EXHIBIT 99
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BANDAG, INCORPORATED o 2905 N. HWY. 61 o MUSCATINE, IA 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
October 16, 2003 Web Site: www.bandag.com
BANDAG, INCORPORATED REPORTS 3RD QUARTER EPS OF $1.03
Flash Results
Bandag, Inc. (NYSE: BDG and BDGA)
(Numbers in Millions, Except Per Share Data)
Q3 2003 Q3 2002 9 Mos. 2003 9 Mos. 2002
Net Sales $211.4 $245.9 $590.7 $669.5
Income before cumulative effect of accounting $20.0 $19.6 $31.1 $32.5*
change
Diluted EPS before cumulative effect of $1.03 $1.02 $1.61 $1.62*
accounting change
Shares Outstanding - diluted 19.4 19.2 19.3 20.1
*A cumulative effect of accounting change of $47.3 million net of income
tax, or $2.35 per diluted share, was recorded in the first quarter of 2002
in accordance with SFAS 142.
MUSCATINE, IOWA, October 16, 2003 -- Bandag, Incorporated (NYSE:BDG and BDGA)
today reported consolidated net income of $20.0 million, or $1.03 per diluted
share, for third quarter 2003, compared to third quarter 2002 consolidated net
income of $19.6 million, or $1.02 per diluted share. Consolidated net sales for
third quarter 2003 were $211.4 million, a decline of 14%, compared to
consolidated net sales of $245.9 million in the prior year period. The decline
was largely attributable to lower sales at Bandag's distribution subsidiary,
Tire Distribution Systems, Inc. (TDS), primarily due to the 2002 and 2003
divestitures and closures.
For the first nine months of 2003, Bandag reported consolidated net income of
$31.1 million, or $1.61 per diluted share. This compares to a consolidated net
loss of $14.7 million, or $0.73 per diluted share for the first nine months of
2002, which included the write-off of goodwill of $47.3 million net of income
tax, or $2.35 per diluted share, related to the adoption of SFAS 142 as of
January 1, 2002. Results for the first nine months of 2003 were impacted by
approximately $0.8 million ($0.5 million after tax, or $0.03 per diluted share)
in net charges related to TDS for divestitures and real estate impairment
charges. In comparison, results for the first nine months of 2002 were reduced
by charges of approximately $10.7 million ($6.7 million after tax, or $0.33
More--
per diluted share) related to litigation expense and $2.2 million ($1.4 million
after tax, or $0.07 per diluted share) related to converting SystemBandag users
to the RoadWare(TM) software system. Consolidated net sales for the first nine
months of 2003 decreased by 12% to $590.7 million from consolidated net sales of
$669.5 million in the prior year period.
In announcing third quarter results, Martin G. Carver, Bandag's Chairman of the
Board and Chief Executive Officer, said, "Overall, third quarter net income
showed improvement compared to the first six months of the year. Although the
North America business unit volume was 4% below the previous year, the U.S.
economy appears to be improving and we are cautiously optimistic we will begin
to see sustainable sales improvement at the business unit level in the months
ahead. Bandag experienced a small unit volume decrease in European markets,
which remained soft. Unit volumes in the International markets experienced
greater declines due in large part to difficult business climates in those
areas."
Reviewing the performance of TDS, Mr. Carver said, "TDS' results were
gratifying, with improvement in both sales and operating margins after
eliminating sales affected by divestitures and closings. We are pleased that our
independent dealers who acquired TDS locations are having success in integrating
those operations into their businesses."
Commenting on the outlook for the remainder of the year, Mr. Carver said, "To
say that we're confident of an economic rebound in the U.S. for the remainder of
the year may overstate the case, given that there are many mixed signals coming
from the marketplace. Nonetheless, we are hopeful that positive indicators will
lead to sustained improvement in the business climate, attesting to the arrival
of economic recovery."
Financial Highlights
o Consolidated net sales for third quarter 2003 were $211.4 million, compared
to consolidated net sales of $245.9 million in third quarter 2002, a
decline of 14%. Affecting the decline were several factors:
o North America business unit volume was 4% below the previous year due
to freight traffic that continued to be flat for most of the quarter,
which adversely affected replacement tire purchasing decisions.
o Unit volume in the European business unit decreased by 2% and unit
volume in the International business unit decreased by 14%.
o The weaker U.S. dollar had a favorable impact of $4.8 million on
consolidated net sales when translating foreign currency denominated
results to U.S. dollars.
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o TDS divestitures contributed to the decline in sales, which was
partially offset by lower inter-company sales eliminations. TDS third
quarter 2003 sales declined 42% to $60.1 million primarily due to 2002
and 2003 divestitures and closures. These divested or closed locations
had sales of approximately $48.8 million in the third quarter of 2002.
Locations that were divested or closed in 2003 contributed $1.7
million to third quarter 2003 sales.
o Operating and other expenses were reduced by 14% to $53.0 million from
$61.9 million in the prior year period, primarily due to TDS divestitures.
o Net foreign exchange income of $1.3 million in third quarter 2003 was
comparable to the net foreign exchange income of $1.0 million in the third
quarter of 2002.
o During third quarter 2003, the North America business unit's operating
profit declined by 10%, or $3.1 million, from third quarter 2002, primarily
due to lower volume, higher raw material costs and an increase in fleet
subsidy.
o Operating income for the European and International business units in third
quarter 2003 was generally comparable to the previous year, despite
decreases in unit volume.
o During third quarter 2003, TDS recorded a profit of $1.9 million, which
included a $0.5 million net gain on divestitures. This compares to an
operating loss of $1.0 million in third quarter 2002, which included a $0.3
million loss on divestitures.
Bandag, Incorporated manufactures retreading materials and equipment for its
worldwide network of more than 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)
Third Quarter Nine Months
Ended September 30, Ended September 30,
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Consolidated Statements of Earnings 2003 2002 2003 2002
- ----------------------------------- ---- ---- ---- ----
Net sales $ 211,390 $ 245,902 $ 590,746 $ 669,542
Interest income 1,298 966 3,506 3,683
Other income 1,624 1,581 5,159 4,816
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Total income 214,312 248,449 599,411 678,041
Cost of products sold 129,791 153,547 374,657 419,714
Operating & other expenses 52,993 61,917 174,829 201,372
Interest expense 527 1,829 1,737 5,341
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Total expenses 183,311 217,293 551,223 626,427
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Income before income taxes and cumulative effect of
accounting change 31,001 31,156 48,188 51,614
Income taxes 11,006 11,528 17,107 19,097
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Income before cumulative effect of accounting change 19,995 19,628 31,081 32,517
Cumulative effect of accounting change (net of income
tax benefit of $3,704) - - - (47,260)
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Net income (loss) $ 19,995 $ 19,628 $ 31,081 $ (14,743)
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Basic earnings (loss) per share
Income before cumulative effect of accounting change $ 1.04 $ 1.03 $ 1.62 $ 1.63
Cumulative effect of accounting change - - - (2.37)
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Net income (loss) $ 1.04 $ 1.03 $ 1.62 $ (0.74)
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Diluted earnings (loss) per share
Income before cumulative effect of accounting change $ 1.03 $ 1.02 $ 1.61 $ 1.62
Cumulative effect of accounting change - - - (2.35)
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Net income (loss) $ 1.03 $ 1.02 $ 1.61 $ (0.73)
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Weighted average shares outstanding
Basic 19,175 19,091 19,150 19,972
Diluted 19,378 19,237 19,342 20,141
Third Quarter Nine Months
Ended September 30, Ended September 30,
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Segment Information 2003 2002 2003 2002
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Net Sales
North America $ 109,986 $ 103,053 $ 278,559 $ 272,931
Europe 17,845 16,883 54,661 44,251
International 23,454 22,000 67,080 68,673
TDS 60,105 103,966 190,446 283,687
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Total net sales $ 211,390 $ 245,902 $ 590,746 $ 669,542
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Segment Operating Profit (Loss)
North America $ 27,000 $ 30,082 $ 47,295 $ 66,016
Europe (147) 360 564 549
International 3,714 3,514 9,814 9,676
TDS 1,867 (959) (4,615) (8,369)
Corporate expenses & other (2,204) (978) (6,639) (14,600)
Net interest (expense) income 771 (863) 1,769 (1,658)
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Income before income taxes and cumulative effect of
accounting change $ 31,001 $ 31,156 $ 48,188 $ 51,614
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Bandag, Incorporated
Unaudited Financial Highlights
(In thousands)
September 30, Dec. 31,
Condensed Consolidated Balance Sheets 2003 2002
- ------------------------------------- ---- ----
Assets:
Cash and cash equivalents $ 179,339 $ 129,412
Investments 9,416 14,261
Accounts receivable - net 156,375 154,484
Inventories 64,355 59,447
Other current assets 56,122 76,453
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Total current assets 465,607 434,057
Property, plant, and equipment - net 109,546 116,698
Other assets 69,570 67,072
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Total assets $ 644,723 $ 617,827
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Liabilities & shareholders' equity:
Accounts payable $ 24,507 $ 26,813
Income taxes payable 24,831 19,883
Accrued liabilities 93,130 93,459
Short-term notes payable and current portion of other obligations 7,434 7,706
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Total current liabilities 149,902 147,861
Long-term debt and other obligations 45,335 45,373
Deferred income tax liabilities - -
Shareholders' equity
Common stock 19,251 19,152
Additional paid-in capital 16,859 13,034
Retained earnings 454,692 442,251
Equity adjustment from foreign currency translation (41,316) (49,844)
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Total shareholders' equity 449,486 424,593
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Total liabilities & shareholders' equity $ 644,723 $ 617,827
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Nine Months
Ended September 30,
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Condensed Consolidated Statements of Cash Flows 2003 2002
- ----------------------------------------------- ---- ----
Operating Activities
Net income (loss) $ 31,081 $ (14,743)
Cumulative effect of accounting change - 50,964
Provisions for depreciation and amortization 20,295 23,756
Decrease in operating assets and liabilities - net 858 36,050
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Net cash provided by operating activities 52,234 96,027
Investing Activities
Additions to property, plant and equipment (11,319) (12,618)
Purchases of investments - net 4,845 (2,357)
Payments for acquisitions of businesses - (1,951)
Proceeds from divestiture of businesses 21,449 3,379
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Net cash provided by (used in) investing activities 14,975 (13,547)
Financing Activities
Principal payments on short-term notes payable and other long-term
liabilities (36) (169)
Cash dividends (18,435) (19,520)
Purchases of Common Stock (184) (40,313)
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Net cash used in financing activities
(18,655) (60,002)
Effect of exchange rate changes on cash and cash equivalents 1,373 (272)
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Increase in cash and cash equivalents
49,927 22,206
Cash and cash equivalents at beginning of year 129,412 145,625
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Cash and cash equivalents at end of period $ 179,339 $ 167,831
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