Exhibit 99
BANDAG, INCORPORATED • 2905 N. HWY. 61 • MUSCATINE, IOWA 52761-5886 • 563/262-1400
Leading the retread industry worldwide
NEWS
| FOR IMMEDIATE RELEASE October 15, 2004 | CONTACT: Phone: Web Site: | Warren W. Heidbreder (563) 262-1260 www.bandag.com |
BANDAG, INCORPORATED REPORTS 3RDQUARTER EPS OF $1.02
Bandag, Inc. (NYSE: BDG and BDGA)
(Numbers in Millions, Except Per Share Data)
| Q3 2004 | Q3 2003 | 9 Mos. 2004 | 9 Mos. 2003 | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Net sales | $ 236.8 | $ 211.4 | $ 621.4 | $ 590.7 | |||||
| Net earnings | $ 20.1 | $ 20.0 | $ 36.0 | $ 31.1 | |||||
| Diluted earnings per share | $ 1.02 | $ 1.03 | $ 1.83 | $ 1.61 | |||||
| Shares outstanding - diluted | 19.7 | 19.4 | 19.7 | 19.3 | |||||
MUSCATINE, IOWA, October 15, 2004 — Bandag, Incorporated (NYSE:BDG and BDGA) today reported consolidated net earnings of $20.1 million, or $1.02 per diluted share, for the third quarter of 2004, compared to third quarter 2003 consolidated net earnings of $20.0 million, or $1.03 per diluted share. Consolidated net sales for the third quarter of 2004 were $236.8 million, an increase of twelve percent compared to third quarter 2003 consolidated net sales of $211.4 million. Of the sales increase, $17.0 million is attributable to Speedco, Bandag’s on-highway quick-service truck lubrication subsidiary, which was acquired in the first quarter of 2004.
For the first nine months of 2004, Bandag reported consolidated net earnings of $36.0 million, or $1.83 per diluted share. This compares to consolidated net earnings of $31.1 million, or $1.61 per diluted share, for the first nine months of 2003. Consolidated net sales for the first nine months of 2004 were $621.4 million, an increase of five percent compared to consolidated net sales of $590.7 million for the first nine months of 2003.
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In announcing third quarter results, Martin G. Carver, Bandag’s Chairman and Chief Executive Officer, said, “Earnings improvement at Tire Distribution Systems, Inc. (TDS), Bandag’s tire distribution subsidiary, and the International business unit, together with Speedco’s strong performance, played a major role in offsetting lower earnings in the North American business unit. In Brazil, tread volume increased 30 percent and in Europe gross margin gains reflected the positive impact of operating improvements and recent price increases.
Reviewing TDS’ performance, Mr. Carver said, “TDS delivered operating income of $3.6 million during the quarter compared to $1.9 million in the third quarter of 2003. This brought year-to-date operating income to $0.7 million compared to a loss of $4.6 million in 2003. Equally important, TDS achieved this increase on relatively flat sales, a clear indicator that the sharp operational focus over the past 18 months is paying off. However, with the divestiture of fifteen locations in Texas expected to take place in the fourth quarter of 2004, we do not necessarily expect the profitability of TDS to remain at the current levels.”
Discussing Speedco performance and expansion plans, Mr. Carver said, “Speedco continues to be an outstanding performer, delivering solid results to both the top and bottom lines. During the quarter, Speedco launched quick-service tire lanes at three existing locations – two in Texas and one in Georgia. New Speedco facilities and additional expansions of quick-service tire lanes at existing facilities are scheduled in the fourth quarter of 2004 and throughout 2005.”
| • | Factors that affected consolidated net sales for the third quarter of 2004 as compared to the third quarter of 2003 were: |
| • | North America business unit volume decreased one percent, a portion of which is attributed to the loss of the Roadway business, while net sales decreased two percent. Net sales were negatively impacted by a $2.3 million increase in sales deductions which was partially offset by a $1.4 million increase in equipment sales. |
| • | European business unit volume increased one percent while net sales increased $3.9 million, or 22 percent. The increase in tread sales is primarily due to the effect of translating foreign currency denominated net sales into U.S. dollars and the impact of price increases. |
| • | International business unit volume increased 24 percent and net sales increased $5.6 million, or 24 percent. The increase in unit volume was led by a 30 percent increase in Brazil. |
| • | Speedco net sales for the quarter were $17.0 million. |
| • | TDS net sales were $60.7 million, compared to $60.1 million in the third quarter of 2003. |
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| • | Overall, translating foreign currency denominated net sales into U.S. dollars produced a favorable impact of approximately $3.3 million on consolidated net sales. |
| • | Despite higher raw material costs within the Traditional Business, third quarter 2004 consolidated gross margin was 38.7 percent, 0.1 percentage points higher than in the third quarter of 2003. |
| • | Consolidated operating and other expenses increased approximately $11.2 million in the third quarter of 2004, primarily due to $4.4 million in expense related to Speedco operations. Consolidated operating and other expenses were also negatively impacted by $1.4 million of net foreign exchange losses, compared to $1.3 million of net foreign exchange gains in the third quarter of 2003. |
| • | Third quarter 2004 consolidated income from operations of $29.9 million compared to $30.2 million in the third quarter of 2003 reflects: |
| • | A decrease in the North American business unit operating income of $2.8 million, primarily due to raw material cost increases and higher operating and other expenses. |
| • | An increase in the European business unit operating income of $0.8 million, primarily due to the effect of price increases partially offset by an increase in operating and other expenses. |
| • | An increase in the International business unit operating income of $1.9 million, primarily due to an increase in sales. |
| • | An increase in TDS operating income of $1.7 million, primarily due to an increase in gross margin and a decrease in operating and other expenses. |
| • | Speedco operating income of $2.0 million in the third quarter of 2004. |
| • | An increase in corporate and other expenses of $3.8 million, primarily due to the unfavorable impact of $0.8 million in net foreign exchange losses in the third quarter of 2004, compared to $1.1 million of net foreign exchange gains in 2003, related to U.S. dollar cash balances held outside the United States. |
| • | In the third quarter of 2004 Bandag received $34.0 million of cash proceeds from the sale of the tire and wheel assets that were repurchased in accordance with Yellow Roadway Corporation’s decision to not renew the outsourcing agreement for Roadway Express tire and wheel services. |
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Outlook
Commenting on the outlook for the remainder of the year, Mr. Carver said, “Bandag has made significant progress in the first nine months, and we remain strategically focused on providing an expanding array of integrated services to keep trucks rolling. While we remain optimistic about the strength of the global economy, we are keeping a watchful eye on rising energy prices and their impact on Bandag’s business worldwide.”
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)
| Third Quarter Ended September 30, | Nine Months Ended September 30, | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2004 | 2003 | 2004 | 2003 | |||||||||||
| Consolidated Statements of Earnings | ||||||||||||||
Income | ||||||||||||||
| Net sales | $ | 236,793 | $ | 211,390 | $ | 621,410 | $ | 590,746 | ||||||
| Other | 2,487 | 1,624 | 5,974 | 5,159 | ||||||||||
| 239,280 | 213,014 | 627,384 | 595,905 | |||||||||||
| Costs and expenses | ||||||||||||||
| Cost of products sold | 145,188 | 129,791 | 392,078 | 374,657 | ||||||||||
| Operating & other expenses | 64,184 | 52,993 | 182,529 | 174,829 | ||||||||||
| 209,372 | 182,784 | 574,607 | 549,486 | |||||||||||
| Income from operations | 29,908 | 30,230 | 52,777 | 46,419 | ||||||||||
| Interest income | 1,339 | 1,298 | 3,381 | 3,506 | ||||||||||
| Interest expense | (275 | ) | (527 | ) | (1,394 | ) | (1,737 | ) | ||||||
| Earnings before income taxes and minority interest | 30,972 | 31,001 | 54,764 | 48,188 | ||||||||||
| Income taxes | 10,757 | 11,006 | 18,441 | 17,107 | ||||||||||
| Minority interest | 91 | -- | 286 | -- | ||||||||||
| Net earnings | $ | 20,124 | $ | 19,995 | $ | 36,037 | $ | 31,081 | ||||||
| Earnings per share | ||||||||||||||
| Basic | $ | 1.04 | $ | 1.04 | $ | 1.87 | $ | 1.62 | ||||||
| Diluted | $ | 1.02 | $ | 1.03 | $ | 1.83 | $ | 1.61 | ||||||
| Weighted average shares outstanding | ||||||||||||||
| Basic | 19,285 | 19,175 | 19,278 | 19,150 | ||||||||||
| Diluted | 19,690 | 19,378 | 19,677 | 19,342 | ||||||||||
| Third Quarter Ended September 30, | Nine Months Ended September 30, | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2004 | 2003 | 2004 | 2003 | |||||||||||
| Segment Information | ||||||||||||||
Net Sales | ||||||||||||||
North America | $ | 108,317 | $ | 109,986 | $ | 291,076 | $ | 278,559 | ||||||
| Europe | 21,751 | 17,845 | 62,521 | 54,661 | ||||||||||
| International | 29,061 | 23,454 | 77,152 | 67,080 | ||||||||||
| TDS | 60,651 | 60,105 | 152,527 | 190,446 | ||||||||||
| Speedco | 17,013 | -- | 38,134 | -- | ||||||||||
| Total net sales | $ | 236,793 | $ | 211,390 | $ | 621,410 | $ | 590,746 | ||||||
| Segment Operating Profit (Loss) | ||||||||||||||
North America | 24,165 | 27,000 | $ | 45,795 | 48,567 | |||||||||
| Europe | 307 | (472 | ) | 333 | 1,040 | |||||||||
| International | 4,796 | 2,895 | 10,709 | 9,053 | ||||||||||
| TDS | 3,563 | 1,867 | 688 | (4,615 | ) | |||||||||
| Speedco | 1,979 | -- | 4,636 | -- | ||||||||||
| Corporate expenses & other | (4,902 | ) | (1,060 | ) | (9,384 | ) | (7,626 | ) | ||||||
| Net interest income | 1,064 | 771 | 1,987 | 1,769 | ||||||||||
| Earnings before income taxes and minority interest | $ | 30,972 | $ | 31,001 | $ | 54,764 | $ | 48,188 | ||||||
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)
| September 30, 2004 | December 31, 2003 | |||||||
|---|---|---|---|---|---|---|---|---|
| Condensed Consolidated Balance Sheets | ||||||||
Assets: | ||||||||
| Cash and cash equivalents | $ | 187,724 | $ | 189,976 | ||||
| Investments | -- | 10,808 | ||||||
| Accounts receivable - net | 149,403 | 156,894 | ||||||
| Inventories | 70,981 | 62,765 | ||||||
| Other current assets | 57,014 | 77,533 | ||||||
| Total current assets | 465,122 | 497,976 | ||||||
Property, plant, and equipment - net | 163,022 | 107,975 | ||||||
| Other assets | 75,394 | 54,578 | ||||||
| Total assets | $ | 703,538 | $ | 660,529 | ||||
| Liabilities & shareholders' equity: | ||||||||
| Accounts payable | $ | 28,232 | $ | 25,710 | ||||
| Income taxes payable | 15,147 | 14,946 | ||||||
| Accrued liabilities | 102,933 | 97,285 | ||||||
| Short-term notes payable and current portion of other obligations | 16,699 | 10,252 | ||||||
| Total current liabilities | 163,011 | 148,193 | ||||||
Long-term debt and other obligations | 36,122 | 35,259 | ||||||
| Minority interest | 2,329 | -- | ||||||
| Shareholders' equity | ||||||||
| Common stock | 19,393 | 19,269 | ||||||
| Additional paid-in capital | 25,914 | 17,903 | ||||||
| Retained earnings | 492,313 | 477,499 | ||||||
| Accumulated other comprehensive loss | (35,544 | ) | (37,594 | ) | ||||
| Total shareholders' equity | 502,076 | 477,077 | ||||||
| Total liabilities & shareholders' equity | $ | 703,538 | $ | 660,529 | ||||
| Nine Months Ended September 30, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2004 | 2003 | |||||||
| Condensed Consolidated Statements of Cash Flows | ||||||||
Operating Activities | ||||||||
| Net earnings | $ | 36,037 | $ | 31,081 | ||||
| Provisions for depreciation and amortization | 19,005 | 20,295 | ||||||
| Decrease (increase) in operating assets and liabilities - net | 13,560 | (20 | ) | |||||
| Net cash provided by operating activities | 68,602 | 51,356 | ||||||
| Investing Activities | ||||||||
| Additions to property, plant and equipment | (25,393 | ) | (11,319 | ) | ||||
| Sales of investments - net | 10,808 | 4,845 | ||||||
| Payments for acquisitions of businesses | (72,682 | ) | -- | |||||
| Proceeds from divestiture of businesses | 1,946 | 21,449 | ||||||
| Proceeds from sale of tire and wheel assets | 34,023 | -- | ||||||
| Net cash provided by (used in) investing activities | (51,298 | ) | 14,975 | |||||
| Financing Activities | ||||||||
| Principal payments on short-term notes payable and other long-term liabilities | (763 | ) | (36 | ) | ||||
| Cash dividends | (18,862 | ) | (18,435 | ) | ||||
| Purchases of common stock | (2,477 | ) | (184 | ) | ||||
| Stock options exercised | 2,500 | 878 | ||||||
| Net cash used in financing activities | (19,602 | ) | (17,777 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents | 46 | 1,373 | ||||||
| Increase (decrease) in cash and cash equivalents | (2,252 | ) | 49,927 | |||||
| Cash and cash equivalents at beginning of year | 189,976 | 129,412 | ||||||
| Cash and cash equivalents at end of period | $ | 187,724 | $ | 179,339 | ||||
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