BANDAG, INCORPORATED o 2905 N. HWY. 61 o MUSCATINE, IOWA 52761-5886 o 563/262-1400
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Leading the retread industry worldwide
NEWS
FOR IMMEDIATE RELEASE CONTACT: Warren W. Heidbreder
Phone: (563) 262-1260
April 17, 2003 Web Site: www.bandag.com
BANDAG, INCORPORATED REPORTS 1ST QUARTER EPS OF $0.12
Flash Results
Bandag, Incorporated (NYSE: BDG and BDGA)
(In thousands, except per share data) Q1 2003 Q1 2002
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Net sales $175.3 $192.5
Income before cumulative effect of
accounting change $2.4 $1.2
Diluted earnings per share before
cumulative effect of accounting change $0.12 $0.06
MUSCATINE, IOWA, April 17, 2003 -- Bandag, Incorporated (NYSE:BDG and BDGA)
today reported consolidated net income of $2.4 million, or $0.12 per diluted
share, for first quarter 2003. This compares to first quarter 2002 consolidated
net income of $1.2 million, or $0.06 per diluted share, before the effect of an
accounting change resulting from the adoption of SFAS No. 142 to recognize
impairment of goodwill. Bandag reported a net loss of $46.0 million, or $2.21
per diluted share, including the effects of the required accounting change in
first quarter 2002. Consolidated net sales for first quarter 2003 were $175.3
million, a decline of 9% compared to consolidated net sales of $192.5 million in
the prior-year period.
In announcing first quarter earnings, Martin G. Carver, Chairman of the Board
and Chief Executive Officer of Bandag said, "Bandag's earnings performance fared
reasonably well in spite of dealer inventory stocking in the closing months of
2002, which adversely impacted first quarter 2003 results, and economic softness
in North America during the first three months of the year. Tire Distributions
Systems, Inc. (TDS) showed some improvement over last year as it continued to
realign its distribution network, selling 17 of its locations to independent
Bandag dealers during first quarter 2003. Customer acceptance of new equipment,
service offerings and technology solutions at Bandag's second annual Fleet
Executive Symposium and the Bandag Alliance Business Conference was particularly
encouraging. Feedback indicates we have the tools and capabilities to improve
the predictability of a fleet's tire system cost, and the consistent service
coverage and product quality to allow fleets to operate more efficiently."
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Financial Highlights
o Consolidated net sales for first quarter 2003 were $175.3 million, a
decline of 9% compared to consolidated net sales of $192.5 million in first
quarter 2002. The decline primarily reflects the 21% decrease in sales at
TDS, combined with a 4% decline in worldwide traditional business tread
rubber volume.
o Consolidated gross margin declined nearly 2 percentage points during first
quarter 2003 from the same period in 2002. The decline is primarily the
result of margin erosion in North America, partially offset by lower sales
at TDS which carry lower gross margins than in the traditional business.
o Consolidated operating and other expenses declined 15%, or $10.2 million.
The decline was principally due to the absence in first quarter 2003 of
approximately $4.0 million for litigation expense and $2.2 million related
to converting SystemBandag users to the RoadWare(TM) software system, both
of which were recorded in first quarter 2002.
o In North America, Bandag's traditional business experienced an 8% decline
in demand for tread rubber during first quarter 2003. Bandag believes that
approximately half of this decline relates to dealer buying during fourth
quarter 2002 as dealers stocked inventories ahead of a January price
increase. First quarter 2003 gross margin in North America was
approximately 9 percentage points lower due to increased fleet and
market-related sales deductions, coupled with higher manufacturing expenses
and lower volume. Operating expenses for first quarter 2003 were $2.4
million higher than the prior-year period, primarily as a result of a $1.4
million increase in pension expense. Overall, North American operating
profit decreased $8.7 million during first quarter 2003 from the prior-year
period.
o In Europe, retread material volume increased approximately 18% over the
prior-year period while sales increased 51%, reflecting the combined
effects of a stronger Euro and increased sales volumes. Gross margin
improved approximately 2.5 percentage points. First quarter 2003 operating
profit was $1.4 million compared to a loss of $0.2 million in the
prior-year period, despite an increase of $1.0 million in net foreign
exchange losses from the prior-year period.
o In the International business unit, retread material volume decreased 5%
and sales decreased 10% in first quarter 2003 as compared to first quarter
2002. Translation of International sales into US Dollars were negatively
impacted by a decrease in the value of the Brazilian Real and the Mexican
Peso. International operating profit, which benefited from an increase of
$2.0 million in net foreign exchange gains from the prior-year period,
increased $1.8 million from first quarter 2002.
o TDS' first quarter 2003 sales declined 21% to $63.6 million, primarily due
to the 2002 and 2003 divestitures and closures of 44 locations. These
divested and closed locations had sales of approximately $20.5 million in
the first quarter of 2002. The locations that were divested in 2003
contributed $7.1 million to first quarter 2003 sales. TDS first quarter
2003 operating loss was $4.1 million, an improvement from the $6.0 million
loss in the prior-year period.
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Commenting on the prospects for 2003, Mr. Carver said, "The economic outlook
remains uncertain for the near term. Nevertheless, we're encouraged by the
continued progress at TDS and our dealers' and fleet customers' positive
response to Bandag's advancements as an innovative solutions provider for
commercial tire dealers and the transportation industry."
Bandag, Incorporated manufactures retreading materials and equipment for its
worldwide network of over 1,100 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, a wholly-owned subsidiary, sells
and services new and retread tires.
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Bandag, Incorporated
Unaudited Financial Highlights
(In thousands, except per share data)
First Quarter
Ended March 31,
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Consolidated Statements of Earnings 2003 2002
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Net sales $ 175,279 $ 192,493
Interest income 1,156 1,409
Other income 1,844 1,652
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Total income 178,279 195,554
Cost of products sold 115,331 122,999
Operating & other expenses 58,608 68,852
Interest expense 659 1,767
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Total expenses 174,598 193,618
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Income before income taxes and cumulative effect of accounting change 3,681 1,936
Income taxes 1,288 716
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Income before cumulative effect of accounting change 2,393 1,220
Cumulative effect of accounting change (net of income tax benefit of $3,704) - (47,260)
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Net income (loss) $ 2,393 $ (46,040)
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Basic earnings (loss) per share
Income before cumulative effect of accounting change $ 0.13 $ 0.06
Cumulative effect of accounting change - (2.30)
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Net income (loss) $ 0.13 $ (2.24)
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Diluted earnings (loss) per share
Income before cumulative effect of accounting change $ 0.12 $ 0.06
Cumulative effect of accounting change - (2.27)
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Net income (loss) $ 0.12 $ (2.21)
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Weighted average shares outstanding
Basic 19,118 20,591
Diluted 19,277 20,781
First Quarter
Ended March 31,
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Segment Information 2003 2002
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Net Sales
North America $ 72,212 $ 76,291
Europe 18,981 12,560
International 20,472 22,750
TDS 63,614 80,892
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Total net sales $ 175,279 $ 192,493
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Segment Operating Profit (Loss)
North America $ 3,916 $ 12,663
Europe 1,390 (172)
International 3,671 1,907
TDS (4,052) (5,965)
Corporate expenses & other (1,741) (6,139)
Net interest (expense) income 497 (358)
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Income before income taxes and cumulative effect of accounting change $ 3,681 $ 1,936
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Bandag, Incorporated
Unaudited Financial Highlights
(In thousands)
Mar. 31, Dec. 31,
Condensed Consolidated Balance Sheets 2003 2002
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Assets:
Cash and cash equivalents $ 146,839 $ 129,412
Investments 11,218 14,261
Accounts receivable - net 125,353 154,484
Inventories 61,899 59,447
Other current assets 75,238 76,453
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Total current assets 420,547 434,057
Property, plant, and equipment - net 112,608 116,698
Other assets 67,939 67,072
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Total assets $ 601,094 617,827
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Liabilities & shareholders' equity:
Accounts payable $ 21,751 $ 26,813
Income taxes payable 15,534 19,883
Accrued liabilities 86,083 93,459
Short-term notes payable and current portion of other obligations 7,451 7,706
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Total current liabilities 130,819 147,861
Long-term debt and other obligations 44,899 45,373
Deferred income tax liabilities - -
Shareholders' equity
Common stock 19,218 19,152
Additional paid-in capital 14,821 13,034
Retained earnings 438,461 442,251
Equity adjustment from foreign currency translation (47,124) (49,844)
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Total shareholders' equity 425,376 424,593
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Total liabilities & shareholders' equity $ 601,094 $ 617,827
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Three Months
Ended March 31,
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Condensed Consolidated Statements of Cash Flows 2003 2002
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Operating Activities
Net income $ 2,393 $ (46,040)
Cumulative effect of accounting change - 50,964
Provisions for depreciation and amortization 7,200 7,687
Decrease in operating assets and liabilities - net 10,482 27,792
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Net cash provided by operating activities 20,075 40,403
Investing Activities
Additions to property, plant and equipment (4,520) (3,162)
Purchases of investments - net 3,043 (1,457)
Payments for acquisitions of businesses - (2,000)
Proceeds from divestiture of businesses 3,867 -
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Net cash provided by (used in) investing activities 2,390 (6,619)
Financing Activities
Principal payments on short-term notes payable and other long-term liabilities (21) (77)
Cash dividends (6,128) (6,502)
Purchases of Common Stock (33) (41)
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Net cash used in financing activities (6,182) (6,620)
Effect of exchange rate changes on cash and cash equivalents 1,144 1,042
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Increase in cash and cash equivalents 17,427 28,206
Cash and cash equivalents at beginning of year 129,412 145,625
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Cash and cash equivalents at end of period $ 146,839 $ 173,831
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