Bandag, Incorporated Reports 1st Quarter EPS of $0.20
Flash Results Bandag, Incorporated
(Numbers in millions, except per share data) Q1 2004 Q1 2003 Net sales $173.5 $175.3 Net income $4.0 $2.4 Diluted earnings per share $0.20 $0.12 Shares outstanding - diluted 19.7 19.3
MUSCATINE, Iowa, April 20 -- Bandag, Incorporated today reported consolidated net income of $4.0 million, or $0.20 per diluted share, for first quarter 2004. This compares to first quarter 2003 consolidated net income of $2.4 million, or $0.12 per diluted share. Consolidated net sales for first quarter 2004 were $173.5 million, a decline of one percent, compared to consolidated net sales of $175.3 million in first quarter 2003.
In announcing first quarter earnings, Martin G. Carver, Chairman of the Board and Chief Executive Officer of Bandag said, "Both U.S. tread sales and Tire Distribution Systems, Inc. (TDS) results indicate continued gradual improvement in the North American markets. Trucking activity is trending stronger than 2003. At the 2004 Bandag Alliance Business Conference, our Strategic Alliance dealers responded very positively to both the acquisition of Speedco, Inc., the quick-service truck lubrication business acquired on February 13, 2004, and the strategy that drove the acquisition - namely, building and expanding capabilities beyond our traditional tire products to enable Bandag and our Strategic Alliance dealers to address a broad range of trucking fleet needs."
Financial Highlights
-- Factors that affected consolidated net sales for first quarter 2004
were:
-- TDS net sales declined by $22.7 million due to divestitures and
closures in 2003 and 2004. First quarter 2004 and 2003 sales of
divested and closed TDS locations were approximately $0.2 million
and $25.1 million, respectively. The 2004 TDS net sales decline was
partially offset by a $4.3 million reduction in intercompany sales
eliminated in consolidation.
-- Speedco sales were $6.7 million for the period between Bandag's
acquisition of 87.5 percent ownership on February 13, 2004 and March
31, 2004.
-- North America business unit volume was six percent higher than the
prior year period, and net sales increased by $10.0 million
primarily due to higher volume and the reduction in intercompany
sales due to the shift of divested TDS sales to the independent
dealers acquiring the TDS locations.
-- European business unit volume decreased two percent, while net sales
increased $2.2 million primarily due to the effect of translating
foreign currency denominated net sales into U.S. dollars.
-- International business unit volume decreased ten percent, while net
sales increased $2.0 million primarily due to the effect of
translating foreign currency denominated net sales into U.S.
dollars.
-- Translating foreign currency denominated net sales into U.S. dollars
produced a favorable impact of approximately $7.1 million on
consolidated net sales.
-- First quarter 2004 consolidated gross margin improved by approximately
one percent, primarily due to the decrease in lower-margin TDS sales.
-- Consolidated operating and other expenses for first quarter 2004 were
$56.6 million, a decrease of $2.1 million from the prior year period,
primarily as a result of the TDS divestitures and closures.
-- Operating income for the North America business unit in first quarter
2004 increased $1.5 million, primarily due to the higher volume.
-- Operating income in the European business unit in first quarter 2004
decreased $0.1 million compared to the previous year. Declines of two
percent in volume and one percent in gross margin were partially offset
by a $1.3 million increase in net foreign exchange gains.
-- Operating income for the International business unit in first quarter
2004 improved $0.4 million compared to the prior year period as
improved gross margins, lower expense-to-sales ratios and the
favorable impact of translating foreign currency denominated net sales
into U.S. dollars more than offset the ten percent decrease in unit
volume.
-- TDS operating loss was reduced by $1.2 million, which is proportionate
to reduced sales.
-- Speedco operating income for the period between February 13, 2004 and
March 31, 2004 was $0.9 million.
-- Corporate expenses and other increased $1.2 million from first quarter
2003 levels, primarily due to unrealized foreign exchange losses on
U.S. denominated investments.
Outlook
Commenting on the continuing outlook for 2004, Mr. Carver said, "Like many companies, we continue to temper our optimism for the remainder of the year, particularly given the volatile conditions in the Middle East and elsewhere, and consumer confidence in the U.S."
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.
Bandag, Incorporated
Unaudited Financial Highlights
(In thousands, except per share data)
First Quarter
Ended March 31,
Consolidated Statements of Earnings 2004 2003
Income
Net sales $173,529 $ 175,279
Other 1,762 1,844
175,291 177,123
Costs and expenses
Cost of products sold 112,803 115,331
Operating & other expenses 56,556 58,608
169,359 173,939
Income from operations 5,932 3,184
Interest income 1,050 1,156
Interest expense (562) (659)
Earnings before income taxes and minority interest 6,420 3,681
Income taxes 2,343 1,288
Minority interest 58 -
Net earnings $ 4,019 $2,393
Earnings per share
Basic $0.21 $0.13
Diluted $0.20 $0.12
Weighted average shares outstanding
Basic 19,250 19,118
Diluted 19,655 19,277
First Quarter
Ended March 31,
Segment Information 2004 2003
Net Sales
North America $82,217 $72,212
Europe 21,196 18,981
International 22,443 20,472
TDS 40,939 63,614
Speedco 6,734 -
Total net sales $173,529 $ 175,279
Segment Operating Profit (Loss)
North America $ 5,454 $3,916
Europe 1,690 1,793
International 3,039 2,672
TDS (2,841) (4,052)
Speedco 903 -
Corporate expenses & other (2,313) (1,145)
Net interest income 488 497
Earnings before income taxes and minority
interest $ 6,420 $3,681
Note: Certain prior year amounts have been reclassified to conform with
the current year presentation.
Bandag, Incorporated
Unaudited Financial Highlights
(In thousands)
Mar. 31, Dec. 31,
Condensed Consolidated Balance Sheets 2004 2003
Assets:
Cash and cash equivalents $159,161 $189,976
Investments 7,412 10,808
Accounts receivable - net 125,112 156,894
Inventories 64,855 62,765
Other current assets 54,613 45,843
Total current assets 411,153 466,286
Property, plant, and equipment - net 146,661 107,975
Other assets 109,543 86,268
Total assets $667,357 $660,529
Liabilities & shareholders' equity:
Accounts payable $29,696 $25,710
Income taxes payable 14,813 14,946
Accrued liabilities 90,003 97,285
Short-term notes payable and current portion
of other obligations 10,673 10,252
Total current liabilities 145,185 148,193
Long-term debt and other obligations 38,929 35,259
Minority interest 2,121 -
Shareholders' equity
Common stock 19,404 19,269
Additional paid-in capital 22,945 17,903
Retained earnings 475,181 477,499
Accumulated other comprehensive loss (36,408) (37,594)
Total shareholders' equity 481,122 477,077
Total liabilities & shareholders' equity $667,357 $660,529
Three Months
Ended March 31,
Condensed Consolidated Statements of Cash Flows 2004 2003
Operating Activities
Net earnings $4,019 $2,393
Provisions for depreciation and amortization 5,845 7,200
Decrease in operating assets and liabilities
- net 21,296 10,482
Net cash provided by operating activities 31,160 20,075
Investing Activities
Additions to property, plant and equipment (6,446) (4,520)
Sales of investments - net 3,396 3,043
Payments for acquisitions of businesses (52,959) -
Proceeds from divestiture of businesses 862 3,867
Net cash provided by (used in) investing
activities (55,147) 2,390
Financing Activities
Principal payments on short-term notes
payable and other long-term liabilities (758) (21)
Cash dividends (6,260) (6,128)
Purchases of Common Stock (33) (33)
Net cash used in financing activities (7,051) (6,182)
Effect of exchange rate changes on cash and
cash equivalents 223 1,144
Increase (decrease) in cash and cash
equivalents (30,815) 17,427
Cash and cash equivalents at beginning of year 189,976 129,412
Cash and cash equivalents at end of period $159,161 $146,839