NEWS RELEASE	CONTACT:	Warren W. Heidbreder
FOR IMMEDIATE RELEASE	PHONE:	563-262-1260
DATE: October 17, 2006	URL:	www.bandag.com

BANDAG, INCORPORATED REPORTS 3^rd QUARTER EPS OF $0.47
Bandag, Incorporated (NYSE: BDG and BDGA)

Flash Results

(Numbers in Millions, Except Per Share Data)

	Q3 2006	Q3 2005	9 Months 2006	9 Months 2005
Net sales	$260.2	$245.3	$719.8	$662.4
Earnings from continuing operations	$9.2	$18.7	$25.4*	$37.4
Diluted EPS from continuing operations	$0.47	$0.95	$1.30*	$1.90

*Before loss from discontinued operations of $16.4 million, or $0.84 per diluted share.

MUSCATINE, IOWA, October 17, 2006 – Bandag, Incorporated (NYSE: BDG and BDGA) today reported consolidated net sales for third quarter 2006 of $260.2 million compared to consolidated net sales of $245.3 million in third quarter 2005, an increase of 6 percent. Consolidated net sales were positively impacted by approximately $2.9 million due to the effect of translating foreign currency denominated net sales into U.S. dollars. Consolidated net earnings were $9.2 million, or $0.47 per diluted share, for third quarter 2006, compared to third quarter 2005 consolidated net earnings of $18.7 million, or $0.95 per diluted share.

During third quarter 2006, Bandag incurred pre-tax expenses of $13.3 million, or $0.44 per diluted share, associated with the previously-announced closing of its manufacturing plant in Shawinigan, Quebec, the employment reduction programs in North America, as well as an employee reduction program in International. Estimated 2006 and 2007 pre-tax cost savings for the reduction of United States based employees remains within the guidance previously provided, which estimated a pre-tax savings of $5.0 to $7.0 million, or $0.16 to $0.23 per diluted share, for 2006 and annualized net pre-tax savings for 2007 of $16.0 million to $20.0 million, or $0.52 to $0.65 per share.

Consolidated net sales for the first nine months of 2006 were $719.8 million, an increase of 9 percent from consolidated net sales of $662.4 million in the first nine months of 2005. For the first nine months of 2006, Bandag reported consolidated earnings from continuing operations of $25.4 million, or $1.30 per diluted share, compared to consolidated net earnings of $37.4 million, or $1.90 per diluted share, in the same period of 2005. During the first quarter of 2006, Bandag recorded the previously announced deferred loss on the sale of its business in South Africa. As a result, for the first nine months of 2006, Bandag recorded a net loss on discontinued operations of $16.4 million, or $0.84 per diluted share, resulting in consolidated net earnings of $9.0 million, or $0.46 per diluted share.

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

In announcing third quarter results, Martin G. Carver, Bandag’s Chairman and Chief Executive Officer, said, “Though North American volume in our traditional business was down due to the loss of distribution and ongoing competition from imported new tires, both TDS and Speedco delivered strong revenues and continue to benefit from the relatively strong commercial trucking activity. While it’s too soon to see any benefits from lower crude oil prices on either our raw material or operating costs, Bandag has better aligned its operating costs with market needs.”

Discussing the company’s previously announced voluntary and involuntary reductions-in-force and the closing of a Canadian manufacturing facility, Mr. Carver said, “The benefits to Bandag from the changes we’ve made in our traditional business in North America are just beginning to emerge and are on track to contribute to fourth quarter results. Outside of North America, similar efforts are underway to identify excess costs, though we don’t anticipate seeing the benefits of most of the reductions until 2007. In North America, as we’ve sharpened our focus on the basics of our business, Bandag Strategic Alliance dealers in both the U.S. and Canada have been supportive.”

Financial Highlights

• Factors that affected consolidated net sales for third quarter 2006 were:

° North American business unit volume decreased 6 percent compared to third quarter 2005 while net sales remained even. Net sales were positively impacted by approximately $1.1 million due to the effect of translating foreign currency denominated net sales into U.S. dollars and by a price increase in January 2006.

° European business unit volume decreased 3 percent and net sales decreased 6 percent. Net sales were negatively impacted by a decrease in fleet sales due to the loss of fleet contract business. Net sales were positively impacted by approximately $0.3 million due to the effect of translating foreign currency denominated net sales.

° International business unit volume decreased 11 percent and net sales decreased 6 percent. Excluding South Africa, unit volume increased 7 percent and net sales increased 11 percent. Net sales were positively impacted by price increases and by approximately $1.5 million due to the effect of translating foreign currency denominated net sales into U.S. dollars.

° TDS net sales increased $9.2 million, or 19 percent, from the prior year period. Net sales were positively impacted by increased unit sales and higher prices.

° Vehicle Services business unit net sales increased $9.1 million, or 41 percent, primarily due to an increase in Speedco net sales of $6.5 million compared to the prior year period. Same store Speedco lube sales increased $2.8 million, or 14 percent, and same store tire sales increased $0.1 million, or 7 percent. Same store revenue is comprised of locations that have operated for twelve full months. As of September 30, 2006 same store lube sales included 35 locations and same store tire sales included 16 locations. Overall, Speedco had 44 locations, 37 with tire service capabilities, as of September 30, 2006, compared to 35 locations, 17 with tire service capabilities, at the same time last year. Truck Lube 1 which provides light truck maintenance, was purchased in April 2006 and contributed $2.4 million to third quarter net sales.

• Third quarter 2006 consolidated gross margin declined by 4.1 percentage points. Traditional Business gross margin declined 5 percentage points. European business unit gross margin declined 3.1 percentage points, primarily due to higher raw material costs and lower sales volume. North American business unit gross margin declined 6.3 percentage points and International business unit gross margin declined 1 percentage point, primarily due to higher raw material costs. Vehicle Services gross margin increased 2.5 percentage points.

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• Consolidated operating and other expenses for third quarter 2006 were lower by $2.8 million, or 4 percent, compared to the prior year period. Increases in Vehicle Services and TDS operating and other expenses were offset by decreases in the North American, European and International business units. North America operating and other expenses decreased $4.0 million primarily due to reduction in workforce and spending decreases due to the restructuring.

• Consolidated restructuring expenses of $13.3 million were recorded in the third quarter of 2006. The North American business unit recorded $12.4 million in restructuring expense and the International business unit recorded $0.9 million.

• Capital expenditures were $58.6 million through September 30, 2006, compared to $39.9 million for the same period last year. The increase in capital expenditures is primarily due to expenditures made by Speedco for new facilities and expansions of tire lanes at existing facilities.

• Subsequent to the end of the third quarter, the European business unit announced a reduction in workforce and expects to record related charges of approximately $5.7 million in the fourth quarter of 2006.

Outlook

Commenting on the outlook for the remainder of 2006, Mr. Carver said, “Overall, we’re optimistic as we move into fourth quarter 2006 and prepare for 2007. Today, Bandag is leaner and more able to manage market change quickly and responsively than at any time in recent history. While uncertainties will continue in global economic conditions, we’re confident that, as an organization, Bandag is in tune with dealers and fleet customers. That customer understanding guides us to take the right steps globally to strengthen the long-term prospects for Bandag and its dealers.”

Bandag, Incorporated manufactures retreading materials and equipment for its worldwide network of more than 900 franchised dealers that produce and market retread tires and provide tire management services. Bandag’s traditional business serves end-users through a wide variety of products offered by dealers, ranging from tire retreading and repairing to tire management systems outsourcing for commercial truck fleets. Tire Distribution, Inc. (TDS), a wholly-owned subsidiary, sells and services new and retread tires. In addition, Bandag has an 87.5% interest in Speedco, Inc., a provider of on-highway truck lubrication and routine tire services to commercial truck owner-operators and fleets.

This press release contains “forward-looking” statements that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, which are based on certain assumptions, describe future expectations of Bandag, and are identifiable in this press release by the use of the words “estimated” and “expects.” These statements are based on management’s current projections, beliefs and opinions as of the date of this press release. They involve known and unknown risk and uncertainties, which may cause the actual results in the future to differ materially from expected results. Bandag’s ability to predict results of the actual effect of future events is inherently uncertain. Factors which could affect the “forward-looking” statements include unanticipated delays or difficulties in achieving and sustaining the expected cost savings from the reduction in U.S. based employees; unanticipated increases or decreases in the expected fourth quarter charge of approximately $5.7 million for the reduction in workforce in the European business unit; and Bandag’s ability to achieve and sustain expected improvements in its competitive position and management of its business.

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

	Third Quarter Ended September 30,						Nine Months Ended September 30,
Consolidated Statements of Earnings	2006			2005			2006			2005
Income
Net sales	$	260,166		$	245,345		$	719,836		$	662,362
Other		1,845			1,512			7,730			4,660
		262,011			246,857			727,566			667,022
Costs and expenses
Cost of products sold		175,874			155,742			490,001			429,046
Operating & other expenses		61,306			64,128			190,980			183,808
Restructuring		13,330			0			13,504			0
		250,510			219,870			694,485			612,854
Income from operations		11,501			26,987			33,081			54,168
Interest income		1,931			2,155			6,263			6,127
Interest expense		(358	)		(431	)		(1,045	)		(1,516	)
Earnings before income taxes, minority interest and discontinued operations		13,074			28,711			38,299			58,779
Income taxes		3,929			9,738			13,268			20,960
Minority interest		(53	)		249			(355	)		394
Earnings from continuing operations		9,198			18,724			25,386			37,425
Net loss on discontinued operations		0			--			(16,356	)		--
Net earnings	$	9,198		$	18,724		$	9,030		$	37,425
Basic earnings (loss) per share
Earnings from continuing operations	$	0.48		$	0.96		$	1.31		$	1.93
Net loss on discontinued operations		--			--			(0.85	)		--
Net earnings	$	0.48		$	0.96		$	0.47		$	1.93
Diluted earnings (loss) per share
Earnings from continuing operations	$	0.47		$	0.95		$	1.30		$	1.90
Net loss on discontinued operations		--			--			(0.84	)		--
Net earnings	$	0.47		$	0.95		$	0.46		$	1.90
Weighted average shares outstanding
Basic		19,323			19,404			19,334			19,408
Diluted		19,445			19,673			19,510			19,697

	Third Quarter Ended September 30,						Nine Months Ended September 30,
Segment Information	2006			2005			2006			2005
Net Sales
Traditional Business
North America	$	123,083		$	123,534		$	341,121		$	325,236
Europe		20,031			21,409			57,899			62,177
International		29,479			31,091			84,159			91,912
TDS		56,418			47,265			152,364			122,863
Vehicle Services		31,155			22,046			84,293			60,174
Total net sales	$	260,166		$	245,345		$	719,836		$	662,362
Segment Operating Profit (Loss)
Traditional Business
North America	$	8,108		$	24,310		$	30,703		$	47,889
Europe		(847	)		(418	)		(2,550	)		776
International		3,129			4,103			7,722			10,987
TDS		3,307			3,341			7,900			4,914
Vehicle Services		293			96			(1,497	)		1,733
Corporate expenses & other		(2,489	)		(4,445	)		(9,197	)		(12,131	)
Net interest income		1,573			1,724			5,218			4,611
Earnings before income taxes and minority interest	$	13,074		$	28,711		$	38,299		$	58,779

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Bandag, Incorporated
Unaudited Financial Highlights
(In thousands)

Condensed Consolidated Balance Sheets	Sept. 30, 2006			Dec. 31, 2005
Assets:
Cash and cash equivalents	$	47,187		$	97,071
Investments		67,100			60,150
Accounts receivable - net		169,403			174,017
Inventories		95,529			84,668
Other current assets		54,676			59,960
Total current assets
		433,895			475,866
Property, plant, and equipment - net		245,272			209,640
Other assets		75,690			69,531
Total assets	$	754,857		$	755,037
Liabilities & shareholders’ equity:
Accounts payable	$	42,420		$	45,794
Income taxes payable		1,379			2,477
Accrued liabilities		97,524			100,647
Short-term notes payable and current portion of other obligations		12,600			15,351
Total current liabilities
		153,923			164,269
Long-term debt and other obligations		26,778			24,061
Deferred income tax liabilities		5,908			4,771
Minority interest		1,411			2,779
Shareholders’ equity
Common stock		19,419			19,436
Additional paid-in capital		44,213			37,191
Retained earnings		512,289			529,372
Accumulated other comprehensive loss		(9,084	)		(26,842	)
Total shareholders’ equity
		566,837			559,157
Total liabilities & shareholders’ equity	$	754,857		$	755,037

	Nine Months Ended September 30,
Condensed Consolidated Statements of Cash Flows	2006			2005
Operating Activities
Net earnings	$	9,030		$	37,425
Non-cash translation adjustment due to sale of South Africa		14,212			--
Provision for depreciation		20,178			19,160
(Increase) decrease in operating assets and liabilities - net		1,910			(15,731	)
Net cash provided by operating activities		45,330			40,854
Investing Activities
Additions to property, plant and equipment		(58,581	)		(39,909	)
(Purchases) maturities of investments - net		(6,950	)		30,015
Payments for acquisitions of businesses		(8,091	)		--
Proceeds from divestiture of businesses		460			2,251
Net cash used in investing activities		(73,162	)		(7,643	)
Financing Activities
Principal payments on short-term notes payable & other long-term liabilities		(1,939	)		(2,378	)
Cash dividends		(19,554	)		(19,329	)
Purchases of common stock		(7,306	)		(4,852	)
Stock options exercised		5,290			2,057
Excess tax benefits from share-based compensation expense		212			--
Net cash used in financing activities		(23,297	)		(24,502	)
Effect of exchange rate changes on cash and cash equivalents		1,245			3,305
Decrease in cash and cash equivalents		(49,884	)		12,014
Cash and cash equivalents at beginning of year		97,071			66,646
Cash and cash equivalents at end of period	$	47,187		$	78,660

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