Bandag, Incorporated Reports 3rd Quarter EPS of $1.02
Bandag, Inc.
Flash Results
(Numbers in Millions, Except Per Share Data)
Q3 2004 Q3 2003 9 Mos. 2004 9 Mos. 2003 Net sales $236.8 $211.4 $621.4 $590.7
Net earnings $20.1 $20.0 $36.0 $31.1
Diluted earnings per share $1.02 $1.03 $1.83 $1.61
Shares outstanding - diluted 19.7 19.4 19.7 19.3
MUSCATINE, Iowa, Oct. 15 -- Bandag, Incorporated today reported consolidated net earnings of $20.1 million, or $1.02 per diluted share, for the third quarter of 2004, compared to third quarter 2003 consolidated net earnings of $20.0 million, or $1.03 per diluted share. Consolidated net sales for the third quarter of 2004 were $236.8 million, an increase of twelve percent compared to third quarter 2003 consolidated net sales of $211.4 million. Of the sales increase, $17.0 million is attributable to Speedco, Bandag's on-highway quick-service truck lubrication subsidiary, which was acquired in the first quarter of 2004.
For the first nine months of 2004, Bandag reported consolidated net earnings of $36.0 million, or $1.83 per diluted share. This compares to consolidated net earnings of $31.1 million, or $1.61 per diluted share, for the first nine months of 2003. Consolidated net sales for the first nine months of 2004 were $621.4 million, an increase of five percent compared to consolidated net sales of $590.7 million for the first nine months of 2003.
In announcing third quarter results, Martin G. Carver, Bandag's Chairman and Chief Executive Officer, said, "Earnings improvement at Tire Distribution Systems, Inc. (TDS), Bandag's tire distribution subsidiary, and the International business unit, together with Speedco's strong performance, played a major role in offsetting lower earnings in the North American business unit. In Brazil, tread volume increased 30 percent and in Europe gross margin gains reflected the positive impact of operating improvements and recent price increases."
Reviewing TDS' performance, Mr. Carver said, "TDS delivered operating income of $3.6 million during the quarter compared to $1.9 million in the third quarter of 2003. This brought year-to-date operating income to $0.7 million compared to a loss of $4.6 million in 2003. Equally important, TDS achieved this increase on relatively flat sales, a clear indicator that the sharp operational focus over the past 18 months is paying off. However, with the divestiture of fifteen locations in Texas expected to take place in the fourth quarter of 2004, we do not necessarily expect the profitability of TDS to remain at the current levels."
Discussing Speedco performance and expansion plans, Mr. Carver said, "Speedco continues to be an outstanding performer, delivering solid results to both the top and bottom lines. During the quarter, Speedco launched quick- service tire lanes at three existing locations -- two in Texas and one in Georgia. New Speedco facilities and additional expansions of quick-service tire lanes at existing facilities are scheduled in the fourth quarter of 2004 and throughout 2005."
Financial Highlights
-- Factors that affected consolidated net sales for the third quarter of
2004 as compared to the third quarter of 2003 were:
-- North America business unit volume decreased one percent, a portion
of which is attributed to the loss of the Roadway business, while
net sales decreased two percent. Net sales were negatively impacted
by a $2.3 million increase in sales deductions which was partially
offset by a $1.4 million increase in equipment sales.
-- European business unit volume increased one percent while net sales
increased $3.9 million, or 22 percent. The increase in tread sales
is primarily due to the effect of translating foreign currency
denominated net sales into U.S. dollars and the impact of price
increases.
-- International business unit volume increased 24 percent and net
sales increased $5.6 million, or 24 percent. The increase in unit
volume was led by a 30 percent increase in Brazil.
-- Speedco net sales for the quarter were $17.0 million.
-- TDS net sales were $60.7 million, compared to $60.1 million in the
third quarter of 2003.
-- Overall, translating foreign currency denominated net sales into
U.S. dollars produced a favorable impact of approximately
$3.3 million on consolidated net sales.
-- Despite higher raw material costs within the Traditional Business,
third quarter 2004 consolidated gross margin was 38.7 percent, 0.1
percentage points higher than in the third quarter of 2003.
-- Consolidated operating and other expenses increased approximately
$11.2 million in the third quarter of 2004, primarily due to
$4.4 million in expense related to Speedco operations. Consolidated
operating and other expenses were also negatively impacted by
$1.4 million of net foreign exchange losses, compared to $1.3 million
of net foreign exchange gains in the third quarter of 2003.
-- Third quarter 2004 consolidated income from operations of $29.9 million
compared to $30.2 million in the third quarter of 2003 reflects:
-- A decrease in the North American business unit operating income of
$2.8 million, primarily due to raw material cost increases and
higher operating and other expenses.
-- An increase in the European business unit operating income of
$0.8 million, primarily due to the effect of price increases
partially offset by an increase in operating and other expenses.
-- An increase in the International business unit operating income of
$1.9 million, primarily due to an increase in sales.
-- An increase in TDS operating income of $1.7 million, primarily due
to an increase in gross margin and a decrease in operating and other
expenses.
-- Speedco operating income of $2.0 million in the third quarter of
2004.
-- An increase in corporate and other expenses of $3.8 million,
primarily due to the unfavorable impact of $0.8 million in net
foreign exchange losses in the third quarter of 2004, compared to
$1.1 million of net foreign exchange gains in 2003, related to U.S.
dollar cash balances held outside the United States.
-- In the third quarter of 2004 Bandag received $34.0 million of cash
proceeds from the sale of the tire and wheel assets that were
repurchased in accordance with Yellow Roadway Corporation's decision to
not renew the outsourcing agreement for Roadway Express tire and wheel
services.
Outlook
Commenting on the outlook for the remainder of the year, Mr. Carver said, "Bandag has made significant progress in the first nine months, and we remain strategically focused on providing an expanding array of integrated services to keep trucks rolling. While we remain optimistic about the strength of the global economy, we are keeping a watchful eye on rising energy prices and their impact on Bandag's business worldwide."
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)
Third Quarter Nine Months
Ended September 30, Ended September 30,
Consolidated Statements
of Earnings 2004 2003 2004 2003
Income
Net sales $236,793 $211,390 $621,410 $590,746
Other 2,487 1,624 5,974 5,159
239,280 213,014 627,384 595,905
Costs and expenses
Cost of products sold 145,188 129,791 392,078 374,657
Operating & other
expenses 64,184 52,993 182,529 174,829
209,372 182,784 574,607 549,486
Income from operations 29,908 30,230 52,777 46,419
Interest income 1,339 1,298 3,381 3,506
Interest expense (275) (527) (1,394) (1,737)
Earnings before income
taxes and minority
interest 30,972 31,001 54,764 48,188
Income taxes 10,757 11,006 18,441 17,107
Minority interest 91 - 286 -
Net earnings $20,124 $19,995 $36,037 $31,081
Earnings per share
Basic $1.04 $1.04 $1.87 $1.62
Diluted $1.02 $1.03 $1.83 $1.61
Weighted average shares
outstanding
Basic 19,285 19,175 19,278 19,150
Diluted 19,690 19,378 19,677 19,342
Third Quarter Nine Months
Ended September 30, Ended September 30,
Segment Information 2004 2003 2004 2003
Net Sales
North America $108,317 $109,986 $291,076 $278,559
Europe 21,751 17,845 62,521 54,661
International 29,061 23,454 77,152 67,080
TDS 60,651 60,105 152,527 190,446
Speedco 17,013 - 38,134 -
Total net sales $236,793 $211,390 $621,410 $590,746
Segment Operating Profit (Loss)
North America $24,165 $27,000 $45,795 $ 48,567
Europe 307 (472) 333 1,040
International 4,796 2,895 10,709 9,053
TDS 3,563 1,867 688 (4,615)
Speedco 1,979 - 4,636 -
Corporate expenses &
other (4,902) (1,060) (9,384) (7,626)
Net interest income 1,064 771 1,987 1,769
Earnings before income
taxes and minority
interest $30,972 $31,001 $54,764 $ 48,188
Note: Certain prior year amounts have been reclassified to conform with
the current year presentation.
Bandag, Incorporated
Unaudited Financial Highlights
(In thousands)
September 30, Dec. 31,
Condensed Consolidated Balance Sheets 2004 2003
Assets:
Cash and cash equivalents $187,724 $189,976
Investments - 10,808
Accounts receivable - net 149,403 156,894
Inventories 70,981 62,765
Other current assets 57,014 77,533
Total current assets 465,122 497,976
Property, plant, and equipment - net 163,022 107,975
Other assets 75,394 54,578
Total assets $703,538 $660,529
Liabilities & shareholders' equity:
Accounts payable $28,232 $25,710
Income taxes payable 15,147 14,946
Accrued liabilities 102,933 97,285
Short-term notes payable and current
portion of other obligations 16,699 10,252
Total current liabilities 163,011 148,193
Long-term debt and other obligations 36,122 35,259
Minority interest 2,329 -
Shareholders' equity
Common stock 19,393 19,269
Additional paid-in capital 25,914 17,903
Retained earnings 492,313 477,499
Accumulated other comprehensive loss (35,544) (37,594)
Total shareholders' equity 502,076 477,077
Total liabilities & shareholders'
equity $703,538 $660,529
Nine Months
Ended September 30,
Condensed Consolidated Statements
of Cash Flows 2004 2003
Operating Activities
Net earnings $36,037 $31,081
Provisions for depreciation and
amortization 19,005 20,295
Decrease (increase) in operating assets
and liabilities - net 13,560 (20)
Net cash provided by operating
activities 68,602 51,356
Investing Activities
Additions to property, plant and
equipment (25,393) (11,319)
Sales of investments - net 10,808 4,845
Payments for acquisitions of businesses (72,682) -
Proceeds from divestiture of businesses 1,946 21,449
Proceeds from sale of tire and wheel
assets 34,023 -
Net cash provided by (used in)
investing activities (51,298) 14,975
Financing Activities
Principal payments on short-term notes
payable and other long-term liabilities (763) (36)
Cash dividends (18,862) (18,435)
Purchases of common stock (2,477) (184)
Stock options exercised 2,500 878
Net cash used in financing activities (19,602) (17,777)
Effect of exchange rate changes on cash
and cash equivalents 46 1,373
Increase (decrease) in cash and cash
equivalents (2,252) 49,927
Cash and cash equivalents at beginning
of year 189,976 129,412
Cash and cash equivalents at end
of period $187,724 $179,339