-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NUiXw+KsOztPs0qB9SHdURsSLKVJ7cfr8c+GmlqH8WyhlhnXb3bexLJ03xlD6P3T 1cr+exQuLlgLFxc1dbj83w== 0000897069-06-001840.txt : 20060804 0000897069-06-001840.hdr.sgml : 20060804 20060804144618 ACCESSION NUMBER: 0000897069-06-001840 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20060630 FILED AS OF DATE: 20060804 DATE AS OF CHANGE: 20060804 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BANDAG INC CENTRAL INDEX KEY: 0000009534 STANDARD INDUSTRIAL CLASSIFICATION: TIRES AND INNER TUBES [3011] IRS NUMBER: 420802143 STATE OF INCORPORATION: IA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07007 FILM NUMBER: 061005460 BUSINESS ADDRESS: STREET 1: 2905 NORTH HIGHWAY 61 STREET 2: BANDAG HEADQUARTERS CITY: MUSCATINE STATE: IA ZIP: 52761-5886 BUSINESS PHONE: 5632621400 MAIL ADDRESS: STREET 1: 2905 N HIGHWAY 61 STREET 2: BANDAG HEADQUARTERS CITY: MUSCATINE STATE: IA ZIP: 52761-5886 10-Q 1 dbk204.htm QUARTERLY REPORT

UNITED STATES
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 JUNE 30, 2006

[_] 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 1-7007


BANDAG, INCORPORATED
(Exact name of registrant as specified in its charter)


Iowa	42-0802143
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
2905 North Highway 61, Muscatine, Iowa	52761-5886
(Address of principal executive offices)	(Zip Code)


(563) 262-1400
(Registrant’s telephone number, including area code)


Not Applicable
(Former name, former address and former fiscal year, if
changed since last report)

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 is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [_] Accelerated filer [X] Non-accelerated filer [_]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [_] No [X]

Common Stock, $1 par value, 9,125,277 shares as of July 31, 2006.
Class A Common Stock, $1 par value, 9,398,296 shares as of July 31, 2006.
Class B Common Stock, $1 par value; 917,253 shares as of July 31, 2006.

BANDAG, INCORPORATED AND SUBSIDIARIES

INDEX



Part I: FINANCIAL INFORMATION				Page No.
	Item	1.	Financial Statements (Unaudited)
			Condensed consolidated balance sheets -
			June 30, 2006 and December 31, 2005	3
			Condensed consolidated statements of operations
			Three months ended June 30, 2006 and 2005
			Six months ended June 30, 2006 and 2005	4
			Condensed consolidated statements of cash flows
			Six months June 30, 2006 and 2005	5
			Notes to condensed consolidated financial statements
			June 30, 2006	6
	Item	2.	Management's Discussion and Analysis of Financial
			Condition and Results of Operations	15
	Item	3.	Quantitative and Qualitative Disclosures about Market Risk	23
	Item	4.	Controls and Procedures	23
PART II: OTHER INFORMATION
	Item	2.	Unregistered Sales of Equity Securities and Use of Proceeds	24
	Item	4.	Submission of Matters to a Vote of Security Holders	24
	Item	6.	Exhibits	25
SIGNATURES				26

PART I. FINANCIAL INFORMATION

BANDAG, INCORPORATED AND SUBSIDIARIES

Item 1. Financial Statements
Condensed Consolidated Balance Sheets

	(Unaudited)
In thousands, except share data	June 30, 2006			December 31, 2005
Assets
Current assets
Cash and cash equivalents	$	71,760		$	97,071
Investments		55,693			60,150
Accounts receivable, net		164,469			174,017
Inventories
Finished products		68,628			67,973
Material and work in process		19,404			16,695

		88,032			84,668
Other current assets		55,453			59,960

Total current assets		435,407			475,866
Property, plant, and equipment		615,420			584,104
Less accumulated depreciation and amortization		(376,440	)		(374,464	)

		238,980			209,640
Intangible assets, net		40,926			32,949
Other assets		37,917			36,582

Total assets	$	753,230		$	755,037

Liabilities and shareholders' equity
Current liabilities
Accounts payable	$	48,830		$	45,794
Accrued employee compensation and benefits		33,275			33,695
Accrued marketing expenses		22,336			24,914
Other accrued expenses		39,768			42,038
Income taxes payable		1,786			2,477
Short-term notes payable and current portion of other obligations		13,428			15,351

Total current liabilities		159,423			164,269
Long-term debt and other obligations		24,589			24,061
Deferred income tax liabilities		5,534			4,771
Minority interest		1,463			2,779
Shareholders' equity
Common stock; $1.00 par value; authorized - 21,500,000 shares;
issued and outstanding - 9,127,100 shares in 2006, 9,129,060 shares in 2005		9,127			9,129
Class A common stock; $1.00 par value; authorized - 50,000,000 shares;
issued and outstanding - 9,407,767 shares in 2006, 9,388,786 shares in 2005		9,408			9,389
Class B common stock; $1.00 par value; authorized - 8,500,000 shares;
issued and outstanding - 917,253 shares in 2006, 917,563 shares in 2005		917			918
Additional paid-in capital		42,105			37,191
Retained earnings		513,096			529,372
Accumulated other comprehensive loss		(12,432	)		(26,842	)

Total shareholders' equity		562,221			559,157

Total liabilities and shareholders' equity	$	753,230		$	755,037

See notes to condensed consolidated financial statements.

BANDAG, INCORPORATED AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Earnings

In thousands, except per share data	Three Months Ended June 30,						Six Months Ended June 30,
	2006			2005			2006			2005
Income
Net sales	$	247,315		$	227,261		$	459,670		$	417,017
Other		1,329			1,087			5,885			3,148

		248,644			228,348			465,555			420,165
Costs and expenses
Cost of products sold		169,383			147,558			314,127			273,304
Engineering, selling, administrative, and other expenses		64,669			62,284			129,848			119,680

		234,052			209,842			443,975			392,984
Income from operations		14,592			18,506			21,580			27,181
Interest income		1,878			2,159			4,332			3,972
Interest expense		(373	)		(629	)		(687	)		(1,085	)

Earnings before income taxes, minority interest
and discontinued operations		16,097			20,036			25,225			30,068
Income taxes		5,740			7,029			9,339			11,222
Minority interest		(122	)		268			(302	)		145

Earnings from continuing operations		10,479			12,739			16,188			18,701
Net loss on discontinued operations		--			--			(16,356	)		--

Net earnings (loss)	$	10,479		$	12,739		$	(168	)	$	18,701

Basic earnings (loss) per share
Earnings from continuing operations	$	0.54		$	0.66		$	0.84		$	0.96
Net loss on discontinued operations		--			--			(0.85	)		--

Net earnings (loss)	$	0.54		$	0.66		$	(0.01	)	$	0.96

Diluted earnings (loss) per share
Earnings from continuing operations	$	0.54		$	0.65		$	0.83		$	0.95
Net loss on discontinued operations		--			--			(0.84	)		--

Net earnings (loss)	$	0.54		$	0.65		$	(0.01	)	$	0.95

Comprehensive net earnings	$	9,451		$	12,578		$	14,242		$	19,452
Cash dividends declared per share	$	0.335		$	0.330		$	0.670		$	0.660
Depreciation included in expense	$	6,869		$	6,255		$	13,522		$	12,737
Weighted average shares outstanding:
Basic		19,354			19,426			19,339			19,409
Diluted		19,513			19,714			19,542			19,710

See notes to condensed consolidated financial statements.

BANDAG, INCORPORATED AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Cash Flows

In thousands	Six Months Ended June 30,
	2006			2005
Operating Activities
Net earnings (loss)	$	(168	)	$	18,701
Non-cash translation adjustment due to sale of South Africa		14,212			--
Provision for depreciation		13,522			12,737
(Increase) decrease in operating assets and liabilities, net		10,509			(6,577	)

Net cash provided by operating activities		38,075			24,861
Investing Activities
Additions to property, plant, and equipment		(44,467	)		(26,243	)
Purchases of investments		(330,543	)		(679,900	)
Maturities of investments		335,000			692,850
Divestitures of businesses		460			2,251
Acquisitions of businesses		(8,091	)		--

Net cash used in investing activities		(47,641	)		(11,042	)
Financing Activities
Principal payments on short-term notes payable and long-term obligations		(1,468	)		(1,886	)
Cash dividends		(13,038	)		(12,873	)
Purchases of Common Stock and Class A Common Stock		(3,408	)		(2,281	)
Stock options exercised		2,523			1,387
Excess tax benefits from share-based compensation expense		196			--

Net cash used in financing activities		(15,195	)		(15,653	)
Effect of exchange rate changes on cash and cash equivalents		(550	)		1,063

Decrease in cash and cash equivalents		(25,311	)		(771	)
Cash and cash equivalents at beginning of period		97,071			66,646

Cash and cash equivalents at end of period	$	71,760		$	65,875

See notes to condensed consolidated financial statements.

BANDAG, INCORPORATED AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements – Unaudited

Note 1. Basis of Presentation

The condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six month period ended June 30, 2006 are not necessarily indicative of the results that may be expected for the year ending December 31, 2006. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005.

Note 2. Comprehensive Net Earnings

Comprehensive net earnings for the three and six month periods ended June 30 were as follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2006			2005			2006			2005
Net earnings (loss)	$	10,479		$	12,739		$	(168	)	$	18,701
Other comprehensive income:
Foreign currency translation		(1,010	)		(161	)		14,512			751
Minimum pension liability		(18	)		--			(102	)		--

Comprehensive net earnings	$	9,451		$	12,578		$	14,242		$	19,452

For the six month period ended June 30, 2006, other comprehensive income includes $14,212,000 of cumulative translation adjustment that was written off as part of the sale of the South African operations.

Note 3. Sale of South Africa Operations

During the first quarter of 2006 the Company recorded the previously announced deferred loss on the sale of its business in South Africa. Bandag recorded a net loss on discontinued operations of $16,356,000, or $0.84 per diluted share. The loss was primarily due to the cumulative translation adjustment of $14,212,000 that was recorded in the Consolidated Balance Sheet related to the South African operation.

BANDAG, INCORPORATED AND SUBSIDIARIES

Note 4. Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data):

	Three Months Ended June 30,				Six Months Ended June 30,
	2006		2005		2006			2005
Numerator:
Earnings from continuing operations	$	10,479	$	12,739	$	16,188		$	18,701
Net loss on discontinued operation		--		--		(16,356	)		--

Net earnings (loss)	$	10,479	$	12,739	$	(168	)	$	18,701

Denominator:
Weighted-average shares - Basic		19,354		19,426		19,339			19,409
Effect of dilutive:
Restricted stock		--		4		1			4
Stock options		159		284		202			297

		159		288		203			301
Weighted-average shares - Diluted		19,513		19,714		19,542			19,710

Basic earnings (loss) per share
Earnings from continuing operations	$	0.54	$	0.66	$	0.84		$	0.96
Net loss on discontinued operations		--		--		(0.85	)		--

Net earnings (loss)	$	0.54	$	0.66	$	(0.01	)	$	0.96

Diluted earnings (loss) per share
Earnings from continuing operations	$	0.54	$	0.65	$	0.83		$	0.95
Net loss on discontinued operations		--		--		(0.84	)		--

Net earnings (loss)	$	0.54	$	0.65	$	(0.01	)	$	0.95

BANDAG, INCORPORATED AND SUBSIDIARIES

Note 5. Retirement Benefit Plans

Net periodic cost for the three and six month periods ended June 30 is composed of the following (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2006			2005			2006			2005
Pension Benefits
Service cost	$	1,137		$	1,201		$	2,454		$	2,402
Interest cost		1,812			1,827			3,797			3,655
Expected return on plan assets		(2,039	)		(1,963	)		(4,203	)		(3,925	)
Amortization of prior service cost		33			32			65			64
Amortization of transitional assets		(6	)		(56	)		10			(112	)
Recognized actuarial (gain) loss		(36	)		289			322			577

Net periodic cost	$	901		$	1,330		$	2,445		$	2,661

Postretirement Benefits
Service cost	$	51		$	56		$	103		$	113
Interest cost		81			98			161			196
Amortization of prior service cost		1			1			2			2
Recognized actuarial gain		(31	)		(14	)		(63	)		(27	)

Net periodic cost	$	102		$	141		$	203		$	284

Note 6. Share-based Compensation

Effective January 1, 2002, the Company adopted the fair value recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation” as amended by SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosures” (the Statement). Under the modified prospective method of adoption selected by the Company under the provisions of the Statement, compensation cost is the same as that which would have been recognized had the recognition provisions of the Statement been applied from its original effective date in 1994. Effective January 1, 2006, the Company adopted SFAS No. 123 (revised 2004) (SFAS 123(R)), “Share-Based Payment” using the modified prospective method.

The Company has historically expensed stock-based compensation over the explicit service period up to the date of retirement. Upon adoption of SFAS 123(R) the Company will recognize compensation cost over the period through the date that the employee is eligible to retire.

SFAS 123(R) also requires that the benefits of tax deductions in excess of compensation amounts recognized for book purposes, to be reported as a financing cash flow rather than an operating cash flow as required previously. This change in presentation in the accompanying unaudited Condensed Consolidated Statement of Cash Flows has reduced net operating cash flows and increased net financing cash flows by $196,000 for the six month period ended June 30, 2006.

BANDAG, INCORPORATED AND SUBSIDIARIES

The Company’s Board of Directors adopted the Bandag, Incorporated Stock Award Plan in 1999 (the Plan) and the Bandag, Incorporated 2004 Stock Grant and Awards Plan in 2004 (the 2004 Plan). No additional grants may be made under plans other than the 2004 Plan. Under the terms of the 2004 Plan, the Company may award to certain eligible employees and directors stock options, stock appreciation rights, performance shares, performance units, restricted stock, restricted stock units, dividend equivalent units and incentive awards, whether granted alone or in addition to, in tandem with, or in substitution for any other award. Up to 2,000,000 shares of Class A Common Stock is authorized for issuance under the 2004 Plan and as of June 30, 2006, 1,773,060 shares were available for issuance under the 2004 Plan.

During the quarter and year-to-date periods ended June 30, 2006, the Company recognized compensation expense related to its stock-based compensation plans of $1,162,000 and $2,374,000, respectively, as compared to $1,162,000 and $2,275,000 for the prior year periods.

A summary of the status of the Company’s option activity under the Plan and the 2004 Plan is presented below (aggregate intrinsic value in thousands):

	Class A Common Shares			Weighted- Average Exercise Price		Aggregate Intrinsic Value
Outstanding, January 1, 2006		1,437,125			$29.80
Granted		62,160			$35.75
Exercised		(99,386	)		$25.39
Forfeited		(737	)		$33.06

Outstanding, June 30, 2006		1,399,162			$30.38		$693

Exercisable, June 30, 2006		1,124,934			$28.89		$2,235

The following summarizes information about stock options outstanding under the Plan and the 2004 Plan at June 30, 2006:

	Options Outstanding			Options Exercisable
Range of Exercise Prices	Class A Common Shares	Average Remaining Contractual Life	Weighted- Average Exercise Price	Class A Common Shares	Weighted- Average Exercise Price
$18.99 - $23.74	206,368	3.5 years	$21.09	206,368	$21.09
$23.74 - $28.48	574,445	5.4 years	$26.25	485,027	$25.99
$28.48 - $33.23	256,514	5.1 years	$32.53	256,514	$32.53
$33.23 - $37.98	108,260	5.8 years	$34.95	57,060	$34.21
$37.98 - $42.72	106,740	7.8 years	$41.02	37,530	$41.14
$42.72 - $47.47	146,835	6.8 years	$44.71	82,435	$44.86

$18.99 - $47.47	1,399,162	5.4 years	$30.38	1,124,934	$28.89

BANDAG, INCORPORATED AND SUBSIDIARIES

The fair value of each option granted is estimated on the grant date using the Black-Scholes model. The following weighted-average assumptions were made in estimating the fair value:

	Six months ended June 30, 2006	Six months ended June 30, 2005
Dividend yield	3.6%	3.7%
Expected volatility	36.5%	29.4%
Risk-free interest rate	4.3%	4.2%
Expected lives	7.7 years	7.7 years

The weighted-average fair value of options granted during the six months ended June 30, 2006 and 2005 was $10.97 and $10.29 per option, respectively.

During the six months ended June 30, 2006, the Company granted 8,290 restricted shares of Class A Common Stock under the 2004 Plan. Bandag accounts for restricted stock at historical cost which equals its fair market value at the date of grant.

A summary of the status of the Company’s restricted stock activity under the Plan and the 2004 Plan is presented below:

	Class A Common Shares
Non-vested, January 1, 2006		124,277
Granted		8,290
Vested		(21,097	)

Non-vested, June 30, 2006		111,470

Restricted stock awards for an aggregate 111,470 shares of Class A Common Stock were outstanding at June 30, 2006, and vest as follows: 42,539 in 2007, 61,955 in 2008 and 6,976 in 2009. The weighted-average fair value of restricted stock granted during the six months ended June 30, 2006 and 2005 was $35.69 and $40.99 per share, respectively. The total fair value of restricted stock awards that vested during the six months ended June 30, 2006 and 2005 was $621,175 and $58,000, respectively.

Note 7. Restructuring

During the second quarter of 2006, North America announced the closing of the tread production plant in Shawinigan, Quebec. Also during the second quarter of 2006, the Company announced that its pension plans have been closed to new hires in the United States and Canada, and that the existing pension plans for salaried and hourly U.S. employees and salaried Canadian employees will be frozen effective December 31, 2006. The Company is considering terminating the pension plans within the next 18 months, although no definitive action has been taken.

BANDAG, INCORPORATED AND SUBSIDIARIES

In addition, Bandag announced it is offering an early retirement program for eligible U.S. employees and a voluntary and involuntary separation programs for U.S. employees. Bandag is offering an early retirement program to eligible U.S. employees who have reached age 55 by December 31, 2006. Approximately 170 employees are eligible. Employees who accept the offer will have five years added to their age in determining their pension benefit. Participants will also be able to purchase medical coverage through the Company until age 65. In addition to early retirement, Bandag is offering a voluntary separation program to eligible U.S. salaried employees. If voluntary separation and early retirement programs result in fewer than 175 salaried employee acceptances, they will be followed by an involuntary termination program. Overall, Bandag expects to reduce its U.S. based workforce by approximately 15%.

Pre-tax expenses associated with the early retirement, voluntary and involuntary separation programs are estimated to be $12,000,000 to $17,000,000, or $0.39 to $0.56 per diluted share, which is expected to be largely recorded in third quarter 2006.

During the second quarter of 2006, the Company’s North American business unit recorded pre-tax charges in engineering, selling, administrative and other expenses of approximately $3,000,000 related to closing the Shawinigan, Quebec facility and a curtailment pre-tax gain of $2,900,000 related to freezing the U.S. pension plan.

Note 8. Acquisitions

Truck Rpm (formerly known as TruckLube1), which provides light truck maintenance, was purchased in April 2006 for approximately $8,091,000. The purchase price allocation is still being finalized pending a final third-party asset valuation.

Note 9. Recent Accounting Pronouncements

In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (FIN 48), which clarifies the accounting for uncertainty in tax positions. This Interpretation requires that the Company recognize the impact of a tax position in the financial statements, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. In addition, FIN 48 provides guidance on the derecognition, classification, accounting in interim periods and disclosure requirements for uncertain tax positions. The accounting provision of FIN 48 will be effective as of the beginning of the 2007 fiscal year, with the cumulative effect being treated as a change in accounting principle which will be recorded as an adjustment to the beginning retained earnings. The Company is currently evaluating the impact of the adoption of FIN 48 on the financial statements.

Note 10. Reclassifications

Note 11. Operating Segment Information

The Company has three reportable operating segments: Traditional Business, TDS and Vehicle Services. The Traditional Business manufactures precured tread rubber, equipment and supplies for retreading tires and operates on a worldwide basis. The operations of the Traditional Business segment are evaluated by worldwide geographic region. The Company’s operations located in the United States and Canada, together with Open Road Technologies, are integrated and managed as one unit, which is referred to internally as North America. The Company’s operations located in Europe principally service European countries, but also export to certain other countries in the Middle East and Northern and Central Africa. This collection of countries is under one management group and is referred to internally as EMEA. The Company’s exports from North America to markets in the Caribbean, Central America, South America and Asia, along with operations in Brazil, Mexico, Venezuela, and royalties from licensees in Australia and South Africa, are combined under one management group referred to internally as International.

TDS operates franchised retreading locations and commercial, retail, and wholesale outlets in the western region of the United States for the sale and maintenance of new and retread tires to principally commercial and industrial customers.

Speedco, together with Truck Rpm (formerly known as TruckLube1), acquired in the second quarter, are now combined into one segment, Vehicle Services. Speedco provides quick-service truck lubrication and routine tire services through company-owned on-highway locations in the United States. Truck Rpm is located in Florida and provides light truck maintenance.

Other consists of corporate administrative expenses, net unrealized foreign exchange gains and losses on U.S. denominated investments, interest income and interest expense.

The Company evaluates performance and allocates resources based primarily on profit or loss before interest and income taxes. Intersegment and intrasegment sales and transfers are recorded at fair market value less a discount between geographic areas within the Traditional Business. Transactions between the Traditional Business and TDS and between the Traditional Business and Speedco are recorded at a value consistent with that to unaffiliated customers.

BANDAG, INCORPORATED AND SUBSIDIARIES

For the three months ended June 30 (in thousands):

	Traditional Business
	North America				EMEA					International
	2006		2005		2006			2005		2006		2005
Sales by Product
Retread products	$	103,833	$	100,517	$	17,004		$	20,055	$	27,626	$	31,425
New tires		--		--		--			--		--		--
Retread tires		--		--		--			--		--		--
Equipment		6,625		3,493		1,342			1,324		375		527
Other		7,480		6,422		--			--		--		--

Net sales to unaffiliated customers	$	117,938	$	110,432	$	18,346		$	21,379	$	28,001	$	31,952

Transfers	$	7,116	$	7,092	$	31		$	211	$	1,987	$	1,683
Operating earnings (loss)	$	15,371	$	14,974	$	(2,504	)	$	273	$	1,345	$	3,445
Interest income		--		--		--			--		--		--
Interest expense		--		--		--			--		--		--

Earnings (loss) before income taxes,
minority interest and discontinued operations	$	15,371	$	14,974	$	(2,504	)	$	273	$	1,345	$	3,445

	TDS				Vehicle Services					Other
	2006		2005		2006			2005		2006			2005
Sales by Product
Retread products	$	--	$	--	$	--		$	--	$	--		$	--
New tires		31,795		25,049		2,861			548		--			--
Retread tires		8,502		7,386		265			65		--			--
Equipment		--		--		--			--		--			--
Other		13,174		10,486		26,433			19,964		--			--

Net sales to unaffiliated customers	$	53,471	$	42,921	$	29,559		$	20,577	$	--		$	--

Transfers	$	5	$	79	$	--		$	--	$	--		$	--
Operating earnings (loss)	$	4,619	$	2,670	$	(794	)	$	838	$	(3,445	)	$	(3,694	)
Interest income		--		--		--			--		1,878			2,159
Interest expense		--		--		--			--		(373	)		(629	)

Earnings (loss) before income taxes,
minority interest and discontinued operations	$	4,619	$	2,670	$	(794	)	$	838	$	(1,940	)	$	(2,164	)

	Consolidated
	2006			2005
Sales by Product
Retread products	$	148,463		$	151,997
New tires		34,656			25,597
Retread tires		8,767			7,451
Equipment		8,342			5,344
Other		47,087			36,872

Net sales to unaffiliated customers	$	247,315		$	227,261

Transfers	$	9,139		$	9,065
Operating earnings	$	14,592		$	18,506
Interest income		1,878			2,159
Interest expense		(373	)		(629	)

Earnings before income taxes, minority
interest and discontinued operations	$	16,097		$	20,036

BANDAG, INCORPORATED AND SUBSIDIARIES

For the six months ended June 30 (in thousands):

	Traditional Business
	North America				EMEA					International
	2006		2005		2006			2005		2006		2005
Sales by Product
Retread products	$	191,630	$	180,331	$	35,971		$	38,595	$	53,872	$	59,702
New tires		--		--		--			--		--		--
Retread tires		--		--		--			--		--		--
Equipment		12,979		7,433		1,897			2,173		808		1,119
Other		13,429		13,938		--			--		--		--

Net sales to unaffiliated customers	$	218,038	$	201,702	$	37,868		$	40,768	$	54,680	$	60,821

Transfers	$	14,182	$	13,710	$	72		$	434	$	4,162	$	2,899
Operating earnings (loss)	$	22,595	$	23,579	$	(1,703	)	$	1,194	$	4,593	$	6,884
Interest income		--		--		--			--		--		--
Interest expense		--		--		--			--		--		--

Earnings (loss) before income taxes,
minority interest and discontinued operations	$	22,595	$	23,579	$	(1,703	)	$	1,194	$	4,593	$	6,884

	TDS				Vehicle Services					Other
	2006		2005		2006			2005		2006			2005
Sales by Product
Retread products	$	--	$	--	$	--		$	--	$	--		$	--
New tires		55,921		42,475		3,708			777		--			--
Retread tires		15,975		13,637		425			93		--			--
Equipment		--		--		--			--		--			--
Other		24,050		19,486		49,005			37,258		--			--

Net sales to unaffiliated customers	$	95,946	$	75,598	$	53,138		$	38,128	$	--		$	--

Transfers	$	5	$	215	$	--		$	--	$	--		$	--
Operating earnings (loss)	$	4,593	$	1,573	$	(1,790	)	$	1,637	$	(6,708	)	$	(7,686	)
Interest income		--		--		--			--		4,332			3,972
Interest expense		--		--		--			--		(687	)		(1,085	)

Earnings (loss) before income taxes,
minority interest and discontinued operations	$	4,593	$	1,573	$	(1,790	)	$	1,637	$	(3,063	)	$	(4,799	)

	Consolidated
	2006			2005
Sales by Product
Retread products	$	281,473		$	278,628
New tires		59,629			43,252
Retread tires		16,400			13,730
Equipment		15,684			10,725
Other		86,484			70,682

Net sales to unaffiliated customers	$	459,670		$	417,017

Transfers	$	18,421		$	17,258
Operating earnings	$	21,580		$	27,181
Interest income		4,332			3,972
Interest expense		(687	)		(1,085	)

Earnings before income taxes, minority
interest and discontinued operations	$	25,225		$	30,068

BANDAG, INCORPORATED AND SUBSIDIARIES

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

GENERAL

Results include the Company’s three reportable operating segments – its Traditional Business, TDS and Vehicle Services.

Restructuring

Pre-tax expenses associated with the early retirement, voluntary and involuntary separation programs are estimated to be $12,000,000 to $17,000,000, or $0.39 to $0.56 per diluted share, which is largely expected to be recorded in third quarter 2006.

Bandag estimates pre-tax cost savings from the early retirement, voluntary and involuntary separation programs to be $5,000,000 to $7,000,000, or $0.16 to $0.23 per diluted share, for 2006, and an annualized net pre-tax savings of $16,000,000 to $20,000,000, or $0.52 to $0.65 per diluted share.

During the second quarter of 2006, the Company’s North American business unit recorded pre-tax charges of approximately $3,000,000 related to closing the Shawinigan, Quebec facility and a curtailment pre-tax gain of $2,900,000 related to freezing the U.S. pension plan.

Sale of South Africa Operations

BANDAG, INCORPORATED AND SUBSIDIARIES

Net Sales

Consolidated net sales for the quarter and year-to-date periods ended June 30, 2006 increased $20,054,000 and $42,653,000, or 9% and 10%, respectively, from the prior year periods. Retread unit volume in the Traditional Business decreased 8% and 6% for the quarter and year-to-date periods ended June 30, 2006, respectively, from the prior year periods. Retread unit volume was negatively impacted by intense pressures from competitive retread tires and low-priced new tires. Net sales were positively impacted by an increase in Vehicle Services net sales of $8,982,000 and $15,010,000, or 44% and 39%, for the quarter and year-to-date periods ended June 30, 2006, respectively. Net sales were positively impacted by an increase in TDS net sales of $10,550,000 and $20,348,000, or 25% and 27%, for the quarter and year-to-date periods ended June 30, 2006, respectively, from the prior year periods. Net sales were also positively impacted by $4,117,000 and $5,431,000 for the quarter and year-to-date periods ended June 30, 2006, respectively, due to the effect of translating foreign currency denominated results to U.S. dollars. The Company’s seasonal sales pattern is tied to the overall performance of the economy and to the level of trucking activity

Gross Margin

Consolidated gross profit margin for the quarter and year-to-date periods ended June 30, 2006 declined 3.6 and 2.8 percentage points, respectively, from the prior year periods. Traditional Business gross profit margin decreased 4.4 and 3.1 percentage points for the quarter and year-to-date periods ended June 30, 2006, respectively, from the prior year periods. The decrease in Traditional Business gross profit margin is primarily due to higher raw material costs.

Operating and Other Expenses

Consolidated operating and other expenses increased $2,385,000 and $10,168,000, or 4% and 8%, for the quarter and year-to-date periods ended June 30, 2006, respectively, from the prior year periods. The increase in consolidated operating and other expenses was substantially impacted by expenses related to the Vehicle Services operations.

Other Income

Consolidated other income increased $2,737,000 for the year-to-date period ended June 30, 2006 from the prior year period. Other income was positively impacted by $1,978,000 due to a legal settlement with a raw material supplier and by $845,000 due to the sale of the Company’s joint venture in India.

Net Earnings

Consolidated earnings from continuing operations were $10,479,000 and $16,188,000, or $0.54 and $0.83 per diluted share, for the quarter and year-to-date periods ended June 30, 2006, respectively, compared to $12,739,000 and $18,701,000, or $0.65 and $0.95 per diluted share, for the prior year periods. During the quarter ended March 31, 2006 the Company recorded a net loss on discontinued operations of $16,356,000, or $0.84 per diluted share, resulting in a net loss of $168,000, or $0.01 per diluted share for the year-to-date period ended June 30, 2006.

BANDAG, INCORPORATED AND SUBSIDIARIES

TRADITIONAL BUSINESS

North America

The Company’s Traditional Business operations located in the United States and Canada, together with Open Road Technologies are integrated and managed as one unit, which is referred to internally as North America. North America sells to independent dealers as well as to TDS and other subsidiaries. Sales to TDS and other subsidiaries are eliminated in consolidation.

The table below depicts the breakout of North America’s retread product sales to TDS and to independent dealers.

(in thousands)	Three Months Ended June 30,							Six Months Ended June 30,
Retread Product Sales	2006		2005		Increase			2006		2005		Increase
Sales to Independent Dealers	$	103,833	$	100,517		3.3	%	$	191,630	$	180,331		6.3	%
Sales to TDS		4,445		4,021		10.5	%		8,800		7,357		19.6	%

Total Retread Product Sales	$	108,278	$	104,538		3.6	%	$	200,430	$	187,688		6.8	%

Retread product sales were negatively impacted by a 5% and 2% decrease in retread material unit volume for the quarter and year-to-date periods ended June 30, 2006, respectively. The decrease in retread material unit volume was offset by the price increases in May 2005 and January 2006. Net sales were positively impacted by increased equipment sales of $3,132,000 and $5,546,000 for the quarter and year-to-date periods ended June 30, 2006, respectively. Net sales were also positively impacted by the effect of translating Canadian dollar foreign currency denominated results to U.S. dollars of $1,563,000 and $2,196,000 for the quarter and year-to-date periods ended June 30, 2006.

Higher raw material costs and an increase in sales incentive programs primarily resulted in a 4.2 and 2.8 percentage point decrease in North America’s gross margin for the quarter and year-to-date periods ended June 30, 2006 from the prior year periods, respectively.

Operating and other expenses decreased $1,919,000, or 7%, for the quarter ended June 30, 2006 from the prior year period. Operating and other expenses increased $2,214,000, or 4%, for the year-to-date period ended June 30, 2006 from the prior year period. The decrease in operating and other expenses for the quarter was primarily due to decreases in personnel related costs. Other income for the year-to-date period ended June 30, 2006, was positively impacted by $1,083,000 due to a legal settlement with a raw material supplier.

Lower operating and other expenses were the primary reason for an increase for North America of $397,000 in earnings before income taxes, minority interest and discontinued operations for the quarter ended June 30, 2006 from the prior year period. Lower gross profit margin and higher operating and other expenses were the primary reasons for a decrease for North America of $984,000 in earnings before income taxes, minority interest and discontinued operations for the year-to-date period ended June 30, 2006 from the prior year period. North America recorded earnings before income taxes, minority interest and discontinued operations of $15,371,000 and $22,595,000 for the quarter and year-to-date periods ended June 30, 2006, respectively, as compared to earnings on the same basis of $14,974,000 $23,579,000 for the prior year periods.

BANDAG, INCORPORATED AND SUBSIDIARIES

EMEA

The Company’s operations located in Europe principally service markets in European countries, but also export to certain other countries in the Middle East and Northern and Central Africa. This collection of countries is under one management group and is referred to internally as EMEA. Net sales in EMEA decreased $3,033,000 and $2,900,000, or 14% and 7%, for the quarter and year-to-date periods ended June 30, 2006, respectively, from the prior year periods. Retread material unit volume decreased 4% and increased 3% for the quarter and year-to-date periods ended June 30, 2006, respectively, as compared to the prior year periods. Net sales and retread material unit volume were negatively impacted by intense competitive pressures and by higher sales deductions for the quarter ended June 30, 2006. Net sales in EMEA in the year-to-date period ended June 30, 2006 were negatively impacted by $2,214,000 due to the effect of translating foreign currency denominated results to U.S. dollars.

Gross margin decreased 11.0 and 7.0 percentage points for the quarter and year-to-date periods ended June 30, 2006, respectively, as compared to the prior year periods. Gross margin for the quarter and year-to-date periods ended June 30, 2006 was negatively impacted by higher raw material costs and a temporary manufacturing shut-down to reduce inventory levels. Operating and other expenses decreased $650,000 and $830,000, or 8% and 6%, for the quarter and year-to-date periods ended June 30, 2006, respectively, as compared to the prior year periods. Other income for the year-to-date period ended June 30, 2006, was positively impacted by $340,000 due to a legal settlement with a raw material supplier.

Lower gross profit margin was the primary reason for a decrease for EMEA of $2,777,000 and $2,897,000 in earnings before income taxes, minority interest and discontinued operations for the quarter and year-to-date periods ended June 30, 2006, respectively. EMEA recorded a loss before income taxes, minority interest and discontinued operations of $2,504,000 and $1,703,000 for the quarter and year-to-date periods ended June 30, 2006, respectively, as compared to earnings on the same basis of $273,000 and $1,194,000 for the prior year periods.

International

The Company’s exports from North America to markets in the Caribbean, Central America, South America and Asia, along with operations in Brazil, Mexico, Venezuela, and royalties from licensees in Australia and South Africa, are combined under one management group referred to internally as International. Net sales in International for the quarter and year-to-date periods ended June 30, 2006 decreased $3,951,000 and $6,141,000, or 12% and 10%, from the prior year periods, respectively. Retread material unit volume decreased 19% and 18% for the quarter and year-to-date periods ended June 30, 2006, respectively, as compared to the prior year periods. Net sales and retread material unit volume for the quarter ended June 30, 2006 were negatively impacted by 15% and 17%, respectively, due to the divestiture of South Africa. Net sales and retread material unit volume for the year-to-date period ended June 30, 2006 were negatively impacted by 14% and 17%, respectively, due to the divestiture of South Africa. Net sales in International for the quarter and year-to-date periods ended June 30, 2006 were positively impacted by price increases and by $2,546,000 and $5,449,000, respectively, due to the effect of translating foreign currency denominated results to U.S. dollars.

BANDAG, INCORPORATED AND SUBSIDIARIES

Gross margin for the quarter and year-to-date periods ended June 30, 2006 decreased 2.3 and 2.5 percentage points from the prior year periods, respectively, primarily due to higher raw material prices. Operating and other expenses for the quarter and year-to-date periods ended June 30, 2006 were even with the prior year periods. Other income for the year-to-date period ended June 30, 2006, was positively impacted by $555,000 due to a legal settlement with a raw material supplier and by $845,000 due to the sale of the Company’s joint venture in India.

Lower net sales and gross profit margin primarily resulted in a decrease for International of $2,100,000 and $2,291,000 in earnings before income taxes, minority interest and discontinued operations for the quarter and year-to-date periods ended June 30, 2006, respectively, as compared to the prior year periods. International recorded earnings before income taxes, minority interest and discontinued operations of $1,345,000 and $4,593,000 for the quarter and year-to-date periods ended June 30, 2006, respectively, as compared to earnings on the same basis of $3,445,000 and $6,884,000 for the prior year periods.

During the first quarter of 2006 the Company recorded the previously announced deferred loss on the sale of its business in South Africa. Bandag recorded a net loss on discontinued operations of $16,356,000. The loss was primarily due to the cumulative translation adjustment of $14,212,000 that was recorded in the Consolidated Balance Sheet related to the South African operation.

TIRE DISTRIBUTION SYSTEMS, INC.

TDS net sales for the quarter and year-to-date periods ended June 30, 2006 increased $10,550,000 and $20,348,000, or 25% and 27%, from the prior year periods, respectively. TDS net sales were positively impacted by increased unit sales and higher prices. TDS sales also benefited from off-the-road tire sales to companies in the construction and mining industries.

Gross margin for the quarter and year-to-date periods ended June 30, 2006 increased 0.7 and 0.2 percentage points from the prior year periods, respectively, primarily due to higher selling prices. Operating and other expenses increased $1,133,000 and $2,766,000, or 13% and 15%, for the quarter and year-to-date periods ended June 30, 2006, respectively, but decreased as a percentage of sales.

Higher net sales was the primary reason for an improvement for TDS of $1,949,000 and $3,020,000 in earnings before income taxes, minority interest and discontinued operations for the quarter and year-to-date periods ended June 30, 2006, respectively. TDS recorded earnings before income taxes, minority interest and discontinued operations of $4,619,000 and $4,593,000 for the quarter and year-to-date periods ended June 30, 2006 as compared to earnings on the same basis of $2,670,000 and $1,573,000 for the prior year periods.

BANDAG, INCORPORATED AND SUBSIDIARIES

VEHICLE SERVICES

The Company’s Speedco, Inc. and Truck Rpm (formerly known as TruckLube1) operations are combined under one management group referred to internally as Vehicle Services. Truck Rpm, which provides light truck maintenance, was purchased in April 2006 and contributed $2,433,000 to net sales for the quarter and year-to-date periods ended June 30, 2006. Speedco net sales for the quarter and year-to-date periods ended June 30, 2006 increased $6,119,000 and $12,147,000, or 30% and 32%, from the prior year periods, respectively. For the quarter ended June 30, 2006, Speedco same store lube sales increased $2,201,000, or 11%, and same store tire sales increased $259,000, or 23%, as compared to the prior year period. For the year-to-date period ended June 30, 2006, Speedco same store lube sales increased $5,008,000, or 14%, and same store tire sales increased $584,000, or 37%, as compared to the prior year period. Same store revenue is comprised of locations that have operated for twelve full months. As of June 30, 2006 same store lube sales included 34 locations and same store tire sales included 11 locations. Speedco had 41 locations, 32 with tire service capabilities, as of June 30, 2006, compared to 35 locations, 13 with tire service capabilities, at the same time last year.

Vehicle Services gross margin for the quarter and year-to-date periods ended June 30, 2006 decreased 2.8 and 3.5 percentage points, respectively as compared to the prior year periods. Operating and other expenses for the quarter and year-to-date periods ended June 30, 2006 increased $4,023,000 and $6,966,000, or 64% and 60%, as compared to the prior year periods, respectively. Gross margin and operating and other expenses were negatively impacted by expenses associated with the start-up of new Speedco stores and the addition of tire lanes to existing stores.

Lower gross margin and higher operating and other expenses were the primary reasons for a decrease for Vehicle Services of $1,632,000 and $3,427,000 in earnings before income taxes, minority interest and discontinued operations for the quarter and year-to-date periods ended June 30, 2006, respectively. Vehicle Services recorded a loss before income taxes, minority interest and discontinued operations of $794,000 and $1,790,000 for the quarter and year-to-date periods ended June 30, 2006, respectively, as compared to earnings on the same basis of $838,000 and $1,637,000 for the prior year periods.

Speedco plans to open six to eight locations in 2007 which compares to thirteen locations scheduled to open in 2006. The moderated 2007 expansion schedule should allow the business to continue to deliver both superior quality service and real growth in lube service and routine tire maintenance, and should lessen the negative impact on earnings.

OTHER

The Company’s Other segment consists of corporate expenses, interest income on invested cash balances and interest expense on long-term and short-term debt. Corporate expenses decreased $249,000 and $978,000 for the quarter and year-to-date periods ended June 30, 2006 as compared to the prior year periods, respectively.

BANDAG, INCORPORATED AND SUBSIDIARIES

Financial Condition:

Liquidity

For the first quarter ended March 31, 2006, the Company classified the non-cash translation adjustment due to the sale of South Africa as investing activities on the Consolidated Condensed Statements of Cash Flows. The Company has determined that the non-cash translation adjustment should be classified in operating activities and therefore has reclassified the $14,212,000 non-cash translation adjustment due to the sale of South Africa to operating activities for the six months ended June 30, 2006. At June 30, 2006, the Company had cash and cash equivalents of $71,760,000, as compared to $97,071,000 at December 31, 2005. At June 30, 2006, the Company had investments of $55,693,000, as compared to $60,150,000 at December 31, 2005. The Company’s ratio of total current assets to total current liabilities was 2.7 to 1 at June 30, 2006, with current assets exceeding current liabilities by $275,984,000. At June 30, 2006, the Company had approximately $105,362,000 in borrowing capacity available under unused lines of credit. The Company believes it has an adequate cash balance for future cash flow needs.

Operating Activities

Net cash provided by operating activities for the six months ended June 30, 2006 was $38,075,000. At June 30, 2006, the Company had a net decrease in operating assets and liabilities of $10,509,000 compared to an increase of $6,577,000 for the prior year period. The net decrease in operating assets and liabilities at June 30, 2006 is primarily due to a decrease in accounts receivables.

Investing Activities

The Company spent $44,467,000 on capital expenditures through June 30, 2006, compared to $26,243,000 spent for the same period last year. The increase in capital expenditures is primarily due to expenditures made by Speedco for new facilities and installations of quick-service tire lanes at existing facilities. The Company typically funds its capital expenditures from cash, investments and operating cash flows.

The Company’s excess funds are invested in financial instruments with various maturities, but only instruments available-for-sale with an original maturity date of over 90 days and auction rate securities are classified as investments for balance sheet purposes. The Company’s maturities of investments exceeded purchases by $4,457,000 during the six months ended June 30, 2006, resulting in total investments of $55,693,000 as of June 30, 2006.

Truck Rpm, which provides light truck maintenance, was purchased in April 2006 for approximately $8,091,000.

BANDAG, INCORPORATED AND SUBSIDIARIES

Financing Activities

Cash dividends totaled $13,038,000 for the six months ended June 30, 2006, compared to $12,873,000 for the same period last year. Cash dividends declared per share were $0.67 for the six months ended June 30, 2006, compared to $0.66 per share for the same period last year.

During the six month period ended June 30, 2006, the Company purchased 99,589 shares of Common Stock and Class A Common Stock at an average price of $34.22 per share, as compared to the purchase of 55,956 shares of Common Stock and Class A Common Stock at an average price of $40.76 per share for the same period last year.

RECENT ACCOUNTING PRONOUNCEMENTS

FORWARD-LOOKING INFORMATION – SAFE HARBOR STATEMENT

In addition to historical information, this quarterly report on Form 10-Q contains forward-looking statements regarding events and trends which may affect the Company’s future operating results and financial position. These statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on certain assumptions, describe future expectations of the Company, and are identified by the use of such words as “expects,” “anticipates” and “estimates” or other words of similar import. These statements are based on management’s current projections, beliefs and opinions as of the date of this Form 10-Q. The Company’s ability to predict results of the actual effect of future expectations is inherently uncertain. Factors which could affect the “forward-looking” statements include: the effect of continued competitive pressures within the U.S.; the uncertainty of the Company’s ability to recover future increases in raw material costs, if any, through further price increases; and unanticipated delays, difficulties or expenses in implementing the changes to the Company’s retirement benefit arrangements and reducing the Company’s workforce; and the Company’s ability to achieve and sustain expected improvements in its competitive position, benefit cost structure and management of its business.

BANDAG, INCORPORATED AND SUBSIDIARIES

Item 3. Quantitative and Qualitative Disclosures about Market Risk

See the Company’s most recent Annual Report filed on Form 10-K (Item 7A). There has been no material change in this information.

Item 4. Controls and Procedures

Based on an evaluation performed by the Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2006.

The Company identified a material weakness relating to the Company’s calculation of finished goods inventory as part of its review of finished goods inventory during the second quarter of 2006. As a result of identifying the material weakness, and as part of the Company’s ongoing efforts to improve internal control over financial reporting, the Company has implemented procedures requiring (1) additional monthly reports showing detail of the inventory cost by plant and by category to facilitate the identification of variances; (2) enhanced input controls to help ensure the appropriate inventory values are recorded; and (3) more detailed analysis by location to help detect variances.

Based on an evaluation performed by the Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, there were no changes, except for those listed above, in the Company’s internal control over financial reporting identified in such evaluation that occurred during the quarter ended June 30, 2006 that has materially affected, or is likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

BANDAG, INCORPORATED AND SUBSIDIARIES

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities(1)

April 1, 2006 -	Total		Average		Total Number		Maximum
June 30, 2006	Number		Price Paid		of Shares		Number of
	of Shares		per Share		Purchased as		Shares that May
	Purchased				Part of Publicly		Yet be Purchased
					Announced		Under the
					Programs		Program
Common Stock
April 1 - April 30		785		$41.05		785		680,776
May 1 - May 31		1,166		$38.86		1,166		639,881
June 1 - June 30		1,400		$35.89		1,400		617,781

Total		3,351		$38.13		3,351		617,781	(1)(2)

Class A Common Stock
April 1 - April 30		9,611		$35.24		9,611		680,776
May 1 - May 31		39,729		$38.86		39,729		639,881
June 1 - June 30		20,700		$31.90		20,700		617,781

Total		70,040		$33.32		70,040		617,781	(1)(2)

(1)

On May 2, 2000, the Board of Directors approved a stock purchase program which authorized the purchase of up to 2,000,000 shares of outstanding Common Stock, Class A Common Stock, and/or Class B Common Stock in the open market or in private transactions. The program has no stated expiration date. No stock purchase program expired during the period covered by the above table.

(2)

Represents the total number of shares of Common Stock, Class A Common Stock and/or Class B common Stock remaining to be purchased under the stock purchase program.

Item 4 – Submission of Matters to a Vote of Security Holders

(a)	The Annual Meeting of the shareholders was held on May 16, 2006.

(b)	The following directors were elected for three-year terms expiring in 2009: Gary E. Dewel R. Stephen Newman

PART II. OTHER INFORMATION

BANDAG, INCORPORATED AND SUBSIDIARIES

In addition to the above directors, the following directors continued as directors for terms expiring as shown below

Name	Term Expires
Roy J. Carver, Jr.	2007
James R. Everline	2007
Phillip J. Hanrahan	2007
Martin G. Carver	2008
Amy P. Hutton	2008

(c)	Two matters were voted upon at the annual meeting. First, the following two nominees, both of whom were incumbent directors, were elected as directors for a three-year term ending in 2009 by the following vote:

Name	Votes For	Votes Withheld
Gary E. Dewel	17,501,123	194,435
R. Stephen Newman	17,458,990	236,568

Shareholders also voted upon a proposal to ratify the selection of Ernst & Young LLP as independent auditors of the Company for the year ending December 31, 2006. The shareholders ratified the selection by the following vote:

Votes For	Votes Against	Abstentions
17,681,070	7,669	6,819

Item 6 — Exhibits

3.1

Bylaws: As amended May 16, 2006.

3.2

Amendment to Bylaws adopted on May 16, 2006. (Incorporated by reference to Exhibit No. 3 to the Company's Current Report on Form 8-K filed May 18, 2006.)

31.1

Certification of Chief Executive Officer.

31.2

Certification of Chief Financial Officer.

32.1

Written Statement of the Chairman of the Board, Chief Executive Officer and President of Bandag, Incorporated
Pursuant to 18 U.S.C. §1350.

32.2

Written Statement of the Vice President, Chief Financial Officer and Secretary of Bandag, Incorporated
Pursuant to 18 U.S.C. §1350.

SIGNATURES

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.

BANDAG, INCORPORATED
(Registrant)


Date: August 4, 2006	/s/ Martin G. Carver
	Martin G. Carver
	Chairman and Chief Executive Officer
Date: August 4, 2006	/s/ Warren W. Heidbreder
	Warren W. Heidbreder
	Vice President, Chief Financial Officer

Exhibit Index

Exhibit
Number

Exhibit

3.1	Bylaws: As amended May 16, 2006.

3.2	Amendment to Bylaws adopted on May 16, 2006. (Incorporated by reference to Exhibit No. 3 to the Company's Current Report on Form 8-K filed May 18, 2006.)

31.1	Certification of Chief Executive Officer.

31.2	Certification of Chief Financial Officer.

32.1	Written Statement of the Chairman of the Board, Chief Executive Officer and President of Bandag, Incorporated Pursuant to 18 U.S.C. §1350.

32.2	Written Statement of the Vice President, Chief Financial Officer and Secretary of Bandag, Incorporated Pursuant to 18 U.S.C. §1350.

EX-3.1 2 dbk204e.htm BY-LAWS

Exhibit 3.1

BY-LAWS

BANDAG, INCORPORATED

As Amended May 16, 2006

ARTICLE I
OFFICES

The principal office of the Corporation in the State of Iowa shall be located in the City of Muscatine, County of Muscatine. The Corporation may have such other offices, either within or without the State of Iowa, as the Board of Directors may designate or as the business of the Corporation may require from time to time.

The registered office of the Corporation required by the Iowa Business Corporation Act to be maintained in the State of Iowa may be, but need not be, identical with the principal office in the State of Iowa, and the address of the registered office may be changed from time to time by the Board of Directors.

ARTICLE II
SHAREHOLDERS

Section 1. Annual Meeting. An annual meeting of the shareholders shall be held at such time during the month of May in each year as shall be designated by the Board of Directors at least sixty (60) days prior to the date of the meeting, or if no such date is designated by the Board of Directors then at 10 o’clock in the forenoon on the third Wednesday in May, for the purpose of electing directors and for the transaction of such other business as may come before the meeting. If the election of directors shall not be held on the day designated as herein provided for any annual meeting of the shareholders, or at any adjournment thereof, the Board of Directors shall cause the election to be held at a special meeting of the shareholders as soon thereafter as conveniently may be.

Section 2. Special Meetings. Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by statute, may be called by the Chairman of the Board, the Board of Directors or the holders of not less than one-tenth of all the outstanding shares of the Corporation entitled to vote at the meeting.

Section 3. Place of Meeting. The Board of Directors may designate any place, either within or without the State of Iowa, as the place of meeting for any annual meeting or for any special meeting called by the Board of Directors. A waiver of notice signed by all shareholders entitled to vote at a meeting may designate any place, either within or without the State of Iowa, as the place for the holding of such meeting. If no designation is made, or if a special meeting be otherwise called, the place of meeting shall be the registered office of the Corporation in the State of Iowa.

Section 4. Notice of Meeting. Written or printed notice stating the place, day and hour of the meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten nor more than sixty days before the date of the meeting, either personally or by mail, by or at the direction of the President, or the Secretary, or the officer or persons calling the meeting, to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, addressed to the shareholder at his address as it appears on the stock transfer books of the Corporation, with postage thereon prepaid.

Section 5. Voting Lists. The officer or agent having charge of the stock transfer books for shares of the Corporation shall make, at least ten days before each meeting of shareholders, a complete list of the shareholders entitled to vote at such meeting, or any adjournment thereof, arranged in alphabetical order, with the address of and the number of shares held by each, which list, for a period of ten days prior to such meeting, shall be kept on file at the registered office of the Corporation and shall be subject to inspection of any shareholder during the whole time of the meeting. The original stock transfer book shall be prima facie evidence as to who are the shareholders entitled to examine such lists or transfer books or to vote at any meeting of shareholders.

Section 6. Quorum. A majority of the votes entitled to be cast, represented in person or by proxy, shall constitute a quorum at a meeting of shareholders. If less than a majority of the votes entitled to be cast are represented at a meeting, a majority of the votes so represented may adjourn the meeting from time to time without further notice. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. The shareholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of sufficient votes to leave less than a quorum.

Section 7. Proxies. At all meetings of shareholders, a shareholder may vote by proxy executed in writing by the shareholder or by his duly authorized attorney in fact. Such proxy shall be filed with the Secretary of the Corporation before or at the time of the meeting. Proxies shall apply only to the meeting for which they are solicited.

Section 8. Voting of Shares. Each outstanding share of Common Stock shall be entitled to one (1) vote per share, and each outstanding share of Class B Common Stock shall be entitled to ten (10) votes per share, upon each matter submitted to a vote at a meeting of shareholders.

Section 9. Closing of Transfer Books or Fixing of Record Date. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or shareholders entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the Board of Directors shall fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than seventy days and, in case of a meeting of shareholders, not less than ten days prior to the date of which the particular action, requiring such determination of shareholders, is to be taken. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof.

ARTICLE III
BOARD OF DIRECTORS

Section 1. General Powers. The business and affairs of the Corporation shall be managed by its Board of Directors.

Section 2. Number, Tenure and Qualifications. The number of directors of the Corporation shall be seven (7). Each director shall serve for the term for which elected and until a successor shall have been elected and qualified, except in the event of resignation, removal, death or other incapacity. Directors need not be residents of the State of Iowa or shareholders of the Corporation.

Section 3. Regular Meetings. A regular meeting of the Board of Directors shall be held without other notice than this By-Law immediately after, and at the same place as, the annual meeting of shareholders. The Board of Directors may provide, by resolution, the time and place, either within or without the State of Iowa, for the holding of additional regular meetings without other notice than such resolution.

Section 4. Special Meetings. Special meetings of the Board of Directors may be called by or at the request of the Chairman of the Board or any two directors. The person or persons authorized to call special meetings of the Board of Directors may fix any place, either within or without the State of Iowa, as the place for holding any special meeting of the Board of Directors called by them.

Section 5. Notice. Notice of any special meeting shall be given at least two days previously thereto by written notice delivered personally or mailed to each director at his business address, or by telegram. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail so addressed, with postage thereon prepaid. If notice be given by telegram, such notice shall be deemed to be delivered when the telegram is delivered to the telegraph company. Any director may waive notice of any meeting. The attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting.

Section 6. Quorum. A majority of the number of directors fixed by Section 2 of this Article III shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, but if less than such majority is present at a meeting, a majority of the directors present may adjourn the meeting from time to time without further notice.

Section 7. Manner of Acting. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors.

Section 8. Vacancies. During the intervals between annual meetings of shareholders, any vacancy occurring in the Board of Directors caused by resignation, removal, death or incapacity, and any newly created directorships resulting from an increase in the number of directors, shall be filled by a majority vote of the directors then in office, whether or not a quorum. Each director chosen to fill a newly created directorship or to fill a vacancy shall hold office until the next annual meeting of the shareholders.

Section 9. Compensation. By resolution of the Board of Directors, the directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors, and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor.

Section 10. Presumption of Assent. A director of the Corporation who is present at a meeting of the Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as the Secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the Secretary of the Corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action.

Section 11. Informal Action by Directors. Any action required to be taken at a meeting of the directors, or any other action which may be taken at a meeting of the directors, may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the directors entitled to vote with respect to the subject matter thereof.

Section 12. Indemnification

(1) The Corporation shall indemnify every person who is or was a party or involved (as a witness or otherwise) or is threatened to be made a party or involved (as a witness or otherwise) (hereafter “Indemnitee”) in any threatened, pending or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative (including a grand jury proceeding), formal or informal, and whether or not by or in the right of the Corporation or otherwise (hereafter a “Proceeding”), by reason of the fact that he is or was a director or officer of the Corporation, or while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, partner, trustee, employee or agent of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan, or other enterprise, or by reason of any action alleged to have been taken or not taken by him while acting in any such capacity, against reasonable expenses (including counsel fees and expenses when incurred) (hereafter “Expenses”) and all liability and loss, including judgments, fines, (including excise taxes assessed with respect to an employee benefit plan), and penalties and amounts paid or to be paid in settlement (whether with or without court approval) (hereafter “Liabilities”), actually incurred by him in connection with such Proceeding, to the fullest extent permitted by law as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment). Notwithstanding anything in this Section 12 to the contrary, except with respect to a proceeding to enforce rights to indemnification or advancement of Expenses under this Section 12, the Corporation shall provide indemnification and advancement of Expenses under this Section 12 to persons seeking indemnification in connection with a proceeding initiated by such person only if such proceeding was authorized by the Board of Directors. In addition to the foregoing mandatory modification provisions, the Corporation may indemnify an employee of the Corporation to the same extent as to an officer or director pursuant to the provisions of this Section 12.

(2) The right to indemnification conferred in this Section 12 shall include the right to be paid or reimbursed by the Corporation the Expenses incurred in connection with the Proceeding in advance of the final disposition thereof promptly after a written request therefor; provided, however, that to the extent required by law, the payment of such Expenses in advance of the final disposition of a proceeding shall be made only upon the Corporation’s receipt of a written undertaking by or on behalf of such person to repay such amounts if it shall ultimately be determined that he is not entitled to be indemnified under this Section 12 or otherwise (this undertaking need not be secured and must be accepted without reference to the ability to repay).

(3) Any indemnification, under this Section 12 (unless ordered by a court or as otherwise provided in Section 12(2) for the advancement of Expenses) shall be made by the Corporation upon a determination that the indemnification of the Indemnitee is proper in the circumstances because he has met the applicable standard of conduct required by Section 490.851 of the Iowa Business Corporation Act. Such determination shall be made (a) by the Board of Directors by majority vote of a quorum consisting of directors not at the time parties to the Proceeding, (b) if a quorum cannot be obtained, by a majority vote of a committee duly designated by the Board of Directors, in which designation directors who are parties may participate, consisting solely of two or more directors not at the time parties to the Proceeding, (c) by special legal counsel selected by the Board of Directors by vote as set forth in clause (a) or (b) of this Section 12(3), or, if a quorum of the Board of Directors cannot be obtained and a committee cannot be designated, selected by majority vote of the full Board of Directors, in which selection directors who are parties may participate, or (d) by the shareholders, but shares owned by or voted under the control of directors who are at the time parties to the Proceeding shall not be voted on the determination.

(4) If a person is entitled under this Section 12 to indemnification by the Corporation for some or a portion of Liabilities and Expenses but not, however, for all of the total amounts thereof, the Corporation shall nevertheless indemnify such person for the portion thereof to which he is entitled.

(5) Notwithstanding anything in these By-laws to the contrary, the Corporation shall not be obligated to make any payment under this Section 12 for indemnification for Liabilities and Expenses in connection with Proceedings settled without the consent of the Corporation, which consent, however, shall not be unreasonably withheld.

(6) If a claim for indemnification or advancement of Expenses under this Section 12 is not paid in full by the Corporation within sixty (60) days after a written claim has been received by the Corporation, the claimant may, at anytime thereafter, bring suit against the Corporation to recover the unpaid amount of the claim. The claimant shall also be entitled to be paid the expenses of prosecuting such claim to the extent he is successful in whole or in part on the merits or otherwise in establishing his right to indemnification or to the advancement of Expenses. Neither (a) the failure of the Corporation (including its Board of Directors, special legal counsel or the shareholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he has met the applicable standard of conduct set forth in Section 490.851 of the Iowa Business Corporation Act, nor (b) the fact that there has been an actual determination by the Corporation (including its Board of Directors, special legal counsel or the shareholders) that the claimant has not met such applicable standard of conduct, shall create a presumption that the claimant has not met the applicable standard of conduct.

(7) The right to indemnification, including the right to the advancement of Expenses, conferred in this Section 12 shall not be exclusive of any other rights to which a person seeking indemnification or advancement of Expenses hereunder may be entitled under any Articles of Incorporation, By-laws, agreement, vote of shareholders or directors, or otherwise. Subject to applicable law, to the extent that any rights to indemnification or advancement of Expenses of such person under any such Article of Incorporation, By-law, agreement, vote of shareholders or directors, or otherwise, are broader or more favorable to such person, the broader or more favorable rights shall control. The Corporation shall have the express authority to enter into such agreements as the Board of Directors deems appropriate for the indemnification of, including the advancement of Expenses to, present or future directors or officers of the Corporation in connection with their service to, or status with, the Corporation or any other corporation, partnership, joint venture, trust or other enterprise, including any employee benefit plan, for whom such person is serving at the request of the Corporation.

(8) The Corporation may purchase and maintain insurance, at its expense, to protect itself and any person who is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director, officer, partner, trustee, employee or agent of another corporation, partnership, joint venture, trust, other enterprise, or employee benefit plan against any Liability asserted against such person and incurred by such person in such capacity, or arising out of such person’s status as such, whether or not the Corporation would have the power to indemnify such person against such Liability under the provisions of this Section 12, the Iowa Business Corporation Act or otherwise. The Corporation may create a trust fund, grant a security interest and/or use other means (including, without limitation, letters of credit, surety bonds and/or similar arrangements), as well as enter into contracts providing for indemnification to the maximum extent permitted by law and including as part thereof any or all of the foregoing, to ensure the payment of such sums as may become necessary to effect full indemnification. The Corporation’s obligation to make indemnification and pay Expenses pursuant to this Section 12 shall be in excess of any insurance purchased and maintained by the Corporation and such insurance shall be primary. To the extent that indemnity or Expenses of a person entitled to indemnification and payment of Expenses pursuant to this Section 12 are paid on behalf of or to such person by such insurance such payments shall be deemed to be in satisfaction of the Corporation’s obligation to such person to make indemnification and pay Expenses pursuant to this Section 12.

(9) The right to indemnification, including the right to advancement of Expenses provided herein, shall be a contract right, shall continue as to a person who has ceased to be a director or officer or to serve in any other of the capacities described in this Section 12, and shall inure to the benefit of the heirs, personal representatives, executors and administrators of such person. Notwithstanding any amendment, alteration, or repeal of this Section 12 or any of its provisions or the adoption of any provision inconsistent with this Section 12 or any of its provisions, any person shall be entitled to indemnification, including the right to the advancement of Expenses, in accordance with the provisions hereof with respect to any action taken or omitted prior to such amendment, alteration, or repeal or adoption of such inconsistent provision, except to the extent such amendment, alteration, repeal, or inconsistent provision provides broader rights with respect to indemnification, including the advancement of Expenses, than the Corporation was permitted to provide prior to the amendment, alteration, repeal, or the adoption of such inconsistent provision or to the extent otherwise prescribed by law.

(10) In the event of any payment under this Section 12, the Corporation shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Corporation to bring suit to enforce such rights.

(11) Indemnitee agrees promptly to notify the Corporation in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification or advancement of Expenses covered hereunder, but Indemnitee’s omission to so notify the Corporation shall not relieve the Corporation from any liability which it may have to Indemnitee under this Section 12 unless such omission materially prejudices the rights of the Corporation (including, without limitation, the Corporation having lost significant substantive or procedural rights with respect to the defense of any Proceeding). If such omission does materially prejudice the rights of the Corporation, the Corporation shall be relieved from liability under this Section 12 only to the extent of such prejudice; but such omission will not relieve the Corporation from any liability which it may have to Indemnitee otherwise than under this Section 12.

(12) The Corporation will be entitled to participate at its own expense in any Proceeding of which it has notice. The Corporation jointly with any other indemnifying party similarly notified of any Proceeding will be entitled to assume the defense of Indemnitee therein, with counsel reasonably satisfactory to Indemnitee. After notice from the Corporation to Indemnitee of its election to assume the defense of Indemnitee in any Proceeding, the Corporation will not be liable to Indemnitee under this Section 12 for any Expenses subsequently incurred by Indemnitee in connection with the defense thereof, except as otherwise provided below. Indemnitee shall have the right to employ its own counsel in any such Proceeding but the fees and expenses of such counsel incurred after notice from the Corporation of its assumption of the defense thereof shall be at the expense of Indemnitee unless: (i) the employment of counsel by Indemnitee has been authorized by the Corporation; or (ii) the Corporation shall not in fact have employed counsel to or cannot in good faith without conflict assume the defense of Indemnitee in such Proceeding or such counsel has not in fact assumed such defense; in each of which case the fees and expenses of Indemnitee’s counsel shall be advanced by the Corporation.

(13) A director or officer is considered to be serving an employee benefit plan at the Corporation’s request if such person’s duties to the Corporation also imposed duties on, or otherwise involves services by, that person to the plan or to the participants in or beneficiaries of the plan.

(14) Notwithstanding anything to the contrary herein contained, no indemnification shall be made pursuant to this Section 12 for (i) breach of a person’s duty of loyalty to the Corporation or its shareholders, (ii) acts or omissions not in good faith or which involve intentional misconduct or knowing violation of the law, (iii) a transaction from which the person seeking indemnification derives an improper personal benefit, or (iv) for liability under Section 490.833 of the Iowa Business Corporation Law.

(15) The Corporation shall indemnify, to the same extent as to an officer or director pursuant to the provisions of this Section 12, any attorney who is or was a regular full-time employee of the Corporation and is or was involved in a threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (including a grand jury proceeding), formal or informal, where the claim or cause of action is or was based on actual or alleged breach of duty, negligence, errors or omissions committed while providing services of a legal nature in the capacity of their employment.

Section 13. Committees. The Board of Directors, by resolution adopted by a majority of the full Board of Directors, may designate from among its members an executive committee and one or more other committees each of which, to the extent provided in such resolution or in the articles of incorporation or the By-Laws of the Corporation, shall have and may exercise all the authority of the Board of Directors, except that no such committee shall have the authority to:

(1)

Authorize distributions;

(2)

Approve or propose to shareholders action required by Chapter 490 of the Iowa Business Corporation Act to be approved by shareholders;

(3)

Fill vacancies on the Board of Directors or any of its committees;

(4)

Amend the articles of incorporation of the Corporation;

(5)

Approve a plan of merger not requiring shareholder approval;

(6)

Adopt, amend or repeal the By-Laws of the Corporation;

(7)

Authorize or approve the reacquisition of shares, except according to a formula or method prescribed by the Board of Directors; or

(8)

Authorize or approve the issuance or sale or contract for sale of shares, or determine the designation and relative rights, preferences, and limitations of a class or series of shares, except that the Board of Directors may authorize a committee or a senior executive officer of the Corporation to do so within limits specifically prescribed by the Board of Directors;

however, the Board of Directors, having acted regarding general authorization for the issuance or sale of shares, or any contract for issuance or sale, and, in the case of a series, the designation of the series, may, pursuant to a general formula or method specified by the Board by resolution or by adoption of a stock option or other plan, authorize a committee to fix the terms of any contract for the sale of the shares and to fix the terms upon which such shares may be issued or sold, including, without limitation, the price, the dividend rate, provisions for redemption, sinking fund, conversion, voting or preferential rights, and provisions for other features of a class of shares, or a series of a class of shares, with full power in such committee to adopt any final resolution setting forth all the terms and to authorize the statement of the terms of a series for filing with the Secretary of State. Written notice of all Executive Committee actions shall be mailed or delivered to all Directors of the Corporation within three (3) days after such action is taken.

Neither the designation of any such committee, the delegation to it of authority, nor action by such committee pursuant to such authority shall alone constitute compliance by any member of the Board of Directors, not a member of the committee in question, with such director’s responsibility to act in good faith, in a manner such director reasonably believes to be in the best interests of the Corporation, and with such care as an ordinarily prudent person in a like position would use under similar circumstances.

Section 14. Meetings by Conference Telephone. Members of the Board of Directors or any committee designated by the Board of Directors may participate in a meeting of the Board of Directors or committee by conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this provision shall constitute presence in person at such meeting.

Section 15. Removal of Directors. A director may be removed from office at any time by the affirmative vote of the holders of a majority of the outstanding shares entitled to vote for the election of directors at a meeting of the shareholders called for that purpose.

Section 16. Composition of the Board of Directors. So long as any shares of Class B Common Stock, $1.00 par value, remain outstanding, the Nominating Committee shall not recommend to the Board of Directors any individual or individuals for election or appointment to the Board of Directors, and the Board of Directors shall not nominate, elect or appoint any such individual or individuals if, after such election or appointment, a majority of the members of the Board of Directors shall not consist of “independent directors” (as defined below).

For purposes of determining an “independent director” eligible for membership on the Board of Directors, an “independent director” is a director who, at the time of determination, and at any time within the three years preceding such time, was not employed by the Corporation or any of its subsidiaries in any capacity and who is not (i) a surviving spouse of Roy J. Carver, (ii) a brother or sister of a surviving spouse of Roy J. Carver, or a child (including an adopted child) of any such person, (iii) a lineal descendant of Roy J. Carver, (iv) a spouse of a lineal descendant of Roy J. Carver, (v) a brother-in-law or sister-in-law of a lineal descendant of Roy J. Carver, and (vi) a brother or sister of Roy J. Carver or a child (including an adopted child) of any such person. For purposes of the foregoing definition, the term “lineal descendant” includes an adopted child.

No substantive amendment to this Section 16 may be made except with the affirmative vote of the holders of a majority of the then outstanding shares of Common Stock and Class B Common Stock, each voting separately as a class.

ARTICLE IV
OFFICERS

Section 1. Corporate Officers. The officers designated as Corporate Officers shall be elected by the Board of Directors and shall consist of a Chairman of the Board, a President, one or more Senior Vice Presidents, one or more Vice Presidents, a Treasurer, a Secretary, one or more Assistant Treasurers, and one or more Assistant Secretaries. The Board of Directors from time to time also may elect one or more Vice Chairmen of the Board and one or more Executive Vice Presidents. Any two or more of such offices may be held by the same person. Corporate officers shall have the power, authority and duties hereinafter set forth relative to their respective offices.

Section 2. Appointive Officers. Upon approval of the Chairman of the Board, an appropriate title may be given from time to time to certain employees of the Corporation who are managing one or several groups, divisions or other operations of the Corporation, provided, however, that any employee who has been given a title shall not be deemed to be a Corporate Officer of the Corporation for any purpose solely by virtue of such title. Each person given any such title shall hold such title at the will of the Chairman of the Board and shall cease to use such title when directed by the Chairman of the Board. He shall have such powers and perform such duties with respect to a group, division or other operation of the Corporation as shall be assigned to him by the Chairman of the Board. Vacancies in appointive offices may be filled by the Chairman of the Board.

Section 3. Election and Term of Office. The Corporate Officers shall be elected annually by the Board of Directors at the first meeting of the Board of Directors held after each Annual Meeting of the Shareholders or as soon thereafter as conveniently may be. Each Corporate Officer shall hold office until his successor is elected and shall have qualified or until his death or until he shall resign or have been removed from office in the manner hereinafter provided. Vacancies may be filled and new offices created and filled at any meeting of the Board of Directors.

Section 4. Removal. Any Corporate Officer elected by the Board of Directors may be removed by the Board of Directors whenever in its judgment the best interests of the Corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed.

Section 5. Vacancies. A vacancy in any Corporate Office because of death, resignation, removal, disqualification or otherwise, may be filled by the Board of Directors for the unexpired portion of the term.

Section 6. Chairman of the Board. The Chairman of the Board shall preside at all meetings of the shareholders and directors. He shall be the chief executive officer of the Corporation and shall have general supervision of the business, affairs and property of the Corporation and over its several officers, subject, however, to the control of the Board of Directors. He shall have authority to execute bonds, mortgages and other contracts requiring the seal, under the seal of the Corporation, except where required and permitted by law to be otherwise signed and executed, and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the Corporation.

Section 6 (a). Vice Chairman of the Board. Each Vice Chairman of the Board shall perform such duties as may be assigned to him by the Board of Directors. In the absence or disability of the Chairman of the Board, the Vice Chairman shall preside at meetings of the shareholders and of the Board of Directors.

Section 7. The President. The President shall perform such duties as may be assigned to him by the Board of Directors. He shall have authority to execute bonds, mortgages and other contracts requiring the seal, under the seal of the Corporation, except where required and permitted by law to be otherwise signed and executed, and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the Corporation.

Section 8. Executive Vice Presidents. Each Executive Vice President shall perform such duties as may be assigned to him by the Board of Directors.

Section 9. Senior Vice Presidents — Vice Presidents. Each Senior Vice President and each Vice President elected as a Corporate Officer shall perform such duties as from time to time may be assigned to him by the Chairman of the Board or by the Board of Directors.

Section 10. The Secretary. The Secretary shall: (a) keep the minutes of the Shareholders’ and Board of Directors’ meetings in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these By-Laws or as required by law; (c) be custodian of the corporate records and of the seal of the Corporation and see that the seal of the Corporation is affixed to all documents the execution of which on behalf of the Corporation under its seal is duly authorized; (d) keep a register of the post office address of each shareholder which shall be furnished to the Secretary by such shareholders; (e) sign with the Chairman of the Board, or the President, or an Executive Vice President, certificates for shares of the corporation, the issuance of which shall have been authorized by resolution of the Board of Directors; (f) have general charge of the stock transfer books of the Corporation; and (g) in general perform all duties incident to the office of the Secretary and such other duties as from time to time may be assigned to him by the Chairman of the Board or by the Board of Directors.

Section 11. The Treasurer. If required by the Board of Directors, the Treasurer shall give a bond for the faithful discharge of his duties in such sum and with such surety or sureties as the Board of Directors shall determine. He shall: (a) have charge and custody of and be responsible for all funds and securities of the Corporation; receive and give receipts for moneys due and payable to the Corporation from any source whatsoever, and deposit all such moneys in the name of the Corporation in such banks, trust companies or other depositaries as shall be selected in accordance with the provisions of Article V of these By-Laws; and (b) in general perform all of the duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him by the Chairman of the Board or by the Board of Directors.

Section 12. Assistant Secretary. The Assistant Secretary, when authorized by the Board of Directors, may sign with the President or an Executive Vice President certificates for shares of the Corporation, the issuance of which shall have been authorized by a resolution of the Board of Directors. The Assistant Secretary, in general, shall perform such duties as shall be assigned to him by the Chairman of the Board.

Section 13. Salaries. The salaries of the Corporate Officers shall be fixed from time to time by the Board of Directors. No officer shall be prevented from receiving such salary by reason of the fact that he is also a director of the Corporation.

ARTICLE V
CONTRACTS, LOANS, CHECKS AND DEPOSITS

Section 1. Contracts. The Board of Directors, the President or any officer designated by the Chairman of the Board, may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances, subject to such limitations as the Board may prescribe.

Section 2. Loans. No loans shall be contracted on behalf of the Corporation and no evidence of indebtedness shall be issued in its name unless authorized by a resolution of the Board of Directors, or, subject to such limitations as the Board may prescribe, unless authorized in writing by the Chairman of the Board or any officer designated by the Chairman of the Board. Any such authority may be general or confined to specific instances.

Section 3. Checks, Drafts, Etc. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation, shall be signed by such officer or officers, agent or agents of the Corporation and in such manner as shall from time to time be determined by resolutions of the Board of Directors.

Section 4. Deposits. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositaries as the Board of Directors may select or may be selected by officers pursuant to authority granted by the Board of Directors.

ARTICLE VI
CERTIFICATES FOR SHARES AND THEIR TRANSFER

Section 1. Certificates for Shares. Certificates representing shares of the Corporation shall be in such form as shall be determined by the Board of Directors. Such certificates shall be signed by the Chairman of the Board, the President or a Senior Vice President and by the Secretary or an Assistant Secretary, provided that such signatures may be facsimiles. The certificates shall be countersigned by a transfer agent and registrar, which countersignatures may also be facsimiles. In case any officer who has signed or whose facsimile signature has been placed on such certificate for the Corporation shall have ceased to be such officer before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer at the time of its issue. All certificates for shares shall be consecutively numbered or otherwise identified. The name and address of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the stock transfer books of the Corporation. All certificates surrendered to the Corporation for transfer shall be cancelled and no new certificate shall be issued until the former certificate for a like number of shares shall have been surrendered and cancelled, except that in case of a lost, destroyed or mutilated certificate a new one may be issued therefor upon such terms and indemnity to the Corporation as the Board of Directors may prescribe.

Section 2. Transfer of Shares. Transfer of shares of the Corporation shall be made only on the stock transfer books of the Corporation by the holder of record thereof or by his legal representative, who shall furnish proper evidence of authority to transfer, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the Corporation, and on surrender for cancellation of the certificate for such shares. The person in whose name shares stand on the books of the Corporation shall be deemed by the Corporation to be the owner thereof for all purposes.

Section 3. Issuance of Fractional Shares or Script. No fractional shares of the Corporation shall be issued and no transfer of a fraction of a share shall be permitted. In lieu of issuing a fraction of a share the Board of Directors may authorize payment in cash of the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined, or may authorize the issuance of script in registered or bearer form which shall entitle the holder to receive a certificate for a full share upon the surrender of such script aggregating a full share. The Board of Directors may cause such script to be issued subject to the condition that it shall become void if not exchanged for certificates representing full shares before a specified date or subject to the condition that the shares for which such script is exchangeable may be sold by the Corporation and the proceeds thereof distributed to the holders of such script or subject to any other conditions which the Board of Directors may deem advisable.

ARTICLE VII
FISCAL YEAR

The fiscal year of the Corporation shall end on the thirty-first day of December in each year.

ARTICLE VIII
DIVIDENDS

The Board of Directors may from time to time declare, and the Corporation may pay, dividends on its outstanding shares in the manner and upon the terms and conditions provided by law and its articles of incorporation.

ARTICLE IX
SEAL

The Board of Directors shall provide a corporate seal which shall be circular in form and shall have inscribed thereon the name of the Corporation and the state of incorporation and the words “Corporate Seal.” The Corporation may use the seal by causing it, or a facsimile thereof, to be impressed or affixed or in any other manner reproduced.

ARTICLE X
WAIVER OF NOTICE

Whenever any notice is required to be given to any shareholder or director of the Corporation under the provisions of the articles of incorporation or under the provisions of the Iowa Business Corporation Act, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice.

ARTICLE XI
AMENDMENTS

These By-Laws may be altered, amended or repealed and new By-Laws may be adopted by the Board of Directors at any regular or special meeting of the Board of Directors, but only in a manner consistent with the provisions of the Restated Articles of Incorporation of the Corporation, as amended from time to time.

EX-31.1 3 dbk204a.htm CERTIFICATION


CERTIFICATIONS	Exhibit 31.1

I, Martin G. Carver, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Bandag, Incorporated;

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: August 4, 2006	By: /s/ Martin G. Carver
	Martin G. Carver
	Chairman and Chief Executive Officer

EX-31.2 4 dbk204b.htm CERTIFICATION


CERTIFICATIONS	Exhibit 31.2

I, Warren W. Heidbreder, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Bandag, Incorporated;

3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: August 4, 2006	By: /s/ Warren W. Heidbreder
	Warren W. Heidbreder
	Vice President, Chief Financial Officer

EX-32.1 5 dbk204c.htm STATEMENT

Exhibit 32.1

Written Statement of the Chairman of the Board, Chief Executive Officer and President of
Bandag, Incorporated
Pursuant to 18 U.S.C. §1350

Solely for the purposes of complying with 18 U.S.C. §1350, I, the undersigned Chairman of the Board, Chief Executive Officer and President of Bandag, Incorporated (the “Company”), hereby certify, based on my knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2006 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Martin G. Carver
Martin G. Carver
August 4, 2006

EX-32.2 6 dbk204d.htm STATEMENT

Exhibit 32.2

Written Statement of the Vice President, Chief Financial Officer and Secretary of Bandag,
Incorporated
Pursuant to 18 U.S.C. §1350

Solely for the purposes of complying with 18 U.S.C. §1350, I, the undersigned Vice President, Chief Financial Officer and Secretary of Bandag, Incorporated (the “Company”), hereby certify, based on my knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2006 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Warren W. Heidbreder
Warren W. Heidbreder
August 4, 2006

-----END PRIVACY-ENHANCED MESSAGE-----

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2006

Commission file number 1-7007

Item 1. Financial StatementsCondensed Consolidated Balance Sheets

Unaudited Condensed Consolidated Statements of Earnings

Unaudited Condensed Consolidated Statements of Cash Flows

Notes to Condensed Consolidated Financial Statements – Unaudited

Note 1. Basis of Presentation

Note 2. Comprehensive Net Earnings

Note 3. Sale of South Africa Operations

Note 4. Earnings Per Share

Note 5. Retirement Benefit Plans

Note 6. Share-based Compensation

Note 7. Restructuring

Note 8. Acquisitions

Note 9. Recent Accounting Pronouncements

Note 10. Reclassifications

Note 11. Operating Segment Information

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

GENERAL

TRADITIONAL BUSINESS

TIRE DISTRIBUTION SYSTEMS, INC.

VEHICLE SERVICES

OTHER

Financial Condition:

Liquidity

Operating Activities

Investing Activities

Financing Activities

RECENT ACCOUNTING PRONOUNCEMENTS

FORWARD-LOOKING INFORMATION – SAFE HARBOR STATEMENT

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Item 4. Controls and Procedures

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds

Item 4 – Submission of Matters to a Vote of Security Holders

Item 6 — Exhibits

Written Statement of the Chairman of the Board, Chief Executive Officer and President ofBandag, IncorporatedPursuant to 18 U.S.C. §1350

Written Statement of the Vice President, Chief Financial Officer and Secretary of Bandag,IncorporatedPursuant to 18 U.S.C. §1350

Item 1. Financial Statements
Condensed Consolidated Balance Sheets

Written Statement of the Chairman of the Board, Chief Executive Officer and President of
Bandag, Incorporated
Pursuant to 18 U.S.C. §1350

Written Statement of the Vice President, Chief Financial Officer and Secretary of Bandag,
Incorporated
Pursuant to 18 U.S.C. §1350