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 4, 2009

OR



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

For the transition period from              to

Commission File Number: 01-13409





MIDAS, INC.

(Exact Name of Registrant as Specified in its Charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 36-4180556                          
|(State or Other Jurisdiction of Incorporation or Organization) |  | (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 6, 2009 was 14,022,552.









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PART I. FINANCIAL INFORMATION



|Item 1: | Condensed Financial Statements
|------- | ------------------------------

MIDAS, INC.

CONDENSED STATEMENTS OF OPERATIONS (Unaudited)

(In millions, except for earnings per share)



|                                                             |  |                                   |      |   |            |   |      |  
|------------------------------------------------------------ |  | --------------------------------- | ---- | - | ---------- | - | ---- | -
|                                                             |  | For the quarterended fiscal March |     
|                                                             |  | 2009                              |      |   | 2008       |  
|                                                             |  | (13 weeks)                        |      |   | (13 weeks) |  
|Sales and revenues:                                          |  |                                   |      |   |            |   |      |  
|Franchise royalties and license fees                         |  | $                                 | 13.0 |   |            | $ | 13.3 |  
|Real estate revenues from franchised shops                   |  |                                   | 8.3  |   |            |   | 8.7  |  
|Company-operated shop retail sales                           |  |                                   | 15.6 |   |            |   | 14.9 |  
|Replacement part sales and product royalties                 |  |                                   | 6.1  |   |            |   | 6.7  |  
|Software sales and maintenance revenue                       |  |                                   | 1.3  |   |            |   | 1.2  |  
|                                                             |  |                                   |      |   |            |   |      |  
|Total sales and revenues                                     |  |                                   | 44.3 |   |            |   | 44.8 |  
|                                                             |  |                                   |      |   |            |   |      |  
|Operating costs and expenses:                                |  |                                   |      |   |            |   |      |  
|Franchised shops  occupancy expenses                        |  |                                   | 5.7  |   |            |   | 5.8  |  
|Company-operated shop parts cost of sales                    |  |                                   | 4.3  |   |            |   | 3.8  |  
|Company-operated shop payroll and employee benefits          |  |                                   | 6.6  |   |            |   | 6.2  |  
|Company-operated shop occupancy and other operating expenses |  |                                   | 5.3  |   |            |   | 5.0  |  
|Replacement part cost of sales                               |  |                                   | 5.3  |   |            |   | 6.1  |  
|Warranty expense                                             |  |                                   | 0.1  |   |            |   | 0.1  |  
|Selling, general, and administrative expenses                |  |                                   | 13.2 |   |            |   | 13.3 |  
|Loss on sale of assets, net                                  |  |                                   | 0.1  |   |            |   | 0.3  |  
|Business transformation charges                              |  |                                   |     |   |            |   | 0.2  |  
|                                                             |  |                                   |      |   |            |   |      |  
|Total operating costs and expenses                           |  |                                   | 40.6 |   |            |   | 40.8 |  
|Operating income                                             |  |                                   | 3.7  |   |            |   | 4.0  |  
|Interest expense                                             |  |                                   | (2.0 | ) |            |   | (2.2 | )
|Other income, net                                            |  |                                   | 0.1  |   |            |   | 0.2  |  
|                                                             |  |                                   |      |   |            |   |      |  
|Income before income taxes                                   |  |                                   | 1.8  |   |            |   | 2.0  |  
|Income tax expense                                           |  |                                   | 0.8  |   |            |   | 0.8  |  
|                                                             |  |                                   |      |   |            |   |      |  
|Net income                                                   |  | $                                 | 1.0  |   |            | $ | 1.2  |  
|                                                             |  |                                   |      |   |            |   |      |  
|                                                             |  |                                  
|Earnings per share:                                          |  |                                   |      |   |            |   |      |  
|Basic                                                        |  | $                                 | 0.07 |   |            | $ | 0.10 |  
|                                                             |  |                                   |      |   |            |   |      |  
|Diluted                                                      |  | $                                 | 0.07 |   |            | $ | 0.09 |  
|                                                             |  |                                   |      |   |            |   |      |  
|                                                             |  |                                  
|Average number of shares:                                    |  |                                   |      |   |            |   |      |  
|Common shares outstanding                                    |  |                                   | 13.5 |   |            |   | 13.4 |  
|Common stock warrants                                        |  |                                   | 0.1  |   |            |   | 0.1  |  
|                                                             |  |                                   |      |   |            |   |      |  
|Shares applicable to basic earnings                          |  |                                   | 13.6 |   |            |   | 13.5 |  
|Equivalent shares on outstanding stock awards                |  |                                   | 0.2  |   |            |   | 0.4  |  
|                                                             |  |                                   |      |   |            |   |      |  
|Shares applicable to diluted earnings                        |  |                                   | 13.8 |   |            |   | 13.9 |  
|                                                             |  |                                   |      |   |            |   |      |  

See notes to condensed financial statements.



1



---

MIDAS, INC.

CONDENSED BALANCE SHEETS

(In millions, except per share data)



|                                                                                                              |  |                 |       |   |                    |   |       |  
|------------------------------------------------------------------------------------------------------------- |  | --------------- | ----- | - | ------------------ | - | ----- | -
|                                                                                                              |  | FiscalMarch2009 |       |   | FiscalDecember2008 |  
|                                                                                                              |  | (Unaudited)     |       |   |                    |  
|Assets:                                                                                                       |  |                 |       |   |                    |   |       |  
|Current assets:                                                                                               |  |                 |       |   |                    |   |       |  
|Cash and cash equivalents                                                                                     |  | $               | 1.6   |   |                    | $ | 1.1   |  
|Receivables, net                                                                                              |  |                 | 30.4  |   |                    |   | 30.4  |  
|Inventories                                                                                                   |  |                 | 4.3   |   |                    |   | 4.3   |  
|Deferred income taxes                                                                                         |  |                 | 11.0  |   |                    |   | 10.7  |  
|Prepaid assets                                                                                                |  |                 | 5.6   |   |                    |   | 4.7   |  
|Other current assets                                                                                          |  |                 | 3.4   |   |                    |   | 4.6   |  
|                                                                                                              |  |                 |       |   |                    |   |       |  
|Total current assets                                                                                          |  |                 | 56.3  |   |                    |   | 55.8  |  
|Property and equipment, net                                                                                   |  |                 | 91.1  |   |                    |   | 92.6  |  
|Goodwill and other intangible assets, net                                                                     |  |                 | 35.4  |   |                    |   | 35.5  |  
|Deferred income taxes                                                                                         |  |                 | 46.4  |   |                    |   | 46.9  |  
|Other assets                                                                                                  |  |                 | 3.9   |   |                    |   | 4.6   |  
|                                                                                                              |  |                 |       |   |                    |   |       |  
|Total assets                                                                                                  |  | $               | 233.1 |   |                    | $ | 235.4 |  
|                                                                                                              |  |                 |       |   |                    |   |       |  
|                                                                                                              |  |                
|Liabilities and equity:                                                                                       |  |                 |       |   |                    |   |       |  
|Current liabilities:                                                                                          |  |                 |       |   |                    |   |       |  
|Current portion of long-term obligations                                                                      |  | $               | 1.5   |   |                    | $ | 1.5   |  
|Current portion of accrued warranty                                                                           |  |                 | 2.4   |   |                    |   | 2.4   |  
|Accounts payable                                                                                              |  |                 | 16.4  |   |                    |   | 21.0  |  
|Accrued expenses                                                                                              |  |                 | 19.8  |   |                    |   | 23.3  |  
|                                                                                                              |  |                 |       |   |                    |   |       |  
|Total current liabilities                                                                                     |  |                 | 40.1  |   |                    |   | 48.2  |  
|Long-term debt                                                                                                |  |                 | 88.0  |   |                    |   | 83.6  |  
|Obligations under capital leases                                                                              |  |                 | 1.7   |   |                    |   | 1.8   |  
|Finance lease obligation                                                                                      |  |                 | 31.4  |   |                    |   | 31.7  |  
|Pension liability                                                                                             |  |                 | 21.5  |   |                    |   | 21.2  |  
|Accrued warranty                                                                                              |  |                 | 13.3  |   |                    |   | 14.1  |  
|Deferred warranty obligation                                                                                  |  |                 | 3.6   |   |                    |   | 3.0   |  
|Other liabilities                                                                                             |  |                 | 6.7   |   |                    |   | 6.5   |  
|                                                                                                              |  |                 |       |   |                    |   |       |  
|Total liabilities                                                                                             |  |                 | 206.3 |   |                    |   | 210.1 |  
|                                                                                                              |  |                 |       |   |                    |   |       |  
|                                                                                                              |  |                
|Temporary equity:                                                                                             |  |                 |       |   |                    |   |       |  
|Non-vested restricted stock subject to redemption                                                             |  |                 | 6.1   |   |                    |   | 5.7   |  
|                                                                                                              |  |                
|Shareholders equity:                                                                                         |  |                 |       |   |                    |   |       |  
|Common stock ($.001 par value, 100 million shares authorized, 17.7 million shares issued) and paid-in capital |  |                 | 7.0   |   |                    |   | 6.8   |  
|Treasury stock, at cost (3.7 million shares)                                                                  |  |                 | (76.8 | ) |                    |   | (76.8 | )
|Retained income                                                                                               |  |                 | 109.4 |   |                    |   | 108.4 |  
|Accumulated other comprehensive loss                                                                          |  |                 | (18.9 | ) |                    |   | (18.8 | )
|                                                                                                              |  |                 |       |   |                    |   |       |  
|Total shareholders equity                                                                                    |  |                 | 20.7  |   |                    |   | 19.6  |  
|                                                                                                              |  |                 |       |   |                    |   |       |  
|Total liabilities and shareholders equity                                                                    |  | $               | 233.1 |   |                    | $ | 235.4 |  
|                                                                                                              |  |                 |       |   |                    |   |       |  

See notes to condensed financial statements.



2



---

MIDAS, INC.

CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)

(In millions)



|                                                                                                                          |  |                                        |      |   |      |   |      |  
|------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------- | ---- | - | ---- | - | ---- | -
|                                                                                                                          |  | For the three monthsended fiscal March |     
|                                                                                                                          |  | 2009                                   |      |   | 2008 |  
|Cash flows from operating activities:                                                                                     |  |                                        |      |   |      |   |      |  
|Net income                                                                                                                |  | $                                      | 1.0  |   |      | $ | 1.2  |  
|Adjustments reconciling net income to net cash provided by (used in) operating activities:                                |  |                                        |      |   |      |   |      |  
|Depreciation and amortization                                                                                             |  |                                        | 2.4  |   |      |   | 2.6  |  
|Stock-based compensation                                                                                                  |  |                                        | 0.7  |   |      |   | 0.9  |  
|Amortization of financing fees                                                                                            |  |                                        | 0.1  |   |      |   | 0.1  |  
|Business transformation charges                                                                                           |  |                                        |     |   |      |   | 0.2  |  
|Deferred income taxes                                                                                                     |  |                                        | 0.2  |   |      |   | 1.1  |  
|Loss on sale of assets                                                                                                    |  |                                        | 0.1  |   |      |   | 0.3  |  
|Cash outlays for business transformation costs                                                                            |  |                                        | (0.1 | ) |      |   | (0.2 | )
|Changes in assets and liabilities, exclusive of effects of business transformation charges, acquisitions and dispositions |  |                                        | (6.1 | ) |      |   | 0.7  |  
|                                                                                                                          |  |                                        |      |   |      |   |      |  
|Net cash provided by (used in) operating activities                                                                       |  |                                        | (1.7 | ) |      |   | 6.9  |  
|                                                                                                                          |  |                                        |      |   |      |   |      |  
|                                                                                                                          |  |                                       
|Cash flows from investing activities:                                                                                     |  |                                        |      |   |      |   |      |  
|Capital investments                                                                                                       |  |                                        | (1.1 | ) |      |   | (1.9 | )
|Cash paid for acquired businesses                                                                                         |  |                                        | (0.1 | ) |      |   | (0.7 | )
|Proceeds from sales of assets                                                                                             |  |                                        |     |   |      |   | 0.1  |  
|                                                                                                                          |  |                                        |      |   |      |   |      |  
|Net cash used in investing activities                                                                                     |  |                                        | (1.2 | ) |      |   | (2.5 | )
|                                                                                                                          |  |                                        |      |   |      |   |      |  
|                                                                                                                          |  |                                       
|Cash flows from financing activities:                                                                                     |  |                                        |      |   |      |   |      |  
|Net borrowings (repayments) under revolving lines of credit                                                               |  |                                        | 4.4  |   |      |   | (3.7 | )
|Increase (decrease) in outstanding checks                                                                                 |  |                                        | (0.6 | ) |      |   | 0.5  |  
|Payment of principal obligations under capital leases                                                                     |  |                                        | (0.1 | ) |      |   | (0.2 | )
|Payment of principal obligations under finance lease                                                                      |  |                                        | (0.3 | ) |      |   | (0.2 | )
|Cash received for common stock                                                                                            |  |                                        |     |   |      |   | 0.1  |  
|                                                                                                                          |  |                                        |      |   |      |   |      |  
|Net cash provided by (used in) financing activities                                                                       |  |                                        | 3.4  |   |      |   | (3.5 | )
|                                                                                                                          |  |                                        |      |   |      |   |      |  
|                                                                                                                          |  |                                       
|Net change in cash and cash equivalents                                                                                   |  |                                        | 0.5  |   |      |   | 0.9  |  
|Cash and cash equivalents at beginning of period                                                                          |  |                                        | 1.1  |   |      |   | 1.3  |  
|                                                                                                                          |  |                                        |      |   |      |   |      |  
|Cash and cash equivalents at end of period                                                                                |  | $                                      | 1.6  |   |      | $ | 2.2  |  
|                                                                                                                          |  |                                        |      |   |      |   |      |  

See notes to condensed financial statements.



3



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MIDAS, INC.

CONDENSED 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 2008                                   |        | 17.7                           |        | $              | 6.8    |  | (3.7           | )      |                     | $ | (76.8 | )                                   |  | $ | 108.4 |  |   |      |   |  | $ | (18.8 | )
|                                                       |        |                                |        |                |        |  |               
|Stock option expense                                   |        |                               |        |                | 0.2    |  |               |        |                     |   |      |                                     |  |   |      |  |   |      |   |  |   |      |  
|                                                       |        |                                |        |                |        |  |               
|Net income                                             |        |                               |        |                |       |  |               |        |                     |   |      |                                     |  |   | 1.0   |  | $ | 1.0  |   |  |   |      |  
|                                                       |        |                                |        |                |        |  |               
|Other comprehensive income                             |        |                                |        |                |        |  |                |        |                     |   |       |                                     |  |   |       |  |   |      |   |  |   |       |  
| foreign currency translation                         |        |                               |        |                |       |  |               |        |                     |   |      |                                     |  |   |      |  |   | (0.2 | ) |  |   | (0.2  | )
| gain on derivative financial instruments, net of tax |        |                               |        |                |       |  |               |        |                     |   |      |                                     |  |   |      |  |   | 0.1  |   |  |   | 0.1   |  
|                                                       |        |                                |        |                |        |  |                |        |                     |   |       |                                     |  |   |       |  |   |      |   |  |   |       |  
|Comprehensive income                                   |        |                               |        |                |       |  |               |        |                     |   |      |                                     |  |   |      |  | $ | 0.9  |   |  |   |      |  
|                                                       |        |                                |        |                |        |  |                |        |                     |   |       |                                     |  |   |       |  |   |      |   |  |   |       |  
|Fiscal first quarter end 2009                          |        | 17.7                           |        | $              | 7.0    |  | (3.7           | )      |                     | $ | (76.8 | )                                   |  | $ | 109.4 |  |   |      |   |  | $ | (18.9 | )
|                                                       |        |                                |        |                |        |  |                |        |                     |   |       |                                     |  |   |       |  |   |      |   |  |   |       |  

See notes to condensed financial statements.



4



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MIDAS, INC.

NOTES TO CONDENSED 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 condensed 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 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 3, 2009. 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 4, 2009 (first quarter fiscal 2009) and March 29, 2008 (first quarter fiscal 2008) and of its financial position as of April 4,
2009. All such adjustments are of a normal recurring nature. The results of operations for the first quarter of fiscal 2009 and 2008 are not necessarily indicative of the results of operations for the full year.

The unaudited condensed financial statements present the consolidated financial information for MDS and its wholly-owned subsidiaries. The unaudited
condensed financial statements for the quarters ended April 4, 2009 and March 29, 2008 both cover a 13-week period. All significant inter-company balances and transactions have been eliminated in consolidation.

In connection with the preparation of its fiscal 2008 year-end financial statements, the Company discovered an error in its pension projected benefit
obligation. The actuarially determined projected benefit obligation was not properly considering certain plan amendments that changed the participant benefit formulas in 1988 and 1991. As a result, the Companys projected benefit obligation was
understated by $3.8 million at fiscal year end 2008. This error had accumulated over the time since the benefit formula changes took place. The Company corrected this error by recording the cumulative impact as an adjustment to opening equity as of
the beginning of fiscal 2006, and recording additional pension expense in fiscal 2006, 2007 and 2008. The previously reported first quarter fiscal 2008 Statement of Operations, Statement of Cash Flows and Pension Plans footnote, have been adjusted
to reflect $0.1 million in additional pension expense.

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



|                                           |  |                                   |  |     
|------------------------------------------ |  | --------------------------------- |  | ----
|                                           |  | For the quarterended fiscal March
|                                           |  | 2009                              |  | 2008
|Weighted-average common shares outstanding |  | 13.5                              |  | 13.4
|Common stock warrants                      |  | 0.1                               |  | 0.1 
|                                           |  |                                   |  |     
|Shares applicable to basic earnings        |  | 13.6                              |  | 13.5
|Effect of dilutive stock awards            |  | 0.2                               |  | 0.4 
|                                           |  |                                   |  |     
|Shares applicable to diluted earnings      |  | 13.8                              |  | 13.9
|                                           |  |                                   |  |     
|                                           |  |                                  
|Potential common share equivalents:        |  |                                   |  |     
|Stock options                              |  | 1.6                               |  | 1.3 

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



5



---

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.

New Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards
(SFAS) No. 141 (Revised 2007), Business Combinations (SFAS 141R). Under SFAS 141R, an acquiring entity will be required to recognize all the assets acquired and liabilities assumed in a transaction at the
acquisition-date fair value with limited exceptions. SFAS 141R will change the accounting treatment for certain specific acquisition related items including: (1) expensing acquisition related costs as incurred; (2) valuing non-controlling
interests at fair value at the acquisition date; and (3) expensing restructuring costs associated with an acquired business. SFAS 141R also includes a substantial number of new disclosure requirements. SFAS 141R is to be applied prospectively
to business combinations for which the acquisition date is on or after our adoption date of January 4, 2009. We expect SFAS 141R will have an impact on our accounting for future business combinations but the effect is dependent upon the
acquisitions that are made in the future.

In February 2008, the FASB issued FASB Staff Position (FSP) 157-2, which delays the
effective date of SFAS 157 for non-financial assets and liabilities that are not measured at fair value on a recurring basis (at least annually) until fiscal years beginning after November 15, 2008. The Company adopted FSP 157-2 early on
January 4, 2009 with no material impact.

In June 2008, the FASB issued FSP Emerging Issues Task Force (EITF) 03-6-1,
Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities (FSP EITF 03-6-1). FSP EITF 03-6-1 clarifies that unvested share-based payment awards that contain non-forfeitable
rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and are to be included in the computation of earnings per share under the two-class method described in SFAS No. 128, Earnings Per
Share. This FSP was effective for us on January 4, 2009 and requires all prior-period earnings per share data that is presented to be adjusted retrospectively. Specifically, the adoption of FSP EITF 03-6-1 required MDS to include
incremental shares in the first quarter of both fiscal 2009 and 2008 Basic Earnings Per Share calculation of 211,000 and 73,000 shares, respectively. These incremental shares did not impact the Basic Earnings Per Share in the first quarter of either
fiscal 2009 or 2008.

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
|                  |  | 2009                                   |     | 2008
|Interest paid     |  | $                                      | 2.1 |      | $ | 2.1
|Income taxes paid |  |                                        | 0.2 |      |   | 0.2

The acquisition of certain company-operated shops resulted in non-cash reductions of accounts
receivable of approximately $0.6 million in the first three months of fiscal 2008.

3. Inventories

Inventories were composed of finished goods in both the quarter ended April 4, 2009 and the year ended January 3, 2009.



6



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4. Business Transformation Activities

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

Prior to fiscal 2009, the Company had recorded charges of $5.4 million related to this program. MDS management expects that this program will result in
additional business transformation charges during fiscal 2009; however, the charges incurred in the first three months of 2009 were not material.

5. Debt
Agreements

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

As of April 4, 2009, a total of $88.0 million was
outstanding under the revolving credit facility. As of January 3, 2009, a total of $83.6 million was outstanding under the revolving credit facility.

In November 2005, $20 million in senior bank debt was converted from floating rate to fixed rate by locking-in LIBOR at 4.89% for a five year period. In addition, in March 2007, MDS entered into an interest rate swap
arrangement to convert an additional $25 million in senior bank debt from floating rate to a fixed rate by locking-in LIBOR at 4.91% for the remaining term of the Companys bank agreement (October 2010). This swap effectively replaced a
declining balance swap that expired in March 2007 under which LIBOR was locked-in at 2.76% for a three-year term. As a consequence, currently $45 million of the Companys $88.0 million in senior bank debt is at fixed rates.

Both the November 2005 and March 2007 swap arrangements have been designated as cash flow hedges and have been evaluated to be highly effective. As a
result, the after-tax change in the fair value of these swaps is recorded in accumulated other comprehensive income as a gain or loss on derivative financial instruments. As of April 4, 2009, the fair value of these instruments was a pre-tax
loss of approximately $2.4 million.

6. 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 |     
|                                              |  | 2009                             |      |   | 2008 |  
|Service cost                                  |  | $                                | 0.2  |   |      | $ | 0.2  |  
|Interest cost on projected benefit obligation |  |                                  | 0.9  |   |      |   | 0.9  |  
|Expected return on assets                     |  |                                  | (1.1 | ) |      |   | (1.2 | )
|Net amortization and deferral                 |  |                                  | 0.2  |   |      |   | 0.1  |  
|                                              |  |                                  |      |   |      |   |      |  
|Total net periodic pension cost               |  | $                                | 0.2  |   |      | $ |     |  
|                                              |  |                                  |      |   |      |   |      |  



7



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The Company made no contributions to the pension plans during the first quarter of fiscal 2009.

7. 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 4, 2009:



|                                    |  |                 |  |                     |              |                               |   |                                                    |  |                                      |  |   |    
|----------------------------------- |  | --------------- |  | ------------------- | ------------ | ----------------------------- | - | -------------------------------------------------- |  | ------------------------------------ |  | - | ---
|                                    |  | Number ofShares |  | Option Price Ranges |              | WeightedAverageExercise Price |   | WeightedAverageRemainingContractual Term(in years) |  | AggregateIntrinsicValue(in millions)
|Outstanding at fiscal year end 2008 |  | 1,677,553       |  | $                   | 6.77 $34.66 |                               | $ | 14.08                                              |  |                                      |  |   |    
|Outstanding at April 4, 2009        |  | 1,677,553       |  |                     | 6.77 34.66  |                               |   | 14.08                                              |  | 5.3                                  |  | $ | 1.2
|Exercisable at April 4, 2009        |  | 1,152,873       |  |                     | 6.77 34.66  |                               |   | 12.00                                              |  | 4.0                                  |  |   | 1.2

No stock options were granted by the Company in the first quarter of fiscal 2009 or 2008.
Additional information pertaining to option activity during the first three months of fiscal 2009 and 2008 was as follows (in millions):



|                                           |  |                                   |   |      |   |    
|------------------------------------------ |  | --------------------------------- | - | ---- | - | ---
|                                           |  | For the quarterended fiscal March
|                                           |  | 2009                              |   | 2008
|Weighted average grant-date fair value of: |  |                                   |   |      |   |    
|Stock options exercised                    |  | $                                 |  |      | $ | 0.1
|Stock options vested                       |  |                                   |  |      |   | 0.3

As of April 4, 2009, there was $2.9 million in stock option compensation expense related to
unvested awards not yet recognized, which is expected to be recognized over a weighted-average period of 1.5 years.

Restricted Stock

From time to time the Company grants shares of restricted stock to certain employees, officers and directors. Certain restricted stock
vests at the five or seven year anniversary, with provisions for accelerated vesting upon the occurrence of certain pre-determined events (cliff-vesting shares), while other restricted stock vests equally over periods of three to five
years or only upon the occurrence of certain pre-determined events (the latter being referred to as performance shares). The fair value of all but the performance share grants is equal to the stock price on the date of the grant. The
fair value of the performance share grants is based on their derived service period calculated using either a Monte Carlo simulation model or managements expectations of achieving the objectives depending on the nature of the performance
criteria. As of both April 4, 2009 and January 4, 2009 there were 690,365 non-vested restricted shares outstanding with weighted average grant-date fair value of $14.66 per share.

As of April 4, 2009, there was $4.0 million of unamortized restricted stock compensation of which $10.1 million was included as a reduction to
paid-in capital and $6.1 million was included in non-vested restricted stock subject to redemption. The $4.0 million of unamortized restricted stock compensation is expected to be recognized over a weighted average period of 2.7 years.

Restricted stock grants include a change in control provision, which provides for cash redemption of non-vested restricted stock in
certain circumstances. Securities and Exchange Commission Accounting Series Release No. 268 (ASR 268), Presentation in Financial Statements of Redeemable Preferred Stocks, requires securities with contingent cash settlement
provisions that are not solely in the control of the issuer, without regard to probability of occurrence, to be classified outside of shareholders equity. While the Company believes the possibility of occurrence of any such change of control
event is remote, the contingent cash settlement of the restricted stock as a result of such event would not be solely in the control of the Company. As such, the Company presents the $6.1 million value of non-vested restricted stock as temporary
equity on the consolidated balance sheet as of April 4, 2009. Upon the vesting of the restricted stock the Company reclassifies the value of the restricted stock to permanent equity.



8



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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 4, 2009, a total of 41,273 warrants remained outstanding. The
exercise price of the warrants is $0.01, and the warrants are exercisable at any time up to March 27, 2013. Any warrants that remain unexercised at March 27, 2013 are automatically exercised as of that date.

The Company did not record an excess tax benefit in the first three months of fiscal 2009 or fiscal 2008 related to stock-based compensation plans or
equity instruments. The Company is in a net operating loss carry-forward position for the first three months of fiscal 2009 and 2008. 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 Statement of Cash Flows.

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

Year-to-date warranty activity through the first three months of fiscal 2009 is summarized as follows (in millions):



|                                                             |  |   |      |  
|------------------------------------------------------------ |  | - | ---- | -
|Accrued warranty at beginning of period                      |  | $ | 16.5 |  
|Warranty expense                                             |  |   | 0.1  |  
|Changes in foreign currency exchange rate                    |  |   | (0.1 | )
|Warranty credit issued to franchisees (warranty claims paid) |  |   | (0.8 | )
|                                                             |  |   |      |  
|Accrued warranty at end of period                            |  |   | 15.7 |  
|Less current portion                                         |  |   | (2.4 | )
|                                                             |  |   |      |  
|Accrued warranty  non-current                               |  | $ | 13.3 |  
|                                                             |  |   |      |  

As of January 1, 2008, the Company changed how the Midas warranty obligations are funded in
the United States. From June 2003 through December 2007, product royalties received from the Companys preferred supply chain vendors were recorded as revenue and substantially offset the cost of warranty claims. Beginning in fiscal 2008, the
Midas warranty program in the United States is funded directly by Midas franchisees. The franchisees are charged a fee for each warranted product sold to customers. The fee is charged when the warranty is registered with the Company. The fee billed
to franchisees is deferred and is recognized as revenue when the actual warranty is redeemed and included in warranty expense. This fee is intended to cover the Companys cost of the new warranty program, thus revenues under this program will
match expenses and the new warranty program will have no impact on the results of operations. In connection with this change, beginning in 2008 Midas system franchisees in the United States started receiving rebates on their purchases from the
Companys preferred supply chain vendors and MDS no longer receives product royalties on Midas franchisee purchases in the United States. Because the Companys U.S. supply chain partners are responsible for the warranty of parts during the
first 12 months, MDS did not begin to record revenues or expenses under the new program until fiscal 2009. As of April 4, 2009, deferred warranty obligations under this new program were $3.6 million.

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



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9. Acquisitions and Divestitures

The Company has entered into a purchase agreement, which could result in the purchase of up to four shops from a Midas franchisee if the purchase agreements are not assigned to third party buyers prior the expiration
of the option periods. The purchase agreements as originally executed required MDS to purchase four shops for approximately $1.1 million no later than March 30, 2009. Additionally, the purchase agreements required MDS, or an assigned third
party, to purchase land and buildings for three of the four locations for approximately $1.6 million. The related land and building purchase must coincide with the business purchase and was also to be completed prior to March 30, 2009, subject
to certain closing conditions. Prior to the March 30, 2009 closing date, certain closing conditions were not met. As a result, both parties agreed to delay the closing date of both the shop and real estate transactions until all closing
conditions could be met. At this time, the Company cannot predict whether the transactions will be consummated.

10. 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 SFAS 157.

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



|                                            |  |                        |  |                       |     |                        |                   |           |   |    
|------------------------------------------- |  | ---------------------- |  | --------------------- | --- | ---------------------- | ----------------- | --------- | - | ---
|                                            |  | As of April 4, 2009    |  | As of January 3, 2009
|                                            |  | Balance Sheet Location |  | FairValue             |     | Balance Sheet Location |                   | FairValue
|Derivatives designed as hedging instruments |  |                        |  |                       |     |                        |                   |           |   |    
|Interest rate contracts                     |  | Other liabilities      |  | $                     | 2.4 |                        | Other liabilities |           | $ | 2.6
|                                            |  |                        |  |                       |     |                        |                   |           |   |    
|Total                                       |  |                        |  | $                     | 2.4 |                        |                   |           | $ | 2.6
|                                            |  |                        |  |                       |     |                        |                   |           |   |    

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



10



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

RESULTS OF OPERATIONS

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

Growing Comparable Shop Sales

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

Brakes:The Midas system has long been a leader in the brake category throughout North
America. The Companys strength in brake services dates back nearly 30 years and is backed by the well-known Midas lifetime guarantee. While brakes remain the largest and most profitable service category for the Midas system, brake sales at
retail have declined over the past several years, producing a significant drag on overall system sales performance. The Companys efforts to drive retail brake sales starts with ensuring brake product quality across the Midas system. During
2008, the Company introduced new mandatory minimum performance standards for Midas brake friction to be used by franchisees. In connection with the improved product quality standards, the Company launched its SecureStop branded brake service, which
helps Midas differentiate the service provided by Midas shops amongst numerous competitors who rely almost exclusively on price. In 2009, the Company is changing its promotional brake strategy from national single-price-point television advertising
to a more locally-focused advertising approach. Brake service is very competitive on a local level and management believes the move to local advertising will provide Midas franchisees with greater flexibility in addressing local market conditions.
Furthermore, it should allow for a more consistent share of voice in brake promotions.

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

The Company continues to test a significantly expanded tire program in certain company-operated and
franchised Midas shops. If this program succeeds, it will serve as a model for shops throughout the Midas system. Going forward, the Company believes that sales of tires and related tire services will be a significant component of future revenue
growth for the Midas system.

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

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

Growing Shop Count

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



11



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During this time the Company has also diverted many new franchisees that may have opened new shops away
from new shop development and instead have helped them buy existing Midas shops from existing Midas franchisees. Midas is an older franchise system and thus numerous long-term franchisees have struggled with the ongoing changes required to adapt to
the current automotive aftermarket. The Company has been working diligently to identify those franchisees that are not capable or not willing to adapt to the new environment and has been assisting them in transitioning out of the Midas system. This
has caused many new franchisees to purchase existing Midas shops rather than to develop new ones. This transformation has been underway for some time and Midas has averaged over 100 shop transitions per year in the past three fiscal years, with most
shops transitioned to new franchisees.

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

In addition to transitions, the Company believes that the roll-out of the Midas-SpeeDee Co-Brand concept and the acquisition/conversion of competing
automotive repair centers both provide a significant opportunity to grow the North American franchise system. A successful test of the new Midas-SpeeDee Co-Brand concept has the potential to create a new growth platform for the Company by
substantially enhancing the economics and return-on-investment of a franchised automotive service shop. Because the automotive service market is both fragmented and saturated, the Company believes that unit growth is best achieved through
acquisitions and conversions of independents rather than de novo opening of newly constructed sites. These two opportunities are explained in greater detail below.

The Midas-SpeeDee Co-Brand Opportunity: In March 2008, MDS acquired the SpeeDee auto service franchise system. The SpeeDee business model focuses on fluid exchanges and maintenance, providing a high
quality auto service experience in a quick-service format. SpeeDee leverages the quick-service customer relationship as a gateway to a broader general repair relationship with its customers.

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

The Company launched its first test of the Midas-SpeeDee
Co-Brand concept with three shops during the third quarter of fiscal 2008. All three were existing SpeeDee locations in California that added the Midas brand to their shop. A fourth Co-Branded unit, also in California, opened on a de novo
basis in October 2008. The initial results have been very encouraging. The three SpeeDee shops that converted to Co-Brand units achieved comparable shop sales increases of 7.8% in the third quarter (after they were co-branded) and 12.7% in the
fourth quarter of fiscal 2008. In the first quarter of fiscal 2009, the comparable shop sales increases accelerated further to 15%. The Company expects to test Co-Branding at additional SpeeDee locations during 2009.

During December of 2008, the Company began a test of the Co-Brand concept within existing Midas shops. Three Midas company-operated shops in suburban
Chicago were remodeled to accommodate the operating requirements of the SpeeDee concept, which generate much higher vehicle throughput than the typical Midas shop. These three test locations officially launched during the first quarter of fiscal
2009. In their first quarter of operation, these Midas shops converted to the Co-Brand model delivered a comparable shop sales increase of nearly 18% compared to sales decreases for other Midas shops in the greater Chicago market. A fourth
company-operated Midas shop was converted and opened as a Co-Brand in April. The Company plans to roll out additional Midas conversions to the Co-Brand concept in Southern California during 2009.



12



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The ongoing testing of the Midas-SpeeDee Co-Brand concept encompasses numerous shop formats, and the
Company expects that such testing will be completed during 2009. The results of these tests will be critical in determining the issues involved with integrating the SpeeDee model into selected Midas locations across the U.S. and Canada. If
successful, the new Co-Brand format could provide a platform for accelerating Company growth by providing Co-Brand opportunities to existing Midas and SpeeDee franchisees, as well as a superior format for de novo shop growth in the future.

Acquisitions and Conversions: The U.S. automotive repair industry is highly fragmented. This is demonstrated by the fact
that Midas, as one of the largest automotive maintenance and repair providers in the U.S., has less than 1% of the automotive repair shops in the U.S. Despite the increase in the number of vehicles on the road in the U.S. over the last 15 years, the
number of automotive service outlets in the U.S. has been in decline. Vehicle complexity and the resulting need for highly skilled technicians, training programs and technologically advanced diagnostic equipment, along with the increased cost of
real estate, has caused a net decrease of almost 7% of all automotive repair outlets in the past 10 years. More recently, automobile dealerships have been closing in record numbers, causing consumers to seek out alternatives.

The Company believes that the acquisition of existing automotive repair shops, as well as the conversion of independent repair facilities to the Midas
and SpeeDee brands, is the most efficient way to grow the MDS system. 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 during this economic downturn.

First Quarter Fiscal 2009 Compared with First Quarter Fiscal 2008

The following is a summary of the Companys sales and revenues for the first quarter of fiscal 2009 and 2008: ($ in millions)



|                                             |  |      |      |                 |       |   |      |   |                 |  |       |  
|-------------------------------------------- |  | ---- | ---- | --------------- | ----- | - | ---- | - | --------------- |  | ----- | -
|                                             |  | 2009 |      | Percentto Total |       |   | 2008 |   | Percentto Total | 
|Franchise royalties and license fees         |  | $    | 13.0 |                 | 29.4  | % |      | $ | 13.3            |  | 29.7  | %
|Real estate revenues from franchised shops   |  |      | 8.3  |                 | 18.7  |   |      |   | 8.7             |  | 19.4  |  
|Company-operated shop retail sales           |  |      | 15.6 |                 | 35.2  |   |      |   | 14.9            |  | 33.2  |  
|Replacement part sales and product royalties |  |      | 6.1  |                 | 13.8  |   |      |   | 6.7             |  | 15.0  |  
|Software sales and maintenance revenue       |  |      | 1.3  |                 | 2.9   |   |      |   | 1.2             |  | 2.7   |  
|                                             |  |      |      |                 |       |   |      |   |                 |  |       |  
|Total sales and revenues                     |  | $    | 44.3 |                 | 100.0 | % |      | $ | 44.8            |  | 100.0 | %
|                                             |  |      |      |                 |       |   |      |   |                 |  |       |  

Total sales and revenues for the first quarter of fiscal 2009 declined $0.5 million, or 1.1%, from
the first quarter of fiscal 2008 to $44.3 million. Within the retail auto service business, royalty revenues and license fees decreased $0.3 million, or 2.3%, from fiscal 2008. This decrease primarily reflects weakness in Midas retail sales as total
North American comparable shop sales declined 3.5%, a reduction in the number of Midas shops in operation, a stronger U.S. dollar reducing the value of Canadian and European royalties and lower franchise fees. These impacts were partially offset by
a $1.0 million increase in royalties due to the March 2008 acquisition of the SpeeDee business.

While royalty revenue in the Midas system
was down in the first quarter of fiscal 2009, U.S. car count rose by 6% and U.S. oil change revenues increased by 23% on a comparable shop basis. MDS management believes its move to a more locally focused, higher frequency advertising program is
generating increased customer visits; however, this increased traffic has not yet translated into increased comparable shop sales as cautious consumers delay more expensive repairs. The Company believes the increased traffic is creating the
foundation for future revenue growth as automobiles continue to age and consumers inevitably return to more normal spending patterns.

Revenues from real estate leases declined $0.4 million to $8.3 million driven by a net reduction in the number of shops paying rent to Midas due to shop closures, lower revenue from sales-based rental agreements and a weaker Canadian
dollar.

Sales from company-operated shops were $15.6 million in the first quarter of fiscal 2009 compared to $14.9 million in the first
quarter of fiscal 2008. The increased revenues reflect a higher company-operated shop count due to shop acquisitions in the past 12 months. Comparable shop sales for the Midas company-operated shops were down 1.6% during the first quarter of fiscal
2009.

Replacement part sales and product royalties decreased 9.0% from $6.7 million to $6.1 million in the first quarter of fiscal 2009.
The Company recorded lower sales of tires to Midas franchisees despite the fact that tire revenues grew nearly 5% at retail as a result of the increased purchasing of tires from sources outside of the Bridgestone-Firestone network, as well as a
weaker Canadian dollar (which offset growth in tire unit sales in Canada). Software sales and maintenance revenue increased $0.1 million to $1.3 million reflecting continued growth in the Companys RO Writer point-of-sale software business.



13



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Total operating costs and expenses declined $0.2 million, or 0.5%, in the first quarter of fiscal 2009 to
$40.6 million. Franchised shop occupancy expenses for franchised shops declined $0.1 million, or 1.7%, reflecting a reduction in Canadian rent expense due to the much weaker Canadian dollar, which was partially offset by scheduled increases in rent
expense for shops leased by the Company and a small increase in shops under lease. Company-operated shop costs and expenses rose to $16.2 million from $15.0 million in the first quarter of fiscal 2009, mostly as a result of additional shops and the
incremental overhead required to support the higher shop count compared to the same period one year ago. Payroll and employee benefit costs increased to 42.3% of company-operated shop sales in the first quarter of fiscal 2009 compared to 41.6% in
the same period of the prior year. Company-operated shop occupancy and other expenses increased as a percentage of sales from 33.6% in the first quarter of fiscal 2008 to 34.0% in the first quarter of fiscal 2009 as a result of lower comparable shop
sales and changes in the composition of the company-operated shops in the portfolio. Company-operated shop cost of sales increased from 25.5% in the first quarter of fiscal 2008 to 27.6% in the first quarter of fiscal 2009, primarily as a result of
an increase in the proportion of sales of oil and tires and higher discounts to drive customer traffic.

Replacement part cost of sales
decreased to 86.9% of replacement part sales and product royalties from 91.0% in the first quarter of fiscal 2008. The decreased cost of replacement part sales relative to revenue was due to improved margins on the products sold to franchisees.
Warranty expense in the first quarter of fiscal 2009 was $0.1 million, which was approximately flat to the prior year.

Selling, general
and administrative expenses in the first quarter of fiscal 2009 declined $0.1 million, or 0.8%, from the first quarter of fiscal 2008 to $13.2 million. The decrease was achieved despite an incremental $0.5 million in operating expenses related to
the SpeeDee business, incremental legal costs for two class action lawsuits and higher pension expense. In this difficult revenue environment, the Company remains very focused on cost control. For example, in early 2009 the Company eliminated salary
increases for all employees in the current year and reduced the company match portion of its 401(k) program.

During the first quarter of
fiscal 2009, business transformation charges were not material. During the first quarter of fiscal 2008, the Company recorded business transformation charges of $0.2 million in connection with the Companys partial funding of the rollout of a
new shop image. The Companys new image program will wind down during fiscal 2009 with an additional $0.5 million in business transformation charges expected during the remainder of fiscal 2009.

During the first quarter of fiscal 2009, the Company recorded a loss on sale of $0.1 million in connection with the sale of certain shop assets. During
the first quarter of fiscal 2008, the Company recorded a loss on sale of $0.3 million in connection with the sale of certain shop assets.

As a result of the above changes, operating income decreased $0.3 million to $3.7 million in the first quarter of fiscal 2009 from $4.0 million in first quarter of fiscal 2008 and operating income margin decreased to 8.4% of sales from 8.9%
of sales.

Interest expense was $2.0 million in the first quarter of fiscal 2009 compared to $2.2 million in the first quarter of fiscal
2008. Interest expense declined in the current year despite higher average bank debt compared to the prior year (due to the SpeeDee acquisition in March 2008) primarily due to a reduction in the Companys borrowing rate.

Other income was $0.1 million in the first quarter of fiscal 2009 compared to $0.2 million in the first quarter of fiscal 2008. Other income consists
primarily of interest income on overdue customer accounts and foreign currency exchange gains or losses.

The Companys effective tax
rate was 44.2% in the first quarter of fiscal 2009 compared to 40.0% in the first quarter of fiscal 2008 and compared to the 2009 statutory tax rate of 39.2%. The fiscal 2009 variance from the statutory rate was primarily due to the write down of a
Canadian deferred tax asset due to a reduction in British Columbias corporate income tax rate.



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The Company anticipates a significant increase in the effective tax rate in the second quarter of fiscal
2009 due to a write-down of the U.S. deferred tax asset. This write-down will result from the vesting of restricted stock awards in May 2009 at a stock price that is lower than the stock price on the day these awards were initially granted. The
Company currently estimates this one-time write-down will result in additional non-cash tax expense of approximately $0.8 million in the second quarter of fiscal 2009.

As a result of the above items, net income decreased $0.2 million from net income of $1.2 million in the first quarter of fiscal 2008 to net income of $1.0 million in the first quarter of fiscal 2009.

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 2009 and 2008, respectively (in millions):



|                                                                                                                                      |  |      |      |   |      |   |      |  
|------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---- | - | ---- | - | ---- | -
|                                                                                                                                      |  | 2009 |      |   | 2008 |  
|Cash provided by operating activities before cash outlays for business transformation costs and net changes in assets and
liabilities |  | $    | 4.5  |   |      | $ | 6.4  |  
|Cash outlays for business transformation costs                                                                                        |  |      | (0.1 | ) |      |   | (0.2 | )
|Net changes in assets and liabilities, exclusive of the effects of business transformation charges, acquisitions and
dispositions     |  |      | (6.1 | ) |      |   | 0.7  |  
|                                                                                                                                      |  |      |      |   |      |   |      |  
|Net cash provided by (used in) operating activities                                                                                   |  |      | (1.7 | ) |      |   | 6.9  |  
|Net cash used in investing activities                                                                                                 |  |      | (1.2 | ) |      |   | (2.5 | )
|Net cash provided by (used in) financing activities                                                                                   |  |      | 3.4  |   |      |   | (3.5 | )
|                                                                                                                                      |  |      |      |   |      |   |      |  
|Net change in cash and cash equivalents                                                                                               |  | $    | 0.5  |   |      | $ | 0.9  |  
|                                                                                                                                      |  |      |      |   |      |   |      |  

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 $0.5 million in the first three months of fiscal 2009.

The Companys operating activities used net cash of $1.7 million during the first three months of fiscal 2009 compared to $6.9 million of cash
provided by operations in the first three months of fiscal 2008. Excluding cash outlays for business transformation costs and changes in assets and liabilities, cash from operating activities decreased from $6.4 million in the first three months of
fiscal 2008 to $4.5 million in the first three months of fiscal 2009, due to the decrease in net income, lower utilization of deferred tax assets, lower stock-based compensation, reduced business transformation charges, a decrease in the gain on
sale of assets and lower depreciation and amortization. Cash outlays for business transformation costs declined from $0.2 million in the first three months of fiscal 2008 to $0.1 million in the first three months of fiscal 2009. Cash outlays for
business transformation costs in the first three months of fiscal 2009 and the first three months of fiscal 2008 were related to the Companys update of its retail shop image.

Changes in assets and liabilities declined from a $0.7 million source of cash in the first three months of fiscal 2008 to a $6.1 million use of cash in
the first three months of fiscal 2009. The $6.1 million use of cash in the first three months of fiscal 2009 was primarily driven by a reduction in accounts payable as seasonally high tire purchases in the fourth quarter of fiscal 2008 were paid, as
well as the timing of advertising payments. The $0.7 million source of cash in the first three months of fiscal 2008 was primarily due to a decline in receivables due to the collection of a non-operating receivable.

Investing activities used $1.2 million of cash in the first three months of fiscal 2009 compared to $2.5 million of cash used in first three months of
fiscal 2008. Fiscal 2009 investing activities consisted of $1.1 million in capital expenditures and $0.1 million paid in conjunction with the acquisition of a shop and other assets from a Midas franchisee. The $1.1 million in capital expenditures
included $0.5 million in Co-Branding spending on Midas company-operated shops, $0.2 million for systems development projects, $0.4 million for company-operated shop equipment additions and other capital expenditures. Fiscal 2008 investing activities
primarily consisted of $1.9 million in capital expenditures, $0.7 million paid in conjunction with the acquisition of nine shops and other assets from certain Midas dealers, and $0.1 million in cash generated as the result of the sale of five shops
to Midas franchisees. The $1.9 million in capital expenditures included $0.4 million in office renovation costs, $0.8 million for real estate purchases, $0.2 million for systems development projects and $0.5 million for company-operated shop
equipment additions and other capital expenditures.

Net cash provided by financing activities was $3.4 million in first three months of
fiscal 2009, compared to net cash used of $3.5 million in first three months of fiscal 2008. During fiscal 2009, MDS increased total debt by $4.0 million, partially offset by a decrease in outstanding checks of $0.6 million. During fiscal 2008, the
Company decreased total debt by $4.1 million, increased outstanding checks by $0.5 million and received $0.1 million in cash from the exercise of outstanding stock options.



15



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

As of April 4, 2009, a total of
$88.0 million was outstanding under the revolving credit facility. As of January 3, 2009, a total of $83.6 million was outstanding under the revolving credit facility.

In November 2005, $20 million in senior bank debt was converted from floating rate to fixed rate by locking-in LIBOR at 4.89% for a five year period. In
addition, in March 2007, MDS entered into an interest rate swap arrangement to convert an additional $25 million in senior bank debt from floating rate to a fixed rate by locking-in LIBOR at 4.91% for the remaining term of the Companys bank
agreement (October 2010). This swap effectively replaced a declining balance swap that expired in March 2007 under which LIBOR was locked-in at 2.76% for a three-year term. As a consequence, currently $45 million of the Companys $88.0 million
in senior bank debt is at fixed rates.

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

The fair values of the Companys interest rate swaps are estimated using Level 2 inputs, which are based on model-derived valuations in which all
significant inputs and significant value drivers are observable in active markets. The Company also considers counterparty credit-risk and bilateral or own credit risk adjustments in estimating fair value, in accordance with the
requirements of SFAS 157.

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

The Company has entered into a purchase agreement, which could result in the purchase of
up to four shops from a Midas franchisee if the purchase agreements are not assigned to third party buyers prior to the expiration of the option periods. The purchase agreements as originally executed required MDS to purchase four shops for
approximately $1.1 million no later than March 30, 2009. Additionally, the purchase agreements required MDS, or an assigned third party, to purchase land and buildings for three of the four locations for approximately $1.6 million. The related
land and building purchase must coincide with the business purchase and was also to be completed prior to March 30, 2009, subject to certain closing conditions. Prior to the March 30, 2009 closing date, certain closing conditions were not
met. As a result, both parties agreed to delay the closing date of both the shop and real estate transactions until all closing conditions could be met. At this time, the Company cannot predict whether the transactions will be consummated by MDS in
fiscal 2009.

Recent market conditions have negatively affected the value of assets held by the Companys pension plans as of
April 4, 2009 and could impact the value of these assets in the future. The most recently reported pension values, as of January 3, 2009, reflected plan assets at fair market value of $44.8 million and an actuarial present value of
projected benefit obligations of $63.8 million.

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



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

CRITICAL ACCOUNTING
POLICIES AND ESTIMATES

In preparing the consolidated financial statements in conformity with accounting principles generally accepted
in the United States of America, management must make a variety of decisions which impact the reported amounts and related disclosures. Such decisions include the selection of the appropriate accounting principles to be applied, the assumptions on
which to base accounting estimates, and the consistent application of those accounting principles. Due to the type of industry in which the Company operates, 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. The Company maintains a warranty
accrual to cover the estimated future liability associated with outstanding warranties. The Company determines the estimated value of outstanding warranty claims based on: 1) an estimate of the percentage of all warranted products sold and
registered in prior periods at retail that are likely to be redeemed; and 2) an estimate of the cost of redemption of each future warranty claim on a current cost basis. These estimates are computed using actual historical registration and
redemption data as well as actual cost information on current redemptions.

The determination of the number of 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 changing the Companys January 3, 2009 outstanding
U.S. warranty liability by approximately $2.2 million. A change in the estimated current cost of warranty redemptions of one dollar would have the effect of changing the outstanding U.S. warranty liability by $0.8 million.

As of January 1, 2008, the Company changed how the Midas warranty obligations are funded in the United States. From June 2003 through December 2007,
product royalties received from the Companys preferred supply chain vendors were recorded as revenue and substantially offset the cost of warranty claims. Beginning in fiscal 2008, the Midas warranty program in the United States is funded
directly by Midas franchisees. The franchisees are charged a fee for each warranted product sold to customers. The fee is charged when the warranty is registered with the Company. The fee billed to franchisees is deferred and is recognized as
revenue when the actual warranty is redeemed and included in warranty expense. This fee is intended to cover the Companys cost of the new warranty program, thus revenues under this program will match expenses and the new warranty program will
have no impact on the results of operations. In connection with this change, beginning in 2008 Midas system franchisees in the United States started receiving rebates on their purchases from the Companys preferred supply chain vendors and MDS
no longer receives product royalties on Midas franchisee purchases in the United States. Because the Companys U.S. supply chain partners are responsible for the warranty of parts during the first 12 months, MDS did not begin to record revenues
or expenses under the new program until fiscal 2009. As of April 4, 2009, deferred warranty obligations under this new program were $3.6 million.

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

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 in making 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 consolidated financial statements.



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

Pensions

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

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

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 under SFAS No. 87 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 8.5% in fiscal 2008 and 2007, and experienced a loss on plan assets of $14.6 million in fiscal 2008, and a gain on plan assets of $7.4 million
in fiscal 2007.

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



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

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

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

Deferred Income Taxes

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

Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are
deductible, management believes it is more likely than not that the Company will realize the benefits of these deductible differences at April 4, 2009. In the event that management determines the Company would not be able to realize all or part
of the net deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to income in the period such determination was made. As of April 4, 2009, the Company had recorded a valuation allowance of $0.6 million
against certain state income tax net operating loss carry forwards 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 4, 2009.

IMPACT OF NEW ACCOUNTING STANDARDS

In December 2007, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards (SFAS) No. 141 (Revised 2007), Business Combinations (SFAS 141R). Under SFAS 141R, an acquiring entity will be required to recognize all
the assets acquired and liabilities assumed in a transaction at the acquisition-date fair value with limited exceptions. SFAS 141R will change the accounting treatment for certain specific acquisition related items including: (1) expensing
acquisition related costs as incurred; (2) valuing non-controlling interests at fair value at the acquisition date; and (3) expensing restructuring costs associated with an acquired business. SFAS 141R also includes a substantial number of
new disclosure requirements. SFAS 141R is to be applied prospectively to business combinations for which the acquisition date is on or after our adoption date of January 4, 2009. We expect SFAS 141R will have an impact on our accounting for
future business combinations but the effect is dependent upon the acquisitions that are made in the future.



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In December 2007, the FASB issued SFAS No. 160, Non-controlling Interests in Consolidated
Financial Statementsan amendment of ARB No. 51, (SFAS 160). SFAS 160 amends Accounting Research Bulletin No. 51, Consolidated Financial Statements, to establish accounting and reporting standards for the
non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 is effective for fiscal years beginning after December 15, 2008. The Company adopted SFAS 160 as of January 4, 2009 and it had no
impact on the Financial Statements. SFAS 160 could have an impact in future periods if the Company were to enter into a transaction with a non-controlling interest.

In February 2008, the FASB issued FASB Staff Position (FSP) 157-2, which delays the effective date of SFAS 157 for non-financial assets and liabilities that are not measured at fair value on a recurring
basis (at least annually) until fiscal years beginning after November 15, 2008. The Company adopted FSP 157-2 early on January 4, 2009 with no material impact.

In April 2008 the FASB issued FASB Staff Position No. FAS 142-3, Determination of the Useful Life of Intangible Assets, (FSP FAS 142-3). FSP FAS 142-3 amends the factors that should be
considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets, in order to improve the consistency between the
useful life of a recognized intangible asset under SFAS 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS 141(R) and other GAAP. FSP FAS 142-3 became effective for MDS on January 4, 2009. FSP
FAS142-3 requires prospective adoption and therefore had no impact on the Financial Statements.

In June 2008, the FASB issued FSP Emerging
Issues Task Force (EITF) 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities (FSP EITF 03-6-1). FSP EITF 03-6-1 clarifies that unvested share-based
payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and are to be included in the computation of earnings per share under the two-class method described in
SFAS No. 128, Earnings Per Share. This FSP was effective for us on January 4, 2009 and requires all prior-period earnings per share data that is presented to be adjusted retrospectively. Specifically, the adoption of FSP EITF
03-6-1 required MDS to include incremental shares in the first quarter of both fiscal 2009 and 2008 Basic Earnings Per Share calculation of 211,000 and 73,000 shares, respectively. These incremental shares did not impact the Basic Earnings Per Share
in the first quarter of either fiscal 2009 or 2008.

In April 2009, the FASB issued FSP No. FAS 157-4 (FSP FAS 157-4),
Determining Fair Value When the Volume and Level of Activity for the Asset or Liability has Significantly Decreased and Identifying Transactions That Are Not Orderly and FSP No. FAS 115-2 (FSP FAS 115-2), Recognition
and Presentation of Other-Than-Temporary Impairments. These two FSPs were issued to provide additional guidance about (1) measuring the fair value of financial instruments when the markets become inactive and quoted prices may
reflect distressed transactions, and (2) recording impairment charges on investments in debt instruments. Additionally, the FASB issued FSP No. FAS 107-1 (FSP FAS 107-1), Interim Disclosures about Fair Value of Financial
Instruments, to require disclosures of fair value of certain financial instruments in interim financial statements. We do not anticipate the adoption of these FSPs will materially impact the Company. These FSPs are effective for
financial statements issued for interim and annual reporting periods ending after June 15, 2009.

FORWARD LOOKING STATEMENTS

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

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



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|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. Historically, the Companys primary exposure is to changes in exchange rates for the U.S. dollar versus the Canadian dollar. Beginning in fiscal 2008, the Company became exposed to changes in exchange rates
between the U.S. dollar and the Euro for international license fees from Europe that were previously fixed and denominated in U.S. dollars.

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

In
November 2005, $20 million in senior bank debt was converted from floating rate to fixed rate by locking-in LIBOR at 4.89% for a five year period. In addition, in March 2007, MDS entered into an interest rate swap arrangement to convert an
additional $25 million in senior bank debt from floating rate to a fixed rate by locking-in LIBOR at 4.91% for the remaining term of the Companys bank agreement (October 2010). This swap effectively replaced a declining balance swap that
expired in March 2007 under which LIBOR was locked-in at 2.76% for a three-year term. As a consequence, currently $45 million of the Companys $88.0 million in senior bank debt is at fixed rates.

Both the November 2005 and March 2007 swap arrangements have been designated as cash flow hedges and have been evaluated to be highly effective. As a
result, the after-tax change in the fair value of these swaps is recorded in accumulated other comprehensive income as a gain or loss on derivative financial instruments. As of April 4, 2009, the fair value of these instruments was a pre-tax
loss of approximately $2.4 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.



|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, the Companys internal controls over financial
reporting.



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PART II. OTHER INFORMATION



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

As previously reported in the Form 8-K
filed by the Company on March 27, 2009, the Ontario Superior Court of Justice released its decision regarding certification of the action as a class proceeding in connection with the suit filed by two Midas franchisees in Canada against Midas
Canada, Inc. (Midas Canada), and Midas International Corporation (Midas International). The suit claims, among other things, that Midas Canada breached its franchise agreement when it closed its manufacturing and distribution
operations in 2003. The plaintiffsLandsbridge Auto Corporation and 405341 Ontario Limitedsought class certification.

Of the
many and varied claims that were asserted by the plaintiffs, the only claims that the plaintiffs will be allowed to advance as a class are whether Midas Canada breached its common law and statutory duties of good faith/fair dealing when Midas Canada
implemented its new supply chain in 2003, and, if so, whether Midas Canada could properly maintain the same royalty structure after ceasing to supply products to franchisees. All other causes of action against Midas Canada and Midas International,
and proposed common issues based on those causes of action, were rejected by the court.

In its decision, the court ruled that Midas Canada
did not breach its franchise agreement when it closed its manufacturing and distribution operations in 2003 or accepted rebates from its supplier. The court also held that Landsbridge is not a proper plaintiff in the proceeding and that the class
definition is limited to only those franchisees who were part of the Midas system before the new supply chain was implemented and continued as franchisees through the date of the claim. There are no class claims remaining against Midas
International.

Midas continues to believe that the plaintiffs case is without merit and will vigorously defend these remaining
claims at trial.



|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 |  | AveragePrice Paidper Share |  | Total Number ofShares Purchasedas Part of PubliclyAnnounced Plansor
Programs |  | Approximate DollarValue of Shares ThatMay Yet BePurchased Under thePlans or Programs (1)
|January 2009:(January 4, 2009 through January 31, 2009)    |  |                               |  |                           |  |                                                                             |  | $                                                                                        | 34,347,399
|February 2009:(February 1, 2009 through February 28, 2009) |  |                               |  |                           |  |                                                                             |  | $                                                                                        | 34,347,399
|March 2009:(March 1, 2009 through April 4, 2009)           |  |                               |  |                           |  |                                                                             |  | $                                                                                        | 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
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | repurchase program, and on May 8, 2007, the Board authorized an additional $50 million increase. As of April 4, 2009, a total of approximately
3,248,100 shares had been repurchased under this plan since its inception. The average price of shares repurchased under the plan was approximately $20.21.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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

None



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

None



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

On February 22, 2009, the Board
of Directors amended the Midas Savings Plan for Salaried Employees (the Savings Plan). The Savings Plan is a tax-qualified retirement savings plan pursuant to which all salaried employees of the Company, including the named executive
officers, are able to contribute up to the limit prescribed by the Internal Revenue Service to the Savings Plan on a pre-tax basis. The amendment reduced the Company match from 100% to 50% of the first 6% of pay contributed to the Savings Plan after
the first year of employment. In connection with this amendment, the Board of Directors also amended the nonqualified Midas Executive Retirement Plan (amended and renamed the Midas Executive Retirement PlanAccount Balance Component in November
2008) (the ERP). Pursuant to the ERP, a participant may elect to defer receipt of up to 20% of his or her base salary and up to 100% (net of applicable withholding) of his or her annual incentive bonus on a pre-tax basis. The ERPs
administrative committee may modify these percentages prior to any plan year. Prior to the amendment, the Company matched 100% of the first 6% of total pay that a participant elects to defer under the ERP and Savings Plan. As a result of the
amendment, the Company matches 50% of the first 6% of total pay that a participant elects to defer under the ERP and Savings Plan.

The
foregoing description is qualified in its entirety by the text of the First Amendment to the Midas Executive Retirement Plan Account Balance Component filed as Exhibit 10.2 hereto.



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



|10.1 | Description of 2009 Incentive Compensation Plan.
|---- | ------------------------------------------------



|10.2 | First Amendment to the Midas Executive Retirement Plan Account Balance Component.
|---- | ---------------------------------------------------------------------------------



|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 14, 2009 |  | /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/ James M. Haeger, Jr.                            
|                   |  | James M. Haeger, Jr.                                
|                   |  | Vice President and Controller                       



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