UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002
OR
[ ] 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
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2905 North Highway 61, Muscatine, Iowa 52761-5886
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(Address of principal executive offices) (Zip Code)
(563) 262-1400
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(Registrant's telephone number, including area code)
Not Applicable
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(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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $1 par value; 9,079,431 shares as of April 30, 2002.
Class A Common Stock, $1 par value; 9,555,596 shares as of April 30, 2002.
Class B Common Stock, $1 par value; 2,037,200 shares as of April 30, 2002.
BANDAG, INCORPORATED AND SUBSIDIARIES
INDEX
Part I: FINANCIAL INFORMATION Page No.
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets -
March 31, 2002 and December 31, 2001 3
Condensed consolidated statements of operations
Three months ended March 31, 2002 and 2001 4
Condensed consolidated statements of cash flows
Three months ended March 31, 2002 and 2001 5
Notes to condensed consolidated financial statements
March 31, 2002 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
2
PART 1. FINANCIAL INFORMATION
BANDAG, INCORPORATED AND SUBSIDIARIES
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
(Unaudited)
March 31, December 31,
In thousands, except share data 2002 2001
--------------- ---------------
Assets
Current assets
Cash and cash equivalents $ 173,831 $ 145,625
Investments 12,151 9,394
Accounts receivable, net 127,782 164,708
Inventories
Finished products 75,332 74,667
Material and work in process 15,035 15,128
--------------- ---------------
90,367 89,795
Other current assets 40,803 40,652
--------------- ---------------
Total current assets 444,934 450,174
Property, plant, and equipment 496,891 501,609
Less accumulated depreciation and amortization (342,826) (343,601)
--------------- ---------------
154,065 158,008
Goodwill, net - 50,964
Intangible assets, net 2,270 315
Other assets 58,310 59,361
--------------- ---------------
Total assets $ 659,579 $ 718,822
=============== ===============
Liabilities and shareholders' equity
Current liabilities
Accounts payable $ 20,695 $ 22,153
Accrued employee compensation and benefits 20,616 25,311
Accrued marketing expenses 21,014 26,396
Other accrued expenses 36,844 30,279
Income taxes payable 11,118 14,947
Short-term notes payable and current portion of other obligations 67,233 67,239
--------------- ---------------
Total current liabilities 177,520 186,325
Long-term debt and other obligations 40,991 40,921
Deferred income tax liabilities 2,937 2,580
Shareholders' equity
Common stock; $1.00 par value; authorized - 21,500,000 shares;
issued and outstanding - 9,080,138 shares in 2002;
9,079,093 shares in 2001 9,080 9,079
Class A common stock; $1.00 par value; authorized - 50,000,000 shares;
issued and outstanding - 9,540,149 shares in 2002;
9,525,514 shares in 2001 9,540 9,525
Class B common stock; $1.00 par value; authorized - 8,500,000 shares;
issued and outstanding - 2,037,200 shares in 2002;
2,037,370 shares in 2001 2,037 2,037
Additional paid-in capital 11,789 11,399
Retained earnings 449,930 502,517
Foreign currency translation adjustment (44,245) (45,561)
--------------- ---------------
Total shareholders' equity 438,131 488,996
--------------- ---------------
Total liabilities and shareholders' equity $ 659,579 $ 718,822
=============== ===============
See notes to condensed consolidated financial statements.
3
BANDAG, INCORPORATED AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
Three Months Ended
In thousands, except per share data March 31,
2002 2001
--------------- --------------
Net sales $ 192,493 $ 205,112
Other income 3,061 4,280
--------------- ---------------
195,554 209,392
Cost of products sold 122,999 136,426
Engineering, selling, administrative, and other expenses 68,852 67,103
Interest expense 1,767 1,884
--------------- ---------------
193,618 205,413
--------------- ---------------
Earnings before income taxes and cumulative
effect of accounting change 1,936 3,979
Income taxes 716 1,651
--------------- ---------------
Earnings before cumulative effect of accounting change 1,220 2,328
Cumulative effect of accounting change
(net of income tax benefit of $3,704) (47,260) -
--------------- ---------------
Net earnings (loss) $ (46,040) $ 2,328
=============== ===============
Basic earnings (loss) per share
Earnings before cumulative effect of accounting change $ 0.06 $ 0.11
Cumulative effect of accounting change (2.30) -
--------------- ---------------
Net earnings (loss) $ (2.24) $ 0.11
=============== ===============
Diluted earnings (loss) per share
Earnings before cumulative effect of accounting change $ 0.06 $ 0.11
Cumulative effect of accounting change (2.27) -
--------------- ---------------
Net earnings (loss) $ (2.21) $ 0.11
============== ==============
Comprehensive net earnings (loss) $ ( 44,724) $ 2,059
Cash dividends per share $ 0.315 $ 0.305
Depreciation included in expense $ 7,641 $ 8,765
Weighted average shares outstanding:
Basic 20,591 20,553
Diluted 20,781 20,689
See notes to condensed consolidated financial statements.
4
BANDAG, INCORPORATED AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
Three Months Ended
In thousands March 31,
2002 2001
--------------- ---------------
Operating Activities
Net earnings (loss) $ (46,040) $ 2,328
Cumulative effect of accounting change 50,964 -
Provision for depreciation and amortization 7,687 11,288
Increase in operating assets and liabilities, net 27,792 12,524
--------------- ---------------
Net cash provided by operating activities 40,403 26,140
Investing Activities
Additions to property, plant, and equipment (3,162) (5,515)
Purchases of investments (5,000) (4,300)
Maturities of investments 3,543 911
Payments for acquisitions of businesses (2,000) -
--------------- ---------------
Net cash used in investing activities (6,619) (8,904)
Financing Activities
Principal payments on short-term notes payable and long-term obligations (77) (236)
Cash dividends (6,502) (6,272)
Purchases of Common Stock and Class A Common Stock (41) (24)
--------------- ---------------
Net cash used in financing activities (6,620) (6,532)
Effect of exchange rate changes on cash and cash equivalents 1,042 178
--------------- ---------------
Increase in cash and cash equivalents 28,206 10,882
Cash and cash equivalents at beginning of period 145,625 86,008
--------------- ---------------
Cash and cash equivalents at end of period $ 173,831 $ 96,890
=============== ===============
See notes to condensed consolidated financial statements.
5
BANDAG, INCORPORATED AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements - Unaudited
Note A. 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 three months ended March 31, 2002 are not necessarily
indicative of the results that may be expected for the year ending December 31,
2002. 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, 2001.
Note B. Comprehensive Net Earnings (Loss)
Comprehensive net earnings (loss) for the three month periods ended March 31,
2002 and 2001 were as follows (in thousands):
Three Months Ended
March 31,
2002 2001
---------- ---------
Net earnings before cumulative effect of
accounting change $ 1,220 $ 2,328
Other comprehensive income:
Foreign currency translation 1,316 (269)
---------- ---------
Comprehensive net earnings before cumulative
effect of accounting change 2,536 2,059
Cumulative effect of accounting change (47,260) -
---------- ---------
Comprehensive net earnings (loss) $ (44,724) $ 2,059
========== =========
6
BANDAG, INCORPORATED AND SUBSIDIARIES
Note C. Earnings (Loss) Per Share
The following table sets forth the computation of basic and diluted earnings
(loss) per share (in thousands, except per share data):
Three Months Ended
March 31,
2002 2001
---------- ---------
Numerator:
Net earnings (loss) $ (46,040) $ 2,328
Denominator:
Denominator for basic earnings (loss)
per share - weighted-average shares 20,591 20,553
Effect of dilutive securities:
Non-vested restricted stock 55 39
Stock options 135 97
---------- ---------
Dilutive potential common shares 190 136
Denominator for diluted earnings (loss) per
share - weighted-average shares and
dilutive potential common shares 20,781 20,689
========== =========
Net earnings (loss) per share:
Basic $ (2.24) $ 0.11
========== =========
Diluted $ (2.21) $ 0.11
========== =========
Note D. Non-Recurring Charges
During the fourth quarter of 2001, the Company recorded net non-recurring
charges totaling $3,400,000 ($2,040,000 net of tax benefits). The net
non-recurring charges included $4,300,000 ($2,580,000 net of tax benefits)
related to the closure of a North American tread rubber manufacturing facility
and certain retirement benefits. Costs included $2,659,000 ($1,595,000 net of
tax benefits) for termination benefits for the reduction of 46 employees,
$1,521,000 ($913,000 net of tax benefits) for early retirement benefits of 19
employees, and other miscellaneous closure costs. In 2001, the Company paid
$1,542,000 related to the termination of 37 employees. In the year-to-date
period ended March 31, 2002, the Company paid $481,000 relating to the
termination of an additional 26 employees. As of March 31, 2002, $2,219,000 of
the charges related to the closure of the North American tread rubber
manufacturing facility remained accrued, which reflects a $58,000 reduction in
the original provision due to costs being lower than original estimates.
7
BANDAG, INCORPORATED AND SUBSIDIARIES
Note E. New Accounting Standard
During the first quarter of 2002, the Company adopted Statement of Financial
Accounting Standards No. 142, (SFAS 142), which resulted in a non-cash
transition charge in the quarter of $47.3 million (net of tax benefit of $3.7
million), or $2.27 per diluted share, to recognize impairment of goodwill,
substantially all of which related to Tire Distribution Systems, Inc. (TDS), the
Company's tire distribution subsidiary. The fair value of the reporting units
was estimated using the expected present value of future cash flows. Pursuant to
SFAS 142 the $47.3 million charge is treated as a change in accounting
principle. Also in accordance with SFAS 142, the Company stopped amortizing
goodwill as of January 1, 2002.
The changes in the carrying amount of goodwill for the quarter ended March 31,
2002, are as follows (in thousands):
North
America TDS
Segment Segment Total
----------- ----------- ----------
Balance as of January 1, 2002 $ 3,388 $ 47,576 $ 50,964
Impairment losses (3,388) (47,576) (50,964)
----------- ----------- ----------
Balance as of March 31, 2002 $ - $ - $ -
=========== =========== ==========
Proforma information (in thousands, except per share data):
Three Months Ended
March 31,
2002 2001
---------- ---------
Reported net earnings before cumulative
effect of accounting change $ 1,220 $ 2,328
Add goodwill amortization - 1,988
---------- ---------
Proforma net earnings before cumulative
effect of accounting change $ 1,220 $ 4,316
========== =========
Basic and diluted earnings per share:
Reported net earnings before cumulative
effect of accounting change $ 0.06 $ 0.11
Add goodwill amortization - 0.10
---------- ---------
Proforma net earnings before cumulative
effect of accounting change $ 0.06 $ 0.21
========== =========
8
BANDAG, INCORPORATED AND SUBSIDIARIES
Note F. Reclassifications
The Company adopted Emerging Issues Task Force (EITF) No. 00-25, "Vendor Income
Statement Characterization of Consideration Paid to a Reseller of the Vendor's
Products," in the first quarter of 2002. Under this Issue, the EITF concluded
that all consideration paid by a vendor to a reseller should be classified as a
reduction of sales and as a reduction of selling and general administrative and
other expenses. As reclassifications, these changes do not affect the Company's
financial position or earnings. In accordance with EITF 00-25 the Company
recorded $6,069,000 as a reduction of sales and as a reduction of selling and
general administrative and other expenses for the first quarter of 2001. These
amounts relate to fleet subsidies and certain marketing programs.
Note G. Legal Proceedings
Bandag, Incorporated vs. Michelin Retread Technologies, Incorporated et al.,
- ----------------------------------------------------------------------------
United States District Court for the Southern District of Iowa, 3-99-CV-80165.
- -----------------------------------------------------------------------------
On September 16, 1999, Bandag, Inc. filed an action against Michelin Retread
Technologies and affiliated companies for violations of state and federal law,
including applicable antitrust laws and the Lanham Act. The Company moved in
December 2000 to amend its complaint to name additional Michelin entities.
Michelin entities have filed counterclaims alleging, among other things, that
the Company injured Michelin by violating the antitrust laws and the Lanham Act
and by conspiring with Bridgestone/Firestone, Inc. to injure Michelin in
violation of the antitrust laws. Both the Company's lawsuit and Michelin's
counterclaims seek compensatory (including treble damages) and injunctive
relief. Bandag intends to seek damages from Michelin in the amount of at least
$8,750,624 in addition to punitive damages. Michelin has informed Bandag that it
intends to seek damages from Bandag and Bridgestone/Firestone in the amount of
$146,165,000 plus treble damages. While the results of the Company's suit and
Michelin's counterclaims cannot be predicted with certainty, a victory on
Michelin's counterclaims could have a material adverse effect on the Company's
consolidated financial position and results of operations. Management, however,
believes that its claims against Michelin are meritorious and that Michelin's
counterclaims are without merit. The Company intends to vigorously defend its
position and has recorded no accrual for the costs, if any, of the ultimate
resolution of this matter.
On February 2, 2001, Michelin moved for a preliminary injunction against the
Company and Bridgestone/ Firestone. Among other things, Michelin asked the Court
to prevent the Company from enforcing agreements with certain franchisees and
from enforcing certain terms in other franchise agreements (including
exclusivity provisions), communicating with Bridgestone/Firestone about certain
subjects or engaging in any joint undertaking, merger or alliance with
Bridgestone/Firestone. The preliminary injunction hearing took place on April
16-17, 2001. The Court denied Michelin's request for a preliminary injunction on
May 4, 2001.
Discovery took place over the course of 2001 and 2002. By mutual agreement,
Bandag and Michelin have dismissed their respective Lanham Act claims against
each other, and Bandag has dismissed its antitrust claims against Michelin. Jury
selection and certain pre-trial proceedings began on May 6, 2002 and the trial
began on May 13, 2002.
9
BANDAG, INCORPORATED AND SUBSIDIARIES
Note H. Operating Segment Information
The Company has two reportable operating segments: the Traditional Business and
TDS. 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 Tire Management Solutions, Inc. (TMS), and Quality Design Systems,
Inc. (QDS), are integrated and managed as one unit, which is referred to
internally as North America. The Company's operations located in Europe
principally service those 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 Europe.
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, South Africa, New Zealand, Indonesia and Malaysia and a licensee in
Australia, are combined under one management group referred to internally as
International.
TDS operates franchised retreading locations and commercial, retail, and
wholesale outlets throughout the United States for the sale and maintenance of
new and retread tires to principally commercial and industrial customers. Other
includes other corporate items.
The Company evaluates performance and allocates resources based primarily on
profit or loss before interest and income taxes. Intersegment sales and
transfers between the Traditional Business and TDS are recorded at a value
consistent with that to unaffiliated customers.
For the three months ended March 31 (in thousands):
Traditional Business
--------------------------------------------------------------------
North America Europe International
2002 2001 2002 2001 2002 2001
Net sales to unaffiliated
customers $ 76,291 $ 79,473 $ 12,560 $ 17,283 $ 22,750 $ 25,484
Transfers between segments 14,053 17,050 156 192 946 1,123
Operating earnings (loss) 12,663 13,332 (172) (68) 1,907 2,947
Interest income - - - - - -
Interest expense - - - - - -
--------------------------------------------------------------------
Earnings (loss) before
income taxes $ 12,663 $ 13,332 $ (172) $ (68) $ 1,907 $ 2,947
====================================================================
TDS Other Consolidated
2002 2001 2002 2001 2002 2001
Net sales to unaffiliated
customers $ 80,892 $ 82,872 $ - $ - $ 192,493 $ 205,112
Transfers between segments 436 528 - - 15,591 18,893
Operating earnings (loss) (5,965) (5,269) (6,139) (6,923) 2,294 4,019
Interest income - - 1,409 1,844 1,409 1,844
Interest expense - - (1,767) (1,884) (1,767) (1,884)
---------- ---------- ----------- ---------- ----------- ----------
Earnings (loss) before
income taxes $ (5,965) $ (5,269) $ (6,497) $ (6,963) $ 1,936 $ 3,979
===================================================================
10
BANDAG, INCORPORATED AND SUBSIDIARIES
Item 2 -Management's Discussion and Analysis of Financial Condition and Results
of Operations.
General
- -------
Results include the Company's two reportable operating segments - its
Traditional Business and Tire Distribution Systems, Inc. (TDS).
During the first quarter of 2002, the Company adopted Statement of Financial
Accounting Standards No. 142, (SFAS 142), which resulted in a non-cash
transition charge in the quarter of $47,300,000 (net of tax benefit of
$3,704,000), or $2.27 per diluted share, to recognize impairment of goodwill,
substantially all of which related to TDS. Pursuant to SFAS 142 the $47,300,000
charge is treated as a change in accounting principle. Also in accordance with
SFAS 142, the Company stopped amortizing goodwill as of January 1, 2002.
During the first quarter of 2002, the Company acquired the assets of Open Road
Technologies, Inc., the supplier of RoadWare(TM) retread shop management
software, with annual sales of approximately $5,000,000.
Consolidated net sales for the quarter ended March 31, 2002 were 6% lower than
the prior year period on a 9% decline in Traditional Business net sales. The
decrease in consolidated and Traditional Business net sales primarily resulted
from a 6% decline in retread material unit volume and a 36% decline in equipment
sales for the quarter ended March 31, 2002. Net sales were also unfavorably
affected by the lower translated value of the Company's
foreign-currency-denominated sales, particularly the euro, Brazilian real and
South African rand. The decrease in retread material unit volume reflects the
continued effects of sluggish business conditions throughout the truck tire
industry worldwide. TDS net sales decreased 2% for the quarter ended March 31,
2002 from the prior year period due to the difficult market conditions. The
Company's seasonal sales pattern, which is tied to trucking activity, was
similar to the first quarter in previous years in that it is seasonally the
slowest quarter for both sales and earnings. Both segments were similarly
affected.
The consolidated and Traditional Business gross profit margins for the quarter
ended March 31, 2002 increased 2.6 and 5.3 percentage points from the prior year
period, respectively, primarily reflecting lower raw material costs across all
business segments and geographic areas.
Excluding the effects of goodwill amortization in 2001, consolidated operating
and other expenses increased 6% and 7%, respectively, for the quarter ended
March 31, 2002 compared to the prior year period. The increase in operating and
other expenses primarily resulted from lower pension income and approximately
$2,200,000 in expense related to converting SystemBandag users to the
RoadWare(TM) software system. Expenses for the Michelin litigation for each of
the quarters ended March 31, 2002 and 2001, were approximately $4,000,000.
11
BANDAG, INCORPORATED AND SUBSIDIARIES
Earnings before the cumulative effect of accounting change for the quarter ended
March 31, 2002 were down 48% from the prior year period. Excluding the effects
of goodwill amortization in 2001, earnings before the cumulative effect of
accounting change for the quarter ended March 31, 2002 were down 72%. Diluted
earnings per share before the cumulative effect of accounting change decreased
to $.06, down from diluted earnings per share of $.11 in the prior year period
or $.21 per diluted share when excluding the effects of goodwill amortization in
2001.
TRADITIONAL BUSINESS
- --------------------
The Company's Traditional Business operations located in the United States and
Canada, together with Tire Management Solutions, Inc. and Quality Design
Systems, Inc., are integrated and managed as one unit, which is referred to
internally as North America. Net sales in North America for the quarter ended
March 31, 2002 were 6% below the prior year period primarily due to a 5% lower
retread material unit volume and a decrease in equipment sales. The decrease in
retread material unit volume reflects the continued effects of sluggish business
conditions throughout the truck tire industry. A decrease in average raw
material costs in the United States and Canada primarily resulted in a 7
percentage point increase in North America's gross margin for the quarter ended
March 31, 2002 from the prior year period. North American operating and other
expenses for the quarter ended March 31, 2002 were 15% higher than the prior
year period primarily due to lower pension income and approximately $2,200,000
in expense related to converting SystemBandag users to the RoadWare(TM) software
system. For the quarter ended March 31, 2002, higher gross profit was offset by
higher operating and other expenses, resulting in a 5% decrease in earnings
before income taxes from the prior year period.
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 Europe. Net sales in Europe
for the quarter ended March 31, 2002 declined 27% from the prior year period on
a retread material unit volume decrease of 19%. The spread between the net sales
decrease and the retread material unit volume decrease is due to the lower
translated value of the euro and lower equipment sales. Gross profit margin for
the quarter ended March 31, 2002 was 1 percentage point lower than the prior
year period. Operating expenses for the quarter ended March 31, 2002 decreased
15% from the prior year period primarily due to the lower translated value of
the euro. Principally as a result of lower sales and gross margin, earnings
before income taxes for the quarter ended March 31, 2002 decreased $104,000 from
the prior year period.
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, South Africa, New Zealand, Indonesia and Malaysia and a licensee in
Australia, are combined under one
12
BANDAG, INCORPORATED AND SUBSIDIARIES
management group referred to internally as International. Net sales in
International for the quarter ended March 31, 2002 declined 11% from the prior
year period as a result of a 3% decrease in retread material unit volume. The
spread between the net sales decrease and the retread material unit volume
decrease is primarily due to the lower translated value of the Brazilian real
and South African rand. The gross profit margin for the quarter ended March 31,
2002 increased 2.6 percentage points from the prior year period due mainly to
lower raw material costs. Operating and other expenses for the quarter ended
March 31, 2002 decreased 15% from the prior year period primarily due to the
lower translated value of the Brazilian real and South African rand. Earnings
before income taxes for the quarter ended March 31, 2002 decreased 35% from the
prior year period primarily due to the reduction in sales.
TIRE DISTRIBUTION SYSTEMS, INC.
- -------------------------------
TDS net sales for the quarter ended March 31, 2002 decreased 2% from the prior
year period. The decrease in net sales resulted from difficult market
conditions. The gross profit margin for the quarter ended March 31, 2002
decreased 1% from the prior year period, while TDS's operating expenses as a
percentage of sales for the quarter ended March 31, 2002 were 2 percentage
points higher than the prior year period primarily due to higher employee
related expenses. Primarily as a result of the lower sales volume and higher
operating expenses, TDS recorded a loss before interest and taxes of $5,965,000
for the quarter ended March 31, 2002. This compares to a loss before interest
and taxes, excluding goodwill amortization, of $3,201,000 in the prior year
period.
Financial Condition:
- -------------------
Liquidity
At March 31, 2002, the Company had cash and cash equivalents of $173,831,000, as
compared to $96,890,000 at December 31, 2001. The Company's ratio of total
current assets to total current liabilities was 2.5 to 1 at March 31, 2002 as
compared to 2.4 to 1 at December 31, 2001. In addition, at March 31, 2002, the
Company had approximately $94,286,000 in borrowings available under unused lines
of credit.
Operating Activities
Net cash provided by operating activities for the quarter ended March 31, 2002
was $14,563,000 more than the amount for the same period last year, primarily
due to decreases in accounts receivables and inventories.
13
BANDAG, INCORPORATED AND SUBSIDIARIES
Investing Activities
The Company spent $3,162,000 on capital expenditures through March 31, 2002,
compared to $5,515,000 spent for the same period last year. The Company
typically funds its capital expenditures from operating cash flows. During the
quarter ended March 31, 2002, the Company acquired the assets of Open Road
Technologies, Inc., the supplier of RoadWare(TM) retread shop management
software for $2,000,000.
The Company's excess funds are invested in financial instruments with various
maturities, but only instruments with an original maturity date of over 90 days
are classified as investments for balance sheet purposes. The Company's
purchases of investments exceeded maturities by $1,757,000 during the three
months, bringing total investments to approximately $12,151,000 as of March 31,
2002.
Financing Activities
Cash dividends totaled $6,502,000 for the first quarter, compared to $6,272,000
for the same period last year. The Company purchased 1,205 shares of its
outstanding Common and Class A Common stock, at prevailing market prices, for
$41,000 during the three months ended March 31, 2002. Cash dividends and stock
purchases were funded from operational cash flows.
14
BANDAG, INCORPORATED AND SUBSIDIARIES
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K for the three months
ended March 31, 2002.
15
BANDAG, INCORPORATED AND SUBSIDIARIES
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: May 14, 2002 /s/ Martin G. Carver
--------------------
Martin G. Carver
Chairman and Chief Executive Officer
Date: May 14, 2002 /s/ Warren W. Heidbreder
------------------------
Warren W. Heidbreder
Vice President, Chief Financial Officer
16