Exhibit 99
| BANDAG, INCORPORATED • 2905 N. HWY. 61 • MUSCATINE, IOWA 52761-5886 • 563/262-1400 |
| Leading the retread industry worldwide |
NEWS
| FOR IMMEDIATE RELEASE | CONTACT: | Warren W. Heidbreder |
| Phone: | (563) 262-1260 | |
| July 16, 2004 | Web Site: | www.bandag.com |
BANDAG, INCORPORATED REPORTS 2ndQUARTER EPS OF $0.60
Flash Results
Bandag, Inc. (NYSE: BDG and BDGA)
(Numbers in Millions, Except Per Share Data)
| Q2 2004 | Q2 2003 | 6 Mos. 2004 | 6 Mos. 2003 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Net sales | $ | 211.1 | $ | 204.1 | $ | 384.6 | $ | 379.4 | ||||||
| Net earnings | $ | 11.9 | $ | 8.7 | $ | 15.9 | $ | 11.1 | ||||||
| Diluted earnings per share | $ | 0.60 | $ | 0.45 | $ | 0.81 | $ | 0.57 | ||||||
| Shares outstanding - diluted | 19.7 | 19.4 | 19.7 | 19.3 | ||||||||||
MUSCATINE, IOWA, July 16, 2004 – Bandag, Incorporated (NYSE: BDG and BDGA) today reported consolidated net earnings of $11.9 million, or $0.60 per diluted share, for second quarter 2004, compared to second quarter 2003 consolidated net earnings of $8.7 million, or $0.45 per diluted share, an increase of 37% and 33% for consolidated net earnings and diluted earnings per share, respectively. Consolidated net earnings for second quarter 2004 included favorable tax adjustments of $1.0 million, or $0.05 per diluted share, resulting primarily from the reassessment of certain tax matters. Consolidated net sales for second quarter 2004 were $211.1 million, an increase of approximately three percent compared to second quarter 2003 consolidated net sales of $204.1 million.
For the first six months of 2004, Bandag reported consolidated net earnings of $15.9 million, or $ 0.81 per diluted share. This compares to consolidated net earnings of $11.1 million, or $0.57 per diluted share, in the first six months of 2003. Consolidated net sales for the first six months of 2004 increased one percent to $384.6 million from $379.4 million in the first six months of 2003.
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In announcing second quarter results, Martin G. Carver, Chairman of the Board and Chief Executive Officer of Bandag, said, “Several factors contributed to our performance in the second quarter. Globally, tread volume was up by five percent during the quarter, reflecting increased trucking activity, particularly in North America. In its first full quarter as part of Bandag, Speedco, Inc. demonstrated both its fit to Bandag and the validity of our strategy to offer our customers a wider range of vehicle services.” In June, Speedco purchased its six licensed locations and now operates 32 on-highway quick-service truck lubrication locations.
“Also important, Tire Distribution Systems, Inc.‘s (TDS) performance improved significantly during the quarter, as Bandag’s distribution subsidiary reduced its net loss from $2.4 million a year ago to a loss of $34,000, reflecting the benefits of selected divestitures and sales increases in some of the remaining locations,” said Mr. Carver.
| • | Factors that affected consolidated net sales for second quarter 2004 were: |
| • | North America business unit volume was approximately three percent higher than the prior year period. Net sales increased by $4.2 million primarily due to higher volume and the reduction in intercompany sales due to the shift of TDS sales to the independent dealers acquiring the divested TDS locations. |
| • | Speedco net sales were $14.4 million for the second quarter of 2004. |
| • | TDS net sales declined by $15.8 million due to divestitures and closures in 2003 and 2004, offset by increases at some of the remaining locations. Second quarter 2004 and 2003 sales by divested and closed TDS locations were approximately $0.3 million and $18.1 million, respectively. |
| • | European business unit volume increased two percent while net sales increased $1.7 million, or ten percent, primarily due to the effect of translating foreign currency denominated net sales into U.S. dollars. |
| • | International business unit volume increased twelve percent and net sales increased $2.5 million, or eleven percent, of which approximately $1.0 million was due to the effect of translating foreign currency denominated net sales into U.S. dollars. |
| • | Overall, translating foreign currency denominated net sales into U.S. dollars produced a favorable impact of approximately $3.2 million on consolidated net sales. |
| • | Second quarter 2004 consolidated gross margin was even with the prior year. |
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| • | Consolidated operating and other expenses were $1.4 million below the prior year despite an additional $3.8 million in expenses related to Speedco operations and the unfavorable impact of the translation rates. TDS operating and other expenses were $5.6 million below the previous year, primarily reflecting the divestitures in 2003 and 2004. Consolidated foreign exchange gain was $0.8 million compared to $2.2 million of loss in second quarter 2003, both of which were primarily related to U.S. dollar cash balances held outside the United States. |
| • | Operating income for the North America business unit in second quarter 2004 decreased $1.5 million, primarily due to raw material cost increases and higher operating and other expenses. |
| • | Operating income in the European business unit in second quarter 2004 decreased $1.4 million compared to the previous year, primarily due to a decline of 5.6 percentage points in gross margin and higher operating and other expenses. |
| • | Operating income for the International business unit in second quarter 2004 decreased $0.6 million compared to the prior year period, primarily due to a decline of 0.8 percentage points in gross margin and higher operating and other expenses. |
| • | TDS reduced its operating loss from $2.4 million in second quarter 2003 to $34,000 in second quarter 2004. Second quarter 2003 results included $1.5 million in losses from divestitures compared to a loss of $0.4 million in the second quarter of 2004. |
| • | Speedco operating income for the second quarter of 2004 was $1.8 million. In June, Speedco purchased its six licensed locations from PM Express for $15.6 million, and began opening its tire operations at various Speedco facilities. Results of the former licensees did not have a material impact on second quarter 2004 results as they were only included for the final three weeks of the quarter. |
| • | Corporate expenses and other was $2.2 million for the second quarter of 2004 compared to $5.4 million in the previous year. The $3.2 million decrease includes the favorable impact of $3.6 million in foreign exchange gains related to U.S. dollar cash balances held outside the United States. |
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In May, Bandag announced that Yellow Roadway Corporation would not be renewing the outsourcing agreement for Roadway Express tire and wheel services and, in accordance with the terms of the agreement, would be repurchasing tire and wheel assets from Bandag. Mr. Carver indicated that the transition process was proceeding smoothly and on schedule, and that Bandag received an initial payment of approximately $32 million on July 9, 2004. Bandag anticipates completing the transition and final settlement in August 2004.
Commenting on the outlook for the second half of 2004, Mr. Carver said, “The improved performance we experienced during the second quarter is heartening, and, while we’re hopeful that the renewed strength we’re seeing in trucking activity gains momentum, we continue to moderate our optimism and closely monitor global economic activity.”
Bandag, Incorporated manufactures retreading materials and equipment for its worldwide network of more than 1,000 franchised dealers that produce and market retread tires and provide tire management services. Bandag’s traditional business serves end-users through a wide variety of products offered by dealers, ranging from tire retreading and repairing to tire management systems outsourcing for commercial truck fleets. TDS sells and services new and retread tires. In addition, Bandag has an 87.5 percent interest in Speedco, Inc., a provider of on-highway truck lubrication services to commercial truck owner-operators and fleets.
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Bandag, Incorporated
Unaudited Financial Highlights
(In thousands, except per share data)
| Second Quarter Ended June 30, | Six Months Ended June 30, | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Consolidated Statements of Earnings | 2004 | 2003 | 2004 | 2003 | ||||||||||
| Income | ||||||||||||||
| Net sales | $ | 211,088 | $ | 204,077 | $ | 384,617 | $ | 379,356 | ||||||
| Other | 1,725 | 1,691 | 3,487 | 3,535 | ||||||||||
| 212,813 | 205,768 | 388,104 | 382,891 | |||||||||||
| Costs and expenses | ||||||||||||||
| Cost of products sold | 134,087 | 129,535 | 246,890 | 244,866 | ||||||||||
| Operating & other expenses | 61,789 | 63,228 | 118,345 | 121,836 | ||||||||||
| 195,876 | 192,763 | 365,235 | 366,702 | |||||||||||
Income from operations | 16,937 | 13,005 | 22,869 | 16,189 | ||||||||||
| Interest income | 992 | 1,052 | 2,042 | 2,208 | ||||||||||
| Interest expense | (557 | ) | (551 | ) | (1,119 | ) | (1,210 | ) | ||||||
| Earnings before income taxes and minority interest | 17,372 | 13,506 | 23,792 | 17,187 | ||||||||||
| Income taxes | 5,341 | 4,813 | 7,684 | 6,101 | ||||||||||
| Minority interest | 137 | -- | 195 | -- | ||||||||||
| Net earnings | $ | 11,894 | $ | 8,693 | $ | 15,913 | $ | 11,086 | ||||||
| Earnings per share | ||||||||||||||
| Basic | $ | 0.62 | $ | 0.45 | $ | 0.83 | $ | 0.58 | ||||||
| Diluted | $ | 0.60 | $ | 0.45 | $ | 0.81 | $ | 0.57 | ||||||
| Weighted average shares outstanding | ||||||||||||||
| Basic | 19,299 | 19,156 | 19,275 | 19,137 | ||||||||||
| Diluted | 19,688 | 19,371 | 19,672 | 19,324 | ||||||||||
| Second Quarter Ended June 30, | Six Months Ended June 30, | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Segment Information | 2004 | 2003 | 2004 | 2003 | ||||||||||
| Net Sales | ||||||||||||||
| North America | $ | 100,542 | $ | 96,361 | $ | 182,759 | $ | 168,573 | ||||||
| Europe | 19,574 | 17,835 | 40,770 | 36,816 | ||||||||||
| International | 25,648 | 23,154 | 48,091 | 43,626 | ||||||||||
| TDS | 50,937 | 66,727 | 91,876 | 130,341 | ||||||||||
| Speedco | 14,387 | -- | 21,121 | -- | ||||||||||
| Total net sales | $ | 211,088 | $ | 204,077 | $ | 384,617 | $ | 379,356 | ||||||
Segment Operating Profit (Loss) | ||||||||||||||
| North America | $ | 16,176 | $ | 17,651 | $ | 21,630 | $ | 21,567 | ||||||
| Europe | (1,664 | ) | (281 | ) | 26 | 1,512 | ||||||||
| International | 2,874 | 3,486 | 5,913 | 6,158 | ||||||||||
| TDS | (34 | ) | (2,430 | ) | (2,875 | ) | (6,482 | ) | ||||||
| Speedco | 1,754 | -- | 2,657 | -- | ||||||||||
| Corporate expenses & other | (2,169 | ) | (5,421 | ) | (4,482 | ) | (6,566 | ) | ||||||
| Net interest income | 435 | 501 | 923 | 998 | ||||||||||
| Earnings before income taxes and minority interest | $ | 17,372 | $ | 13,506 | $ | 23,792 | $ | 17,187 | ||||||
Note: Certain prior year amounts have been reclassified to conform with the current year presentation. | ||||||||||||||
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Bandag, Incorporated
Unaudited Financial Highlights
(In thousands)
| Condensed Consolidated Balance Sheets | June 30, 2004 | Dec. 31, 2003 | ||||||
|---|---|---|---|---|---|---|---|---|
| Assets: | ||||||||
| Cash and cash equivalents | $ | 130,492 | $ | 189,976 | ||||
| Investments | 8,088 | 10,808 | ||||||
| Accounts receivable - net | 136,976 | 156,894 | ||||||
| Inventories | 69,859 | 62,765 | ||||||
| Other current assets | 92,696 | 77,533 | ||||||
| Total current assets | 438,111 | 497,976 | ||||||
Property, plant, and equipment - net | 156,883 | 107,975 | ||||||
| Other assets | 78,370 | 54,578 | ||||||
| Total assets | $ | 673,364 | $ | 660,529 | ||||
| Liabilities & shareholders' equity: | ||||||||
| Accounts payable | $ | 32,633 | $ | 25,710 | ||||
| Income taxes payable | 9,414 | 14,946 | ||||||
| Accrued liabilities | 94,809 | 97,285 | ||||||
| Short-term notes payable and current portion of other obligations | 10,721 | 10,252 | ||||||
| Total current liabilities | 147,577 | 148,193 | ||||||
Long-term debt and other obligations | 40,405 | 35,259 | ||||||
| Minority interest | 2,238 | -- | ||||||
| Shareholders' equity | ||||||||
| Common stock | 19,374 | 19,269 | ||||||
| Additional paid-in capital | 24,824 | 17,903 | ||||||
| Retained earnings | 478,612 | 477,499 | ||||||
| Accumulated other comprehensive loss | (39,666 | ) | (37,594 | ) | ||||
| Total shareholders' equity | 483,144 | 477,077 | ||||||
| Total liabilities & shareholders' equity | $ | 673,364 | $ | 660,529 | ||||
| Six Months Ended June 30, | ||||||||
|---|---|---|---|---|---|---|---|---|
| Condensed Consolidated Statements of Cash Flows | 2004 | 2003 | ||||||
| Operating Activities | ||||||||
| Net earnings | $ | 15,913 | $ | 11,086 | ||||
| Provisions for depreciation and amortization | 11,708 | 14,010 | ||||||
| Decrease in operating assets and liabilities - net | 9,036 | (4,991 | ) | |||||
| Net cash provided by operating activities | 36,657 | 20,105 | ||||||
| Investing Activities | ||||||||
| Additions to property, plant and equipment | (12,857 | ) | (8,647 | ) | ||||
| Purchases of investments - net | 2,720 | (2,133 | ) | |||||
| Payments for acquisitions of businesses | (71,868 | ) | -- | |||||
| Proceeds from divestiture of businesses | 882 | 11,115 | ||||||
| Net cash provided by (used in) investing activities | (81,123 | ) | 335 | |||||
| Financing Activities | ||||||||
| Principal payments on short-term notes payable and other | ||||||||
| long-term liabilities | (760 | ) | (31 | ) | ||||
| Cash dividends | (12,567 | ) | (12,279 | ) | ||||
| Purchases of common stock | (2,348 | ) | (110 | ) | ||||
| Stock options exercised | 1,891 | 616 | ||||||
| Net cash used in financing activities | (13,784 | ) | (11,804 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents | (1,234 | ) | 3,906 | |||||
| Increase (decrease) in cash and cash equivalents | (59,484 | ) | 12,542 | |||||
| Cash and cash equivalents at beginning of year | 189,976 | 129,412 | ||||||
| Cash and cash equivalents at end of period | $ | 130,492 | $ | 141,954 | ||||
