EX-99 2 cmw1567a.htm PRESS RELEASE

Exhibit 99

NEWS RELEASE CONTACT:    Warren W. Heidbreder
FOR IMMEDIATE RELEASE PHONE:    563-262-1260
DATE: July 19, 2005 URL:    www.bandag.com

BANDAG, INCORPORATED REPORTS 2ND QUARTER EPS OF $0.65
Bandag, Inc. (NYSE: BDG and BDGA)

Flash Results

(Numbers in Millions, Except Per Share Data)
Q2 2005 Q2 2004 6 Mos. 2005 6 Mos. 2004
Net sales     $227.3   $213.2   $417.0   $389.9  
Net earnings   $12.7   $11.9   $18.7   $15.9  
Diluted earnings per share   $0.65   $0.60   $0.95   $0.81  
Shares outstanding - diluted    19.7    19.7    19.7    19.7  

MUSCATINE, IOWA, July 19, 2005 – Bandag, Incorporated (NYSE:BDG and BDGA) today reported consolidated net earnings of $12.7 million, or $0.65 per diluted share, for second quarter 2005. This compares to second quarter 2004 consolidated net earnings of $11.9 million, or $0.60 per diluted share. 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 2005 were $227.3 million, an increase of seven percent, compared to consolidated net sales of $213.2 million in second quarter 2004. Net sales were positively impacted by approximately $4.9 million due to the effect of translating foreign currency denominated net sales into U.S. dollars.

For the first six months of 2005, Bandag reported consolidated net earnings of $18.7 million, or $0.95 per diluted share, compared to consolidated net earnings of $15.9 million, or $0.81 per diluted share, in the same period of 2004. Consolidated net sales for the first six months of 2005 were $417.0 million, an increase of seven percent from consolidated net sales of $389.9 million in the first six months of 2004.

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BANDAG, Incorporated
2905 N. Hwy. 61, Muscatine, IA 52761-5886
Tel 563.262.1400 – Url www.bandag.com

In announcing second quarter 2005 results, Martin G. Carver, Chairman of the Board and Chief Executive Officer of Bandag, said, “Reflecting the benefits of increased transportation activity, North American net sales and unit volume were up over the 2004 period. These favorable transportation business conditions also were evident in the quarter’s strong performance at Speedco and Tire Distribution Systems, Inc. (TDS).”

Financial Highlights

  • Factors that affected consolidated net sales for second quarter 2005 were:
  o Speedco sales increased by $6.2 million compared to the prior year period, primarily due to the June 2004 acquisition of six licensed locations which were owned and operated by PM Express, Inc. Net sales were also positively impacted by an increase in volume at existing locations, the addition of three new facilities and the expansion of tire lanes at nine existing locations.
  o TDS sales declined $8.0 million from the prior year period, reflecting the divestitures during 2004. The divested locations had net sales of approximately $17.0 million in the second quarter of 2004. TDS net sales were positively impacted by an increase in service revenue and new tire sales.
  o North America business unit volume increased five percent and net sales increased eight percent as compared to second quarter 2004. Net sales were positively impacted by price increases in December 2004 and May 2005.
  o European business unit volume decreased ten percent while net sales increased nine percent. Net sales were positively impacted by a September 2004 price increase and by approximately $1.0 million due to the effect of translating foreign currency denominated net sales into U.S. dollars.
  o International business unit volume decreased two percent while net sales increased twenty-five percent. Net sales were positively impacted by price increases and by approximately $2.8 million due to the effect of translating foreign currency denominated net sales into U.S. dollars.

  • Second quarter 2005 consolidated gross margin declined by one percentage point. Speedco’s gross margin declined 4.2 percentage points, primarily due to the start-up of new stores and the addition of tire lanes to existing stores. TDS’ gross margin increased 0.5 percentage points. Traditional business gross margin declined 2.1 percentage points, primarily due to lower than anticipated gross margin on fleet contract business.

  • Consolidated operating and other expenses for second quarter 2005 were $0.8 million higher than the prior year period.

  • Interest income increased $1.2 million, primarily due to an increase in cash and interest rates.

  • The effective tax rate increased to 35.1% from 30.7% in the prior year period. The lower effective tax rate in 2004 was largely attributable to a $1.0 million favorable tax adjustment in second quarter 2004.

  • Capital expenditures were $26.2 million through June 30, 2005, compared to $12.9 million for the same period last year. The increase in capital expenditures is primarily due to expenditures made by Speedco for new facilities and expansions of tire lanes at existing facilities.

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Outlook

Commenting on the sales outlook for second half of 2005, Mr. Carver said, “Continued high equipment utilization in the trucking sector, improving fundamentals at TDS and the ongoing expansion of Speedco should bode well for Bandag. Nevertheless, we continue to carefully monitor the impact of higher oil prices on both transportation industry fuel costs and our own raw material costs for the remainder of the year.”

Bandag, Incorporated manufactures retreading materials and equipment for its worldwide network of approximately 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% interest in Speedco, Inc., a provider of on-highway truck lubrication and routine tire 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
 2005
 2004
 2005
 2004
Income                    
Net sales   $ 227,261   $ 213,180   $ 417,017   $ 389,861  
Other    1,087    1,419    3,148    2,646  
     228,348    214,599    420,165    392,507  

Costs and expenses		  
Cost of products sold    147,558    136,128    273,304    251,284  
Operating & other expenses    62,284    61,534    119,680    118,354  
     209,842    197,662    392,984    369,638  

Income from operations		    18,506    16,937    27,181    22,869  
Interest income    2,159    992    3,972    2,042  
Interest expense    (629 )  (557 )  (1,085 )  (1,119 )
Earnings before income taxes and minority interest    20,036    17,372    30,068    23,792  
Income taxes    7,029    5,341    11,222    7,684  
Minority interest    268    137    145    195  
  Net earnings   $ 12,739   $ 11,894   $ 18,701   $ 15,913  

Earnings per share		  
  Basic   $ 0.66   $ 0.62   $ 0.96   $ 0.83  
  Diluted   $ 0.65   $ 0.60   $ 0.95   $ 0.81  

Weighted average shares outstanding		  
  Basic    19,426    19,299    19,409    19,275  
  Diluted    19,714    19,688    19,710    19,672  

Second Quarter
Ended June 30,
 Six Months
Ended June 30,
Segment Information
 2005
 2004
 2005
 2004

Net Sales		                    

North America		   $ 110,432   $ 102,634   $ 201,702   $ 188,003  
Europe    21,379    19,574    40,768    40,770  
International    31,952    25,648    60,821    48,091  
TDS    42,921    50,937    75,598    91,876  
Speedco    20,577    14,387    38,128    21,121  
  Total net sales   $ 227,261   $ 213,180   $ 417,017   $ 389,861  

Segment Operating Profit (Loss)		  

North America		   $ 14,974   $ 16,176   $ 23,579   $ 21,630  
Europe    273    (1,664 )  1,194    26  
International    3,445    2,874    6,884    5,913  
TDS    2,670    (34 )  1,573    (2,875 )
Speedco    838    1,754    1,637    2,657  
Corporate expenses & other    (3,694 )  (2,169 )  (7,686 )  (4,482 )
Net interest income    1,530    435    2,887    923  
Earnings before income taxes and minority interest   $ 20,036   $ 17,372   $ 30,068   $ 23,792  

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,
2005
 Dec. 31,
2004

Assets:		            
Cash and cash equivalents   $ 65,875   $ 66,646  
Investments    123,165    136,115  
Accounts receivable - net    156,373    157,809  
Inventories    79,708    69,892  
Other current assets    55,102    55,793  
  Total current assets    480,223    486,255  

Property, plant, and equipment - net		    184,935    170,018  
Other assets    74,359    74,454  
  Total assets   $ 739,517   $ 730,727  

Liabilities & shareholders' equity:		  
Accounts payable   $ 43,528   $ 33,138  
Income taxes payable    3,883    2,995  
Accrued liabilities    89,613    104,580  
Short-term notes payable and current portion of other obligations    17,856    17,845  
  Total current liabilities    154,880    158,558  

Long-term debt and other obligations		    31,943    29,963  
Deferred income tax liabilities    8,174    7,502  
Minority interest    2,429    2,417  
Shareholders' equity  
  Common stock    19,555    19,452  
  Additional paid-in capital    34,095    28,839  
  Retained earnings    516,846    513,152  
  Accumulated other comprehensive loss    (28,405 )  (29,156 )
    Total shareholders' equity    542,091    532,287  
    Total liabilities & shareholders' equity   $ 739,517   $ 730,727  

Six Months
Ended June 30,
Condensed Consolidated Statements of Cash Flows
 2005
 2004

Operating Activities		            
  Net earnings   $ 18,701   $ 15,913  
  Provision for depreciation    12,737    11,238  
  (Increase) decrease in operating assets and liabilities - net    (6,577 )  9,506  
    Net cash provided by operating activities    24,861    36,657  
Investing Activities  
  Additions to property, plant and equipment    (26,243 )  (12,857 )
  Sales of investments - net    12,950    31,670  
  Payments for acquisitions of businesses    --    (71,868 )
  Proceeds from divestiture of businesses    2,251    882  
    Net cash used in investing activities    (11,042 )  (52,173 )
Financing Activities  
  Principal payments on short-term notes payable and other long-term liabilities    (1,886 )  (760 )
  Cash dividends    (12,873 )  (12,567 )
  Purchases of common stock    (2,281 )  (2,348 )
  Stock options exercised    1,387    1,891  
    Net cash used in financing activities    (15,653 )  (13,784 )
Effect of exchange rate changes on cash and cash equivalents    1,063    (1,234 )
    Decrease in cash and cash equivalents    (771 )  (30,534 )
Cash and cash equivalents at beginning of year    66,646    100,326  
    Cash and cash equivalents at end of period   $ 65,875   $ 69,792  

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

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