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

                                                        Percentage of Sales and Revenues
Fiscal Year                                            2008             2007           2006
Franchise royalties and license fees                      30.5 %          33.8 %         36.3 %
Real estate revenues from franchised shops                18.4            20.2           20.7
Company-operated shop retail sales                        32.8            25.7           23.2
Replacement part sales and product royalties              15.6            17.8           17.5
Software sales and maintenance revenue                     2.7             2.5            2.3

Sales and revenues                                       100.0           100.0          100.0
Franchised shops-occupancy expenses                       12.2            12.4           12.3
Company-operated shop parts cost of sales                  8.6             6.3            5.5
Company-operated shop payroll and employee
benefits                                                  13.9            10.7           10.0
Company-operated shop occupancy and other
operating expenses                                        11.1             8.6            7.9
Replacement part cost of sales                            14.1            14.6           13.7
Warranty expense (benefit)                                (1.4 )          (2.4 )          2.5
Selling, general, and administrative expenses             28.8            29.8           32.8
Loss (gain) on sale of assets, net                         0.5            (0.1 )         (1.9 )
Business transformation charges                            0.8             2.1            1.9

Total operating costs and expenses                        88.6            82.0           84.7

Operating income                                          11.4            18.0           15.3
Interest expense                                          (4.9 )          (5.1 )         (5.1 )
Other income, net                                          0.4             0.2            0.7

Income before income taxes                                 6.9            13.1           10.9
Income taxes                                               2.7             5.8            5.0

Net income                                                 4.2 %           7.3 %          5.9 %

Company Overview

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

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

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

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

Growing Comparable Shop Sales

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

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

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

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

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

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

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

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

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

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

Growing Shop Count

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

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

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

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

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

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

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

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

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

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

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

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

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

Fiscal Reporting Periods

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

Results of Operations-Fiscal 2008 Compared to Fiscal 2007

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Results of Operations-Fiscal 2007 Compared to Fiscal 2006

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

. . .