EX-99 2 sdc769a.htm PRESS RELEASE

Exhibit 99

BANDAG, INCORPORATED        •        2905 N. HWY. 61        •        MUSCATINE, IOWA 52761-5886        •        563/262-1400
Leading the retread industry worldwide

NEWS

FOR IMMEDIATE RELEASE CONTACT:     Warren W. Heidbreder
Phone:     (563) 262-1260
July 16, 2004 Web Site:     www.bandag.com



BANDAG, INCORPORATED REPORTS 2nd QUARTER EPS OF $0.60
Flash Results
Bandag, Inc. (NYSE: BDG and BDGA)


(Numbers in Millions, Except Per Share Data)

Q2 2004
 Q2 2003
 6 Mos. 2004
 6 Mos. 2003
Net sales     $ 211.1   $ 204.1   $ 384.6   $ 379.4  
Net earnings   $ 11.9   $ 8.7   $ 15.9   $ 11.1  
Diluted earnings per share   $ 0.60   $ 0.45   $ 0.81   $ 0.57  
Shares outstanding - diluted    19.7    19.4    19.7    19.3  



MUSCATINE, IOWA, July 16, 2004 – Bandag, Incorporated (NYSE: BDG and BDGA) today reported consolidated net earnings of $11.9 million, or $0.60 per diluted share, for second quarter 2004, compared to second quarter 2003 consolidated net earnings of $8.7 million, or $0.45 per diluted share, an increase of 37% and 33% for consolidated net earnings and diluted earnings per share, respectively. Consolidated net earnings for second quarter 2004 included favorable tax adjustments of $1.0 million, or $0.05 per diluted share, resulting primarily from the reassessment of certain tax matters. Consolidated net sales for second quarter 2004 were $211.1 million, an increase of approximately three percent compared to second quarter 2003 consolidated net sales of $204.1 million.

For the first six months of 2004, Bandag reported consolidated net earnings of $15.9 million, or $ 0.81 per diluted share. This compares to consolidated net earnings of $11.1 million, or $0.57 per diluted share, in the first six months of 2003. Consolidated net sales for the first six months of 2004 increased one percent to $384.6 million from $379.4 million in the first six months of 2003.



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In announcing second quarter results, Martin G. Carver, Chairman of the Board and Chief Executive Officer of Bandag, said, “Several factors contributed to our performance in the second quarter. Globally, tread volume was up by five percent during the quarter, reflecting increased trucking activity, particularly in North America. In its first full quarter as part of Bandag, Speedco, Inc. demonstrated both its fit to Bandag and the validity of our strategy to offer our customers a wider range of vehicle services.” In June, Speedco purchased its six licensed locations and now operates 32 on-highway quick-service truck lubrication locations.

“Also important, Tire Distribution Systems, Inc.‘s (TDS) performance improved significantly during the quarter, as Bandag’s distribution subsidiary reduced its net loss from $2.4 million a year ago to a loss of $34,000, reflecting the benefits of selected divestitures and sales increases in some of the remaining locations,” said Mr. Carver.

Financial Highlights

  • Factors that affected consolidated net sales for second quarter 2004 were:

  • North America business unit volume was approximately three percent higher than the prior year period. Net sales increased by $4.2 million primarily due to higher volume and the reduction in intercompany sales due to the shift of TDS sales to the independent dealers acquiring the divested TDS locations.

  • Speedco net sales were $14.4 million for the second quarter of 2004.

  • TDS net sales declined by $15.8 million due to divestitures and closures in 2003 and 2004, offset by increases at some of the remaining locations. Second quarter 2004 and 2003 sales by divested and closed TDS locations were approximately $0.3 million and $18.1 million, respectively.

  • European business unit volume increased two percent while net sales increased $1.7 million, or ten percent, primarily due to the effect of translating foreign currency denominated net sales into U.S. dollars.

  • International business unit volume increased twelve percent and net sales increased $2.5 million, or eleven percent, of which approximately $1.0 million was due to the effect of translating foreign currency denominated net sales into U.S. dollars.

  • Overall, translating foreign currency denominated net sales into U.S. dollars produced a favorable impact of approximately $3.2 million on consolidated net sales.

  • Second quarter 2004 consolidated gross margin was even with the prior year.



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  • Consolidated operating and other expenses were $1.4 million below the prior year despite an additional $3.8 million in expenses related to Speedco operations and the unfavorable impact of the translation rates. TDS operating and other expenses were $5.6 million below the previous year, primarily reflecting the divestitures in 2003 and 2004. Consolidated foreign exchange gain was $0.8 million compared to $2.2 million of loss in second quarter 2003, both of which were primarily related to U.S. dollar cash balances held outside the United States.

  • Operating income for the North America business unit in second quarter 2004 decreased $1.5 million, primarily due to raw material cost increases and higher operating and other expenses.

  • Operating income in the European business unit in second quarter 2004 decreased $1.4 million compared to the previous year, primarily due to a decline of 5.6 percentage points in gross margin and higher operating and other expenses.

  • Operating income for the International business unit in second quarter 2004 decreased $0.6 million compared to the prior year period, primarily due to a decline of 0.8 percentage points in gross margin and higher operating and other expenses.

  • TDS reduced its operating loss from $2.4 million in second quarter 2003 to $34,000 in second quarter 2004. Second quarter 2003 results included $1.5 million in losses from divestitures compared to a loss of $0.4 million in the second quarter of 2004.

  • Speedco operating income for the second quarter of 2004 was $1.8 million. In June, Speedco purchased its six licensed locations from PM Express for $15.6 million, and began opening its tire operations at various Speedco facilities. Results of the former licensees did not have a material impact on second quarter 2004 results as they were only included for the final three weeks of the quarter.

  • Corporate expenses and other was $2.2 million for the second quarter of 2004 compared to $5.4 million in the previous year. The $3.2 million decrease includes the favorable impact of $3.6 million in foreign exchange gains related to U.S. dollar cash balances held outside the United States.






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Outlook

In May, Bandag announced that Yellow Roadway Corporation would not be renewing the outsourcing agreement for Roadway Express tire and wheel services and, in accordance with the terms of the agreement, would be repurchasing tire and wheel assets from Bandag. Mr. Carver indicated that the transition process was proceeding smoothly and on schedule, and that Bandag received an initial payment of approximately $32 million on July 9, 2004. Bandag anticipates completing the transition and final settlement in August 2004.

Commenting on the outlook for the second half of 2004, Mr. Carver said, “The improved performance we experienced during the second quarter is heartening, and, while we’re hopeful that the renewed strength we’re seeing in trucking activity gains momentum, we continue to moderate our optimism and closely monitor global economic activity.”

Bandag, Incorporated manufactures retreading materials and equipment for its worldwide network of more than 1,000 franchised dealers that produce and market retread tires and provide tire management services. Bandag’s traditional business serves end-users through a wide variety of products offered by dealers, ranging from tire retreading and repairing to tire management systems outsourcing for commercial truck fleets. TDS sells and services new and retread tires. In addition, Bandag has an 87.5 percent interest in Speedco, Inc., a provider of on-highway truck lubrication services to commercial truck owner-operators and fleets.











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Bandag, Incorporated
Unaudited Financial Highlights
(In thousands, except per share data)

Second Quarter Ended June 30,
 Six Months Ended June 30,
Consolidated Statements of Earnings
 2004
 2003
 2004
 2003
                   
Income   
Net sales   $ 211,088   $ 204,077   $ 384,617   $ 379,356  
Other    1,725    1,691    3,487    3,535  
     212,813    205,768    388,104    382,891  
Costs and expenses   
Cost of products sold    134,087    129,535    246,890    244,866  
Operating & other expenses    61,789    63,228    118,345    121,836  
     195,876    192,763    365,235    366,702  

Income from operations		    16,937    13,005    22,869    16,189  
Interest income    992    1,052    2,042    2,208  
Interest expense    (557 )  (551 )  (1,119 )  (1,210 )
Earnings before income taxes and minority interest    17,372    13,506    23,792    17,187  
Income taxes    5,341    4,813    7,684    6,101  
Minority interest    137    --    195    --  
  Net earnings   $ 11,894   $ 8,693   $ 15,913   $ 11,086  
Earnings per share  
  Basic   $ 0.62   $ 0.45   $ 0.83   $ 0.58  
  Diluted   $ 0.60   $ 0.45   $ 0.81   $ 0.57  
Weighted average shares outstanding  
  Basic    19,299    19,156    19,275    19,137  
  Diluted    19,688    19,371    19,672    19,324  


Second Quarter Ended June 30,
 Six Months Ended June 30,
Segment Information
 2004
 2003
 2004
 2003
                   
Net Sales                    
North America   $ 100,542   $ 96,361   $ 182,759   $ 168,573  
Europe    19,574    17,835    40,770    36,816  
International    25,648    23,154    48,091    43,626  
TDS    50,937    66,727    91,876    130,341  
Speedco    14,387    --    21,121    --  
  Total net sales   $ 211,088   $ 204,077   $ 384,617   $ 379,356  

Segment Operating Profit (Loss) 		  
North America   $ 16,176   $ 17,651   $ 21,630   $ 21,567  
Europe    (1,664 )  (281 )  26    1,512  
International    2,874    3,486    5,913    6,158  
TDS    (34 )  (2,430 )  (2,875 )  (6,482 )
Speedco    1,754    --    2,657    --  
Corporate expenses & other    (2,169 )  (5,421 )  (4,482 )  (6,566 )
Net interest income    435    501    923    998  
Earnings before income taxes and minority interest   $ 17,372   $ 13,506   $ 23,792   $ 17,187  

Note:   Certain prior year amounts have been reclassified to conform with the current year presentation.

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Bandag, Incorporated
Unaudited Financial Highlights
(In thousands)

Condensed Consolidated Balance Sheets
 June 30, 2004
Dec. 31, 2003
           
Assets:  
Cash and cash equivalents   $ 130,492   $ 189,976  
Investments    8,088    10,808  
Accounts receivable - net    136,976    156,894  
Inventories    69,859    62,765  
Other current assets    92,696    77,533  
  Total current assets    438,111    497,976  

Property, plant, and equipment - net		    156,883    107,975  
Other assets    78,370    54,578  
  Total assets   $ 673,364   $ 660,529  
Liabilities & shareholders' equity:  
Accounts payable   $ 32,633   $ 25,710  
Income taxes payable    9,414    14,946  
Accrued liabilities    94,809    97,285  
Short-term notes payable and current portion of other obligations    10,721    10,252  
  Total current liabilities    147,577    148,193  

Long-term debt and other obligations		    40,405    35,259  
Minority interest    2,238    --  
Shareholders' equity  
  Common stock    19,374    19,269  
  Additional paid-in capital    24,824    17,903  
  Retained earnings    478,612    477,499  
  Accumulated other comprehensive loss    (39,666 )  (37,594 )
    Total shareholders' equity    483,144    477,077  
    Total liabilities & shareholders' equity   $ 673,364   $ 660,529  

Six Months Ended June 30,
Condensed Consolidated Statements of Cash Flows
 2004
 2003
           
Operating Activities            
  Net earnings   $ 15,913   $ 11,086  
  Provisions for depreciation and amortization    11,708    14,010  
  Decrease in operating assets and liabilities - net    9,036    (4,991 )
    Net cash provided by operating activities    36,657    20,105  
Investing Activities  
  Additions to property, plant and equipment    (12,857 )  (8,647 )
  Purchases of investments - net    2,720    (2,133 )
  Payments for acquisitions of businesses    (71,868 )  --  
  Proceeds from divestiture of businesses    882    11,115  
    Net cash provided by (used in) investing activities    (81,123 )  335  
Financing Activities  
  Principal payments on short-term notes payable and other  
    long-term liabilities    (760 )  (31 )
  Cash dividends    (12,567 )  (12,279 )
  Purchases of common stock    (2,348 )  (110 )
  Stock options exercised    1,891    616  
    Net cash used in financing activities    (13,784 )  (11,804 )
Effect of exchange rate changes on cash and cash equivalents    (1,234 )  3,906  
    Increase (decrease) in cash and cash equivalents    (59,484 )  12,542  
Cash and cash equivalents at beginning of year    189,976    129,412  
    Cash and cash equivalents at end of period   $ 130,492   $ 141,954  


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