Bandag, Incorporated Reports 1st Quarter EPS
Bandag, Inc.
Flash Results
(Numbers in Millions, Except Per Share Data)
Q1 2005 Q1 2004 Net sales $186.6 $173.5 Net earnings $6.0 $4.0 Diluted earnings per share $0.30 $0.20 Shares outstanding - diluted 19.7 19.7
MUSCATINE, IOWA, April 15 -- Bandag, Incorporated today reported consolidated net earnings of $6.0 million, or $0.30 per diluted share, for first quarter 2005. This compares to first quarter 2004 consolidated net earnings of $4.0 million, or $0.20 per diluted share. Consolidated net sales for first quarter 2005 were $186.6 million, an increase of eight percent, compared to consolidated net sales of $173.5 million in first quarter 2004. Net sales were positively impacted by approximately $4.2 million due to the effect of translating foreign currency denominated net sales into U.S. dollars.
In announcing first quarter 2005 results, Martin G. Carver, Chairman of the Board and Chief Executive Officer of Bandag said, "First quarter results reflected growing strength in the North American trucking industry. Globally, high raw material and transportation costs pressured margins in our traditional business. Bandag continued to invest in Speedco's expanding operations, building new on-highway truck lubrication and tire service locations as well as adding tire service lanes at existing locations. Tire Distribution Systems, Inc. (TDS) operating results improved by $1.7 million, largely attributable to strengthening demand and margin improvement."
Financial Highlights
-- Factors that affected consolidated net sales for first quarter 2005
were:
- Speedco sales increased by $10.8 million compared to the prior
year period. Sales in the first quarter of 2004 are included from
February 13, 2004, the date Bandag acquired an 87.5% majority
interest in Speedco.
- TDS sales declined $8.3 million from the prior year period,
reflecting the divestitures during 2004. The divested locations
had net sales of approximately $15.0 million in the first quarter
of 2004.
- North America business unit volume increased five percent and net
sales increased seven percent as compared to first quarter 2004.
Net sales were positively impacted by a December 2004 price
increase.
- European business unit volume decreased seventeen percent and net
sales decreased nine percent. Unit volume and net sales were
negatively impacted by the loss of several dealers during 2004;
however, net sales were positively impacted by approximately
$1.3 million due to the effect of translating foreign currency
denominated net sales into U.S. dollars.
- International business unit volume increased six percent and net
sales increased twenty-nine percent. Net sales were positively
impacted by price increases and by approximately $2.2 million due
to the effect of translating foreign currency denominated net
sales into U.S. dollars.
-- First quarter 2005 consolidated gross margin declined by one
percentage point. TDS gross margin increased approximately four
percentage points, primarily due to higher selling prices.
Traditional business gross margin declined three percentage points
primarily due to higher raw material costs.
-- Consolidated operating and other expenses for first quarter 2005 were
$0.5 million higher than the prior year period, primarily due to
increased expenses related to Speedco expansion offset by the
divestiture-related decrease at TDS.
-- Interest income increased $0.8 million, primarily due to an increase
in cash and interest rates.
-- The effective tax rate increased to 41.8% from 36.5% in the prior
year, largely attributable to an adjustment in the deferred tax
balances.
Outlook
Commenting on the outlook for 2005, Mr. Carver said, "On the positive side, we believe continued strength in the trucking industry in our major markets will work to Bandag's benefit as we continue delivering an expanded array of valued-added vehicle services, which complement our traditional business. At the same time, we recognize that continued increases in raw material and transportation costs will be a concern throughout 2005."
Bandag, Incorporated manufactures retreading materials and equipment for its worldwide network of approximately 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% interest in Speedco, Inc., a provider of on-highway truck lubrication and routine tire 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 2005 2004
Income
Net sales $186,617 $173,529
Other 2,424 1,762
189,041 175,291
Costs and expenses
Cost of products sold 123,294 112,803
Operating & other expenses 57,072 56,556
180,366 169,359
Income from operations 8,675 5,932
Interest income 1,813 1,050
Interest expense (456) (562)
Earnings before income taxes and
minority interest 10,032 6,420
Income taxes 4,193 2,343
Minority interest (123) 58
Net earnings $5,962 $4,019
Earnings per share
Basic $0.31 $0.21
Diluted $0.30 $0.20
Weighted average shares outstanding
Basic 19,392 19,250
Diluted 19,707 19,655
First Quarter
Ended March 31,
Segment Information 2005 2004
Net Sales
North America $88,131 $82,217
Europe 19,389 21,196
International 28,869 22,443
TDS 32,677 40,939
Speedco 17,551 6,734
Total net sales $186,617 $173,529
Segment Operating Profit (Loss)
North America $8,605 $5,454
Europe 921 1,690
International 3,439 3,039
TDS (1,097) (2,841)
Speedco 799 903
Corporate expenses & other (3,992) (2,313)
Net interest income 1,357 488
Earnings before income taxes and
minority interest $10,032 $6,420
Bandag, Incorporated
Unaudited Financial Highlights
(In thousands)
Mar. 31, Dec. 31,
Condensed Consolidated Balance Sheets 2005 2004
Assets:
Cash and cash equivalents $205,896 $202,761
Accounts receivable - net 137,164 157,809
Inventories 77,962 69,892
Other current assets 55,078 55,793
Total current assets 476,100 486,255
Property, plant, and equipment - net 172,760 170,018
Other assets 73,871 74,454
Total assets $722,731 $730,727
Liabilities & shareholders' equity:
Accounts payable $29,454 $33,138
Income taxes payable 6,315 2,995
Accrued liabilities 95,197 104,580
Short-term notes payable and current
portion of other obligations 15,446 17,845
Total current liabilities 146,412 158,558
Long-term debt and other obligations 31,025 29,963
Deferred income tax liabilities 7,203 7,502
Minority interest 2,249 2,417
Shareholders' equity
Common stock 19,573 19,452
Additional paid-in capital 32,297 28,839
Retained earnings 512,216 513,152
Accumulated other comprehensive loss (28,244) (29,156)
Total shareholders' equity 535,842 532,287
Total liabilities & shareholders' equity $722,731 $730,727
Three Months
Ended March 31,
Condensed Consolidated Statements of Cash Flows 2005 2004
Operating Activities
Net earnings $5,962 $4,019
Provision for depreciation 6,482 5,610
Decrease in operating assets and liabilities
- net 7,408 20,402
Net cash provided by operating activities 19,852 30,031
Investing Activities
Additions to property, plant and equipment (8,893) (6,446)
Sales of investments - net - 3,396
Payments for acquisitions of businesses - (52,959)
Proceeds from divestiture of businesses - 862
Net cash (used in) investing activities (8,893) (55,147)
Financing Activities
Principal payments on short-term notes
payable and other long-term liabilities (1,886) (758)
Cash dividends (6,418) (6,260)
Purchases of common stock (481) (33)
Stock options exercised 699 1,129
Net cash used in financing activities (8,086) (5,922)
Effect of exchange rate changes on cash
and cash equivalents 262 223
Increase (decrease) in cash and
cash equivalents 3,135 (30,815)
Cash and cash equivalents at beginning of year 202,761 189,976
Cash and cash equivalents at end of period $205,896 $159,161