Bandag, Incorporated Reports 4th Quarter EPS of $1.50
Flash Results Bandag, Inc.
(Numbers in millions, except per share data)
12 Mos. 12 Mos. Q4 2003 Q4 2002 2003 2002 Net Sales $225.7 $231.0 $816.4 $900.5 Income before cumulative effect of accounting change $29.1 $17.5 $60.2 $50.1* Diluted EPS before cumulative effect of accounting change $1.50 $0.91 $3.11 $2.52* Shares Outstanding - diluted 19.5 19.3 19.4 19.9
*Before reflecting a cumulative effect of accounting change of $47.3 million (net of income tax benefit of $3.7 million), or $2.38 per diluted share, which was recorded in the first quarter of 2002 in accordance with SFAS 142.
MUSCATINE, IOWA, Jan. 27 -- Bandag, Incorporated today reported consolidated net income of $29.1 million, or $1.50 per diluted share, for fourth quarter 2003, which compares to fourth quarter 2002 consolidated net income of $17.5 million, or $0.91 per diluted share. Net income for each of fourth quarter 2002 and 2003 included favorable tax adjustments of approximately $3.0 million, or $0.15 per diluted share, resulting primarily from the resolution of certain tax matters. Consolidated net sales for fourth quarter 2003 were $225.7 million, a decline of two percent compared to consolidated net sales of $231.0 million in the prior year period. The decline in net sales was largely attributable to the lower sales of Bandag's distribution subsidiary, Tire Distribution Systems, Inc. (TDS), primarily due to the planned divestitures and closures in 2002 and 2003.
For the full year, Bandag reported consolidated net income of $60.2 million, or $3.11 per diluted share, compared to 2002 net income of $2.8 million, or $0.14 per diluted share, which included the write-off of goodwill, primarily of TDS, of $47.3 million net of income tax, or $2.38 per diluted share, related to the adoption of Statement of Financial Accounting Standards No. 142 as of January 1, 2002. Consolidated net sales for 2003 decreased nine percent to $816.4 million from $900.5 million in 2002.
In announcing fourth quarter results, Martin G. Carver, Bandag's Chairman of the Board and Chief Executive Officer, said, "Bandag improved its margins in both the traditional business and TDS during the final three months of 2003. Our investments in capabilities to provide customized solutions to our customers served us well during a year that proved to be challenging for the transportation industry."
Financial Highlights
-- Consolidated net sales for fourth quarter 2003 were $225.7 million,
compared to consolidated net sales of $231.0 million in fourth quarter
2002, a decline of two percent. Affecting the results were several
factors:
* TDS divestitures and closures were the primary contributing factor to
the decline in sales, which was partially offset by lower inter-
company sales eliminations. TDS fourth quarter 2003 sales declined
39 percent to $49.3 million, primarily due to 2002 and 2003
divestitures and closures. These divested and closed locations had
sales of approximately $33.6 million in the fourth quarter of 2002.
* North American business unit volume was two percent below the
previous year, although net sales were up approximately $14.0 million
primarily due to a price increase implemented January 1, 2003 and to
a shift in sales from TDS to independent dealers.
* Unit volume in the European business unit decreased one percent while
unit volume in the International business unit increased three
percent.
* The weaker U.S. dollar had a favorable impact of $10.9 million on
consolidated net sales when translating foreign currency denominated
net sales to U.S. dollars.
-- Fourth quarter 2003 consolidated gross margin improved by three
percentage points, primarily due to higher margins in the European and
International business units, coupled with decreased TDS sales which
carry lower margins.
-- Consolidated operating and other expenses for fourth quarter 2003 were
reduced by 14 percent to $58.9 million from $68.5 million in the prior
year period, primarily due to TDS divestitures. Operating and other
expenses in North America were negatively impacted by $2.1 million of
increased pension expense. Operating and other expenses in fourth
quarter 2002 included $2.7 million related to impairment charges
recorded against the carrying value of the joint venture in India, and
operations in Brazil and Venezuela.
-- Operating income for the North America business unit in fourth quarter
2003 was generally comparable to the previous year, despite a decrease
in volume.
-- Operating income for the European business unit increased $4.2 million
for the fourth quarter of 2003 as compared to the previous year,
primarily due to the absence of $3.5 million of restructuring charges
recorded in the fourth quarter of 2002.
-- International business unit operating income increased $5.0 million for
the fourth quarter of 2003 as compared to the previous year, primarily
due to the absence of $2.7 million related to impairment charges
recorded in the fourth quarter of 2002.
-- During fourth quarter 2003, TDS reported an operating profit of
$1.6 million as compared to an operating loss of $3.0 million in fourth
quarter 2002. TDS operating profit was positively impacted by higher
gross margin and the divestiture of several less profitable locations.
Commenting on fourth quarter results and the overall outlook for 2004, Mr. Carver said, "Financial results have improved at our European, International and most particularly our TDS operations for the fourth quarter of 2003. Even though economic recovery remains in the early stages, our progress during 2003 positions Bandag well to benefit from new revenue opportunities and continued economic improvement."
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.
Bandag, Incorporated
Unaudited Financial Highlights
(In thousands, except per share data)
Fourth Quarter Twelve Months
Consolidated Statements Ended December 31, Ended December 31,
of Earnings 2003 2002 2003 2002
Net sales $225,651 $230,961 $816,397 $900,503
Interest income 1,329 1,341 4,835 5,024
Other income 1,795 1,610 6,954 6,426
Total income 228,775 233,912 828,186 911,953
Cost of products sold 133,482 143,975 508,139 563,689
Operating & other expenses 58,915 68,517 233,744 269,889
Interest expense 666 1,516 2,403 6,857
Total expenses 193,063 214,008 744,286 840,435
Income before income taxes
and cumulative effect of
accounting change 35,712 19,904 83,900 71,518
Income taxes 6,593 2,368 23,700 21,465
Income before cumulative
effect of accounting
change 29,119 17,536 60,200 50,053
Cumulative effect of
accounting change (net of
income tax benefit of
$3,704) - - - (47,260)
Net income $29,119 $17,536 $60,200 $2,793
Basic earnings per share
Income before cumulative
effect of accounting
change $1.52 $ 0.92 $3.14 $2.53
Cumulative effect of
accounting change - - - (2.39)
Net income $1.52 $ 0.92 $3.14 $0.14
Diluted earnings per share
Income before cumulative
effect of accounting
change $1.50 $ 0.91 $3.11 $2.52
Cumulative effect of
accounting change - - - (2.38)
Net income $1.50 $ 0.91 $3.11 $0.14
Weighted average shares
outstanding
Basic 19,193 19,099 19,161 19,754
Diluted 19,451 19,277 19,369 19,888
Fourth Quarter Twelve Months
Ended December 31, Ended December 31,
Segment Information 2003 2002 2003 2002
Net Sales
North America $121,380 $107,347 $399,939 $380,278
Europe 28,403 22,925 83,064 67,176
International 26,587 19,441 93,667 88,114
TDS 49,281 81,248 239,727 364,935
Total net sales $225,651 $230,961 $816,397 $900,503
Segment Operating Profit
(Loss)
North America $29,491 $29,235 $76,786 $95,251
Europe 2,154 (2,060) 2,718 (1,511)
International 4,422 (593) 14,236 9,083
TDS 1,598 (3,013) (3,017) (11,382)
Corporate expenses &
other (2,616) (3,490) (9,255) (18,090)
Net interest (expense)
income 663 (175) 2,432 (1,833)
Income before income taxes
and cumulative effect of
accounting change $35,712 $19,904 $83,900 $71,518
Bandag, Incorporated
Unaudited Financial Highlights
(In thousands)
Dec. 31, Dec. 31,
Condensed Consolidated Balance Sheets 2003 2002
Assets:
Cash and cash equivalents $189,976 $129,412
Investments 10,808 14,261
Accounts receivable - net 156,894 143,723
Inventories 62,765 59,447
Other current assets 45,843 76,453
Total current assets 466,286 423,296
Property, plant, and equipment - net 107,975 116,698
Other assets 84,600 77,833
Total assets $658,861 $617,827
Liabilities & shareholders' equity:
Accounts payable $25,710 $26,813
Income taxes payable 14,946 19,883
Accrued liabilities 97,285 93,459
Short-term notes payable and current portion
of other obligations 10,252 7,706
Total current liabilities 148,193 147,861
Long-term debt and other obligations 35,259 45,373
Shareholders' equity
Common stock 19,269 19,152
Additional paid-in capital 17,903 13,034
Retained earnings 477,499 442,251
Accumulated other comprehensive loss (39,262) (49,844)
Total shareholders' equity 475,409 424,593
Total liabilities & shareholders' equity $658,861 $ 617,827
Twelve Months
Ended December 31,
Condensed Consolidated Statements of Cash Flows 2003 2002
Operating Activities
Net income $60,200 $2,793
Cumulative effect of accounting change - 50,964
Provisions for depreciation and amortization 27,179 32,333
(Increase) decrease in operating assets
and liabilities - net (7,957) 45,257
Net cash provided by operating activities 79,422 131,347
Investing Activities
Additions to property, plant and equipment (16,265) (14,801)
Purchases of investments - net 3,453 (3,567)
Payments for acquisitions of businesses - (1,951)
Proceeds from divestiture of businesses 21,315 6,604
Net cash provided by (used in) investing
activities 8,503 (13,715)
Financing Activities
Principal payments on short-term notes payable
and other long-term liabilities (7,066) (67,979)
Cash dividends (24,595) (25,550)
Purchases of Common Stock (238) (40,334)
Net cash used in financing activities (31,899) (133,863)
Effect of exchange rate changes on cash and
cash equivalents 4,538 18
Increase in cash and cash equivalents 60,564 (16,213)
Cash and cash equivalents at beginning of year 129,412 145,625
Cash and cash equivalents at end of period $189,976 $ 129,412