
|Corporate restructuring costs             |  |                 |      |   |                    |   |      |                     |  |   | 1.1  | 
|Special charges                           |  |                 |      |   |                    |   |      |                     |  |   | 0.2  | 
|Company-operated shop restructuring costs |  |                 | 0.2   |   |                    |   | (0.1  | )                   |  |   | 0.8  | 
|European arbitration award                |  |                 | 25.5  |   |                    |   | 25.5  |                     |  |   |     | 
|                                          |  |                 |       |   |                    |   |       |                     |  |   |      | 
|Consolidated Adjusted EBITDA              |  | $               | 28.5  |   |                    | $ | 28.8  |                     |  | $ | 28.2 | 
|                                          |  |                 |       |   |                    |   |       |                     |  |   |      | 

As calculated in accordance with the amended credit agreement, the following table presents the
Companys actual Leverage Ratio as of the three most recent measurement periods (dollars in millions):



|                             |  |                 |  |                    |  |                    
|---------------------------- |  | --------------- |  | ------------------ |  | -------------------
|Fiscal Period                |  | FiscalMarch2011 |  | FiscalDecember2010 |  | FiscalSeptember2010
|                             |  |                 | 
|Total Debt                   |  | $64.1           |  | $65.1              |  | $67.6              
|                             |  |                 | 
|Consolidated Adjusted EBITDA |  | $28.5           |  | $28.8              |  | $28.2              
|                             |  |                 | 
|Leverage Ratio               |  | 2.25 to 1       |  | 2.26 to 1          |  | 2.40 to 1          

The
financial covenants require that the Company maintain a minimum fixed charge coverage ratio (Fixed Charge Ratio) of not less than 1.3 to 1.0. This ratio is calculated as (a) Consolidated Adjusted EBITDA plus Net Rent for the
previous fiscal year to (b) consolidated interest expense paid in cash, plus (i) Net Rent for the previous fiscal year, (ii) consolidated capital expenditures, (iii) scheduled principal payments made, and, (iv) expense for
taxes paid in cash. Net Rent is defined as consolidated rent expense less consolidated rent revenue from leased shops subleased to franchisees for the most recently completed full fiscal year.

As calculated in accordance with the amended credit agreement, the following table presents the Companys actual Fixed Charge Ratio
as of the three most recent measurement periods (dollars in millions):



|                                   |  |                 |      |  |                    |   |      |                     |  |   |      | 
|---------------------------------- |  | --------------- | ---- |  | ------------------ | - | ---- | ------------------- |  | - | ---- | 
|Fiscal Period                      |  | FiscalMarch2011 |      |  | FiscalDecember2010 |   |      | FiscalSeptember2010 | 
|                                   |  |                 |     
|Consolidated Adjusted EBITDA       |  | $               | 28.5 |  |                    | $ | 28.8 |                     |  | $ | 28.2 | 
|Net Rent                           |  |                 | 5.4  |  |                    |   | 5.4  |                     |  |   | 4.2  | 
|                                   |  |                 |      |  |                    |   |      |                     |  |   |      | 
|EBITDAR                            |  | $               | 33.9 |  |                    | $ | 34.2 |                     |  | $ | 32.4 | 
|                                   |  |                 |      |  |                    |   |      |                     |  |   |      | 
|                                   |  |                 |     
|Consolidated interest paid in cash |  | $               | 8.4  |  |                    | $ | 9.2  |                     |  | $ | 8.8  | 
|Net Rent                           |  |                 | 5.4  |  |                    |   | 5.4  |                     |  |   | 4.2  | 
|Consolidated capital expenditures  |  |                 | 4.3  |  |                    |   | 4.3  |                     |  |   | 3.0  | 
|Capital lease principal payments   |  |                 | 0.1  |  |                    |   | 0.3  |                     |  |   | 0.2  | 
|Finance lease principal payments   |  |                 | 1.4  |  |                    |   | 1.3  |                     |  |   | 1.3  | 
|Cash taxes paid                    |  |                 | 0.7  |  |                    |   | 0.6  |                     |  |   | 0.5  | 
|                                   |  |                 |      |  |                    |   |      |                     |  |   |      | 
|                                   |  |                 |     
|Total Fixed Charges                |  | $               | 20.3 |  |                    | $ | 21.1 |                     |  | $ | 18.0 | 
|                                   |  |                 |      |  |                    |   |      |                     |  |   |      | 
|                                   |  |                 |     
|Fixed Charge Ratio                 |  |                 | 1.67 |  |                    |   | 1.62 |                     |  |   | 1.80 | 



16



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The financial covenants also require that the Company maintain a minimum net worth of not
less than $17.5 million plus 50% of positive consolidated net income for quarterly periods beginning with the fourth quarter of fiscal 2010. Prior to the March 2011 amendment, the covenants required the Company to maintain a minimum net worth of not
less than $20.0 million plus 50% of positive consolidated net income beginning in fiscal 2010 through the third quarter of 2010. As calculated in accordance with the amended credit agreement, the following table presents the Companys actual
minimum net worth as of the three most recent measurement periods (dollars in millions):



|                           |  |                 |      |  |                    |   |      |                     |  |   |      | 
|-------------------------- |  | --------------- | ---- |  | ------------------ | - | ---- | ------------------- |  | - | ---- | 
|Fiscal Period              |  | FiscalMarch2011 |      |  | FiscalDecember2010 |   |      | FiscalSeptember2010 | 
|                           |  |                 |     
|Minimum net worth required |  | $               | 18.0 |  |                    | $ | 17.5 |                     |  | $ | 21.2 | 
|                           |  |                 |     
|Actual net worth           |  | $               | 22.8 |  |                    | $ | 21.3 |                     |  | $ | 36.6 | 

As of April 2,
2011, a total of $62.0 million was outstanding under the revolving credit facility. As of January 1, 2011, a total of $62.7 million was outstanding under the revolving credit facility. As of April 2, 2011, there was $35.7 million of
available borrowing capacity under the Companys revolving credit facility, as amended.

In November 2005, $20 million in
revolving bank debt was converted from floating rate to fixed rate by locking-in LIBOR at 4.89% for a five-year period. In addition, in March 2007, MDS entered into an interest rate swap arrangement to convert an additional $25 million in revolving
bank debt from floating rate to a fixed rate by locking-in LIBOR at 4.91% through October 2010. Both of these swap arrangements expired prior to January 1, 2011.

In January 2010, the Company entered into a $40 million forward starting swap to coincide with the end dates of its existing swaps. As a result of this forward swap transaction, in the period from
November 2010 through October 2013 (end of the recently extended bank agreement) the Company has locked-in LIBOR at 2.71% for $40 million of its $62.7 million in revolving bank debt.

The November 2005, March 2007 and January 2010 swap arrangements have been designated as cash flow hedges and have been evaluated to
be highly effective. As a result, the after-tax change in the fair value of these swaps is recorded in accumulated other comprehensive loss as a gain or loss on derivative financial instruments.

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

On April 7, 2011, the Company made a net cash payment of 
15.6 million ($22.4 million) to settle its obligations to MESA resulting from the March 3, 2011, arbitration award. This amount was borrowed under the Companys revolving credit facility.

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



17



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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

Valuation of Warranty
Liabilities

Customers are provided a written warranty from MDS on certain Midas products purchased from Midas shops in
North America, namely brake friction, mufflers, shocks and struts. The warranty will be honored at any Midas shop in North America and is valid for the lifetime of the vehicle, but is voided if the vehicle is sold.

Prior to July 1, 2009 in Canada and January 1, 2008 in the U.S., product royalties received from the Companys preferred
supply chain vendors were recorded in revenue and substantially offset the cost of warranty claims. Beginning on January 1, 2008 in the U.S. and July 1, 2009 in Canada, the Midas warranty program became funded directly by franchisees. The
Company maintains a warranty accrual to cover the estimated future liability associated with outstanding warranties issued prior to July 1, 2009 in Canada and January 1, 2008 in the U.S. The Company determines the estimated amount of
outstanding warranty claims based on: 1) an estimate of the percentage of all warranted products sold and registered in prior periods at retail that are likely to be redeemed; and 2) an estimate of the cost of redemption of each future warranty
claim on a current cost basis. These estimates are computed using actual historical registration and redemption data as well as actual cost information on current redemptions.

The determination of the number of products sold that are likely to be redeemed requires MDS to make significant estimates and assumptions regarding the relationship of historical warranty claim behavior;
warranty claim behavior across product lines and geographical areas; and the impact of changes in consumer behavior on future warranty claims. A decrease of one percentage point in the estimated percentage of warranted products likely to be redeemed
in the U.S. would have the effect of decreasing the Companys January 1, 2011 outstanding U.S. warranty liability by approximately $1.8 million. A change in the estimated current cost of warranty redemptions of one dollar would have the
effect of changing the outstanding U.S. warranty liability by approximately $0.5 million.

Valuation of Receivables

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

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

Pensions

The Company has non-contributory defined benefit pension plans covering certain of its employees. The Companys funding policy for
the U.S. plan is to contribute amounts sufficient to meet the minimum funding requirement of the Employee Retirement Income Act of 1974, plus any additional amounts the Company may deem to be appropriate. The



18



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Company accounts for its defined benefit pension plans in accordance with ASC 715 Compensation  Retirement Benefits, which requires that amounts recognized in the financial statements be
determined on an actuarial basis. The amount recorded as pension assets or liabilities is determined by comparing the projected benefit obligation (PBO) to the fair value of the plan assets. Amounts recognized in accumulated other comprehensive
income consist of unrecognized actuarial gains, losses, and prior service costs, net of tax.

To account for its defined
benefit pension plans in accordance with ASC 715, the Company must make three main determinations at the end of each fiscal year. First, it must determine the actuarial assumption for the discount rate used to reflect the time value of money in the
calculation of the projected benefit obligation for the end of the current fiscal year and to determine the net periodic pension cost for the subsequent year. To determine this rate, the Companys third-party actuary prepares a detailed
analysis of projected future cash flows using the Mercer Discount Yield Curve.

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

Third,
the Company must determine the expected long-term rate of return on assets assumption that is used to determine the expected return on plan assets component of the net periodic pension cost for the subsequent year. The difference between the actual
return on plan assets and the expected return is deferred and is recognized in net periodic pension cost over a five-year period. The Company assumed a long-term rate of return on pension assets of 8.25% in fiscal 2010 and 2009, and experienced
gains on plan assets of $5.2 million in fiscal 2010 and $6.2 million in fiscal 2009.

The Companys pension plan
investments are primarily comprised of bond and equity mutual funds and cash reserves. The pension plans have no investments in alternative investment vehicles such as private equity funds or hedge funds, nor have the plans ever held such
investments.

Volatile market conditions over the past several years have increased the risks associated with certain
investments held by MDS pension plans which have negatively impacted the value of investments, net periodic pension costs and created funding requirements. We expect to have additional pension funding obligations of $2.9 million in fiscal 2011.

Carrying Values of Goodwill and Long-Lived Assets

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

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

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



19



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

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

Deferred Income Taxes

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

Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax
assets are deductible, management believes it is more likely than not that the Company will realize the benefits of these deductible differences at April 2, 2011. In the event that management determines the Company would not be able to realize
all or part of the net deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to income in the period such determination was made. As of April 2, 2011, the Company had recorded a valuation allowance of $2.1
million against certain foreign tax credit carryovers because the company determined that it was more likely than not that this portion of the deferred tax asset will not be realized. Additionally, the Company had recorded valuation allowances of
$0.4 million against certain state income tax net operating loss carryovers because the Company has determined that it is more likely than not that this portion of these deferred tax assets will not be realized. However, due to the inherent
uncertainty involved in determining the realizability of the companys deferred tax assets, the future realizability could differ from management estimates at April 2, 2011.

IMPACT OF NEW ACCOUNTING STANDARDS

New Accounting Pronouncements 
Adopted

There were no new accounting pronouncements adopted during the first quarter of fiscal 2011 which had an impact on
the Companys Condensed Consolidated Financial Statements.

New Accounting Pronouncements  Issued

There are no recently issued accounting pronouncements which pertain to MDS.



20



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FORWARD LOOKING STATEMENTS

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

The Companys results of operations and the forward-looking statements could be affected by, among others things: general economic
conditions in the markets in which the Company operates; economic developments that have a particularly adverse effect on one or more of the markets served by the Company; the ability to execute managements internal operating plans; the timing
and magnitude of capital expenditures; the Companys ability to access debt and equity markets; economic and market conditions in the U.S. and worldwide; currency exchange rates; changes in consumer spending levels and demand for new products
and services; and overall competitive activities. Certain of these risks are more fully described in Item 1A of Part I of the Companys annual report on Form 10-K. 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 3. Quantitative and Qualitative
Disclosures About Market Risk.

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

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.

Interest rate risk is managed through variable rate borrowings in combination with swaps to fixed interest rates
on a portion of those borrowings. In November 2005, $20 million in revolving bank debt was converted from floating rate to fixed rate by locking-in LIBOR at 4.89% for a five-year period. In addition, in March 2007, MDS entered into an interest rate
swap arrangement to convert an additional $25 million in revolving bank debt from floating rate to a fixed rate by locking-in LIBOR at 4.91% through October 2010. Both of these swap arrangements expired prior to January 1, 2011.

In January 2010, the Company entered into a $40 million forward starting swap to coincide with the end dates of its existing swaps. As a
result of this forward swap transaction, in the period from November 2010 through October 2013 (end of the recently extended bank agreement) the Company has locked-in LIBOR at 2.71% for $40 million of its $62.0 million in revolving bank debt.

The November 2005, March 2007 and January 2010 swap arrangements have been designated as cash flow hedges and have been
evaluated to be highly effective. As a result, the after-tax change in the fair value of these swaps is recorded in accumulated other comprehensive income as a gain or loss on derivative financial instruments. As of April 2, 2011, the fair
value of these instruments was a pre-tax loss of approximately $1.7 million.

Market risk also arises within the
Companys defined benefit plans to the extent that the obligations of the plans are not fully matched by assets. Pension plan obligations are subject to change due to fluctuations in long-term interest rates as well as factors such as
inflation, salary increases and plan members living longer. The pension plan assets include equity and debt securities, the values of which will change as equity prices and interest rates vary. Changes in equity prices and interest rates could
result in plan assets which are insufficient over time to cover the level of projected obligations. This could result in material changes to the Companys pension expense and impact the level of contributions to the plans in the future.



21



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Item 4. Controls and Procedures.



| | (a) | Evaluation of disclosure controls and procedures.
| | --- | -------------------------------------------------

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

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



| | (b) | Changes in internal controls over financial reporting.
| | --- | ------------------------------------------------------

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



22



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PART II. OTHER INFORMATION



|Item 1. | Legal Proceedings.
|------- | ------------------

Reference is
made to the disclosures set forth in the Companys Form 10-K for the year ended January 1, 2011 under the heading Legal Proceedings for a description of certain legal proceedings in which the Company is involved. As disclosed
on the Companys Form 10-K, the arbitral tribunal issued a ruling on March 3, 2011 with respect to the MESA/ Mobivia arbitration.



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

There have been
no material changes from the risk factors previously disclosed in the Companys most recent annual report on Form 10-K.



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds.
|------- | ------------------------------------------------------------

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



|                                                           |  |                                    |   |  |                            |  |   |                                                                              |  |  |                                                                                      |  |  |   |            | 
|---------------------------------------------------------- |  | ---------------------------------- | - |  | -------------------------- |  | - | ---------------------------------------------------------------------------- |  |  | ------------------------------------------------------------------------------------ |  |  | - | ---------- | 
|Period                                                     |  | Total Numberof
SharesPurchased (1) |   |  | AveragePrice Paidper Share |  |   | Total Number ofShares Purchasedas Part of PubliclyAnnounced Plansor
Programs |  |  | Approximate DollarValue of SharesThat May Yet BePurchased Under thePlans or Programs | 
|                                                           |  |                                    |   | 
|January 2011:(January 2, 2011 through January 29, 2011)    |  |                                    |  |  |                            |  |  |                                                                              |  |  |                                                                                     |  |  | $ | 34,347,399 | 
|                                                           |  |                                    |   | 
|February 2011:(January 30, 2011 through February 26, 2011) |  |                                    |  |  |                            |  |  |                                                                              |  |  |                                                                                     |  |  | $ | 34,347,399 | 
|                                                           |  |                                    |   | 
|March 2011:(February 27, 2011 through April 2, 2011)       |  |                                    |  |  |                            |  |  |                                                                              |  |  |                                                                                     |  |  | $ | 34,347,399 | 
|                                                           |  |                                    |   |  |                            |  |   |                                                                              |  |  |                                                                                      |  |  |   |            | 
|                                                           |  |                                    |   | 
|Total                                                      |  |                                    |  |  |                            |  |  |                                                                              |  |  |                                                                                     |  |  |   |            | 
|                                                           |  |                                    |   |  |                            |  |   |                                                                              |  |  |                                                                                      |  |  |   |            | 



|(1) | On November 9, 2004, the Company announced that the Board of Directors had authorized a share repurchase of up to $25 million in MDS stock. On May 9, 2006,
the MDS Board of Directors authorized a $25 million increase in the share repurchase program, and on May 8, 2007, the Board authorized an additional $50 million increase. As of April 2, 2011, a total of approximately 3,248,100 shares had
been repurchased under this plan since its inception. The average price of shares repurchased under the plan was approximately $20.21. This program has been suspended.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Item 3. | Defaults Upon Senior Securities.
|------- | --------------------------------

None



|Item 4. | Removed and Reserved
|------- | --------------------



|Item 5. | Other Information.
|------- | ------------------



|(a) | Information required to be disclosed in a report on Form 8-K.
|--- | -------------------------------------------------------------



|Item 5.07 | Submission of Matters to a Vote of Security Holders.
|--------- | ----------------------------------------------------



|(a) | The 2011 Annual Meeting of Stockholders of Midas, Inc. was held on May 10, 2011.
|--- | --------------------------------------------------------------------------------



|(b) | The following matter concerning the election of directors of the Company was voted upon at the Annual Meeting with the accompanying results:
|--- | --------------------------------------------------------------------------------------------------------------------------------------------

Election of directors whose term expires at the 2014 Annual Meeting of Stockholders:



|                    |  |     |           |  |          |  |           |                  |  |  |           | 
|------------------- |  | --- | --------- |  | -------- |  | --------- | ---------------- |  |  | --------- | 
|                    |  | For |           |  | Withheld |  |           | Broker Non-Votes | 
|Thomas L. Bindley   |  |     | 8,439,747 |  |          |  | 2,097,888 |                  |  |  | 1,052,275 | 
|Robert R. Schoeberl |  |     | 8,433,699 |  |          |  | 2,103,936 |                  |  |  | 1,052,275 | 

The following
additional matters were voted upon at the Annual Meeting with the following results:



| | (1) | The proposal to ratify the appointment of KPMG LLP as the Companys independent auditors for the fiscal year ending December 31, 2011 was approved by
stockholders as follows:
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|           |  |         |  |             |  |                 
|---------- |  | ------- |  | ----------- |  | ----------------
|For        |  | Against |  | Abstentions |  | Broker Non-Votes
|11,501,607 |  | 49,575  |  | 38,728      |  | 0               



| | (2) | The advisory proposal on compensation of the Companys named executive officers as disclosed in the proxy statement for the Annual Meeting was approved by
stockholders as follows:
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|          |  |           |  |             |  |                 
|--------- |  | --------- |  | ----------- |  | ----------------
|For       |  | Against   |  | Abstentions |  | Broker Non-Votes
|8,038,309 |  | 2,468,910 |  | 30,416      |  | 1,052,275       



| | (3) | With respect to the advisory proposal on the frequency with which stockholders will vote for the approval of the compensation of the Companys named executive
officers, stockholders voted by a plurality vote for every three years.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|          |  |           |  |             |  |             |  |                 
|--------- |  | --------- |  | ----------- |  | ----------- |  | ----------------
|One Year  |  | Two Years |  | Three Years |  | Abstentions |  | Broker Non-Votes
|3,962,891 |  | 73,087    |  | 6,472,289   |  | 29,368      |  | 1,052,275       



|(c) | Inapplicable.
|--- | -------------



|(d) | The Company intends to hold an advisory vote on the compensation of the Companys named executive officers every three years.
|--- | -----------------------------------------------------------------------------------------------------------------------------



23



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|(b) | Not applicable.
|--- | ---------------



|Item 6. | Exhibits.
|------- | ---------



|     |  |                                                                         
|---- |  | ------------------------------------------------------------------------
|31.1 |  | Rule 13a  14(a) / 15d  14(a) Certification of Chief Executive Officer.
|     | 
|31.2 |  | Rule 13a  14(a) / 15d  14(a) Certification of Chief Financial Officer.
|     | 
|32.1 |  | Section 1350 Certifications.                                            

SIGNATURE

Pursuant to the requirements 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.



|                   |  |  |  |                                                     
|------------------ |  |  |  | ----------------------------------------------------
|Date: May 12, 2011 |  |  |  | /s/ Alan D. Feldman                                 
|                   |  |  |  | Alan D. Feldman                                     
|                   |  |  |  | Chairman, President and Chief Executive Officer     
|                   |  | 
|                   |  |  |  | /s/ William M. Guzik                                
|                   |  |  |  | William M. Guzik                                    
|                   |  |  |  | Executive Vice President and Chief Financial Officer
|                   |  | 
|                   |  |  |  | /s/ Audrey L. Gualandri                             
|                   |  |  |  | Audrey L. Gualandri                                 
|                   |  |  |  | Vice President and Controller                       



24