Bandag, Incorporated Reports 4th Quarter EPS of $0.57
Bandag, Incorporated
Flash Results
(Numbers in Millions, Except Per Share Data)
Q4 2006 Q4 2005 12 Months 12 Months 2006 2005 Net sales $253.7 $252.3 $973.6 $914.6 Earnings from continuing operations $11.2 $12.1 $36.6* $49.5 Diluted EPS from continuing operations $0.57 $0.62 $1.87* $2.52
*Before loss from discontinued operations of $16.6 million, or $0.85 per diluted share.
MUSCATINE, Iowa, Feb. 7 -- Bandag, Incorporated today reported consolidated net sales for fourth quarter 2006 of $253.7 million compared to consolidated net sales of $252.3 million in fourth quarter 2005, an increase of 1 percent. Consolidated net sales were positively impacted by approximately $2.6 million due to the effect of translating foreign currency denominated net sales into U.S. dollars. Consolidated earnings from continuing operations were $11.2 million, or $0.57 per diluted share, for fourth quarter 2006, compared to fourth quarter 2005 consolidated net earnings of $12.1 million, or $0.62 per diluted share. During fourth quarter 2006, Bandag incurred pre-tax restructuring expenses of $6.3 million, or $0.20 per diluted share, primarily associated with the European business unit reduction in workforce.
On December 5, 2006, Bandag announced that it had entered into a definitive merger agreement with Bridgestone Americas Holding, Inc. (BSAH) pursuant to which BSAH will acquire the outstanding shares of each class of stock of Bandag for US $50.75 per share in cash. This proposed merger remains subject to the receipt of shareholder approval and other regulatory approvals, as well as the satisfaction of customary closing conditions. The transaction is expected to be completed in the second quarter of 2007.
For full year 2006, Bandag reported consolidated net sales of $973.6 million, an increase of 6 percent from consolidated net sales in 2005 of $914.6 million. Consolidated earnings from continuing operations for 2006 were $36.6 million, or $1.87 per diluted share, compared to consolidated net earnings of $49.5 million, or $2.52 per diluted share, in 2005. During 2006, Bandag recorded the previously announced deferred loss on the sale of its business in South Africa. As a result, Bandag recorded a net loss on discontinued operations of $16.6 million, or $0.85 per diluted share, resulting in consolidated net earnings of $20.0 million, or $1.02 per diluted share. During 2006, Bandag incurred pre-tax expenses of $19.8 million, or $0.65 per diluted share, associated with the closing of its manufacturing plant in Shawinigan, Quebec, the employment reduction programs in North America, as well as an employee reduction program in Europe and International.
In announcing earnings, Martin G. Carver, Bandag chairman, president and chief executive officer said, "The combined effects of the buildup of new trucking equipment capacity, on-going uncertainty in energy and raw material prices, and continued slow freight volumes particularly early in the fourth quarter suppressed unit and sales volume in Bandag's traditional retread business. Both Tire Distribution Systems, Inc. (TDS), Bandag's tire distribution subsidiary, and our Vehicle Services business unit, which includes Speedco's on-highway truck lubrication business, delivered solid sales improvements. In Bandag's traditional businesses, our 2006 business simplification efforts set the stage to contain operating costs and help counter generally slow growth in trucking freight volumes, particularly in North America."
Financial Highlights
-- Factors that affected consolidated net sales for fourth quarter 2006
were:
-- North American business unit volume decreased 12 percent compared to
fourth quarter 2005 and net sales decreased 8 percent. The sales
decline was partially offset by a sales increase of approximately
$0.5 million due to the effect of translating foreign currency
denominated net sales into U.S. dollars and by a price increase in
January 2006.
-- European business unit volume and net sales increased 1 percent.
Net sales were negatively impacted by lower fleet sales and an
increase in sales incentive programs. Net sales were positively
impacted by approximately $1.3 million due to the effect of
translating foreign currency denominated net sales.
-- International business unit volume decreased 7 percent and net sales
decreased 8 percent. Excluding South Africa, unit volume increased
8 percent and net sales increased 6 percent. Net sales were
positively impacted by approximately $0.8 million due to the effect
of translating foreign currency denominated net sales into U.S.
dollars.
-- TDS net sales increased $6.7 million, or 15 percent, from the prior
year period. Net sales were positively impacted by increased unit
sales and higher prices.
-- Vehicle Services business unit net sales increased $6.9 million, or
31 percent, primarily due to an increase in Speedco net sales of
$4.3 million compared to the prior year period. Same store Speedco
lube sales increased $0.5 million, or 3 percent, but same store tire
sales decreased $0.1 million, or 5 percent. Same store revenue is
comprised of locations that have operated for twelve full months.
As of December 31, 2006, same store lube sales included 35 locations
and same store tire sales included 21 locations. Overall, Speedco
had 47 locations, 39 with tire service capabilities, as of
December 31, 2006, compared to 35 locations, 23 with tire service
capabilities, at the same time last year. Truck Lube 1 which
provides light truck maintenance was purchased in April 2006 and
contributed $2.3 million to fourth quarter net sales.
-- Fourth quarter 2006 consolidated gross margin declined by
0.5 percentage points. Traditional Business gross margin remained even
primarily due to an increase in the North America business unit gross
margin of 2.1 percentage points. North America business unit gross
margin was positively impacted by a decrease in sales incentive
programs which was partially offset by higher raw material prices.
International business unit and European business unit gross margin
each declined 3.9 percentage points, primarily due to higher raw
material costs. Vehicle Services gross margin increased 1.1 percentage
points.
--Consolidated operating and other expenses for fourth quarter 2006
decreased $6.5 million, or 10 percent, compared to the prior year
period. Operating and other expenses decreased in all business units
with the exception of Vehicle Services. North America, International
and European business units operating and other expenses decreased due
to reductions in workforce and spending decreases.
-- Consolidated restructuring expenses of $6.3 million were recorded in
the fourth quarter of 2006. The European business unit recorded
$5.8 million in restructuring expenses and the North America business
unit recorded $0.5 million.
-- Capital expenditures were $74.1 million through December 31, 2006,
compared to $63.4 million for the same period last year. The increase
in capital expenditures is primarily due to expenditures made by
Speedco for new facilities and expansions of tire lanes at existing
facilities.
Bandag, Incorporated manufactures retreading materials and equipment for its worldwide network of more than 900 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. 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.
This press release contains "forward-looking" statements that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, which are based on certain assumptions, describe future expectations of Bandag, and are identifiable by the use of words like "estimated" and "expects." These statements are based on management's current projections, beliefs and opinions as of the date of this press release. They involve known and unknown risk and uncertainties, which may cause the actual results in the future to differ materially from expected results. Bandag's ability to predict results of the actual effect of future events is inherently uncertain. Factors which could affect the "forward-looking" statements include unanticipated issues associated with obtaining approvals to complete the proposed merger or other unexpected issues that could impact the closing of the proposed merger; unanticipated delays or difficulties in achieving and sustaining the expected cost savings from Bandag's employee reduction programs; and Bandag's ability to achieve and sustain expected improvements in its competitive position and management of its business.
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 2006 2005 2006 2005
Income
Net sales $253,734 $252,278 $973,570 $914,640
Other 2,810 1,639 10,540 6,299
256,544 253,917 984,110 920,939
Costs and expenses
Cost of products sold 171,654 169,387 661,655 598,433
Operating & other expenses 61,862 68,383 252,842 252,191
Restructuring 6,258 3,100 19,762 3,100
239,774 240,870 934,259 853,724
Income from operations 16,770 13,047 49,851 67,215
Interest income 1,708 1,963 7,971 8,090
Interest expense (388) (435) (1,433) (1,951)
Earnings before income taxes,
minority interest and
discontinued operations 18,090 14,575 56,389 73,354
Income taxes 6,961 1,994 20,229 22,954
Minority interest (41) 527 (396) 921
Earnings from continuing
operations 11,170 12,054 36,556 49,479
Net loss on discontinued
operations (248) - (16,604) -
Net earnings $10,922 $12,054 $19,952 $49,479
Basic earnings (loss) per share
Earnings from continuing
operations $0.58 $0.62 $1.89 $2.55
Net loss on discontinued
operations (0.01) - (0.86) -
Net earnings $0.57 $0.62 $1.03 $2.55
Diluted earnings (loss) per
share
Earnings from continuing
operations $0.57 $0.62 $1.87 $2.52
Net loss on discontinued
operations (0.01) - (0.85) -
Net earnings $0.56 $0.62 $1.02 $2.52
Weighted average shares
outstanding
Basic 19,368 19,350 19,342 19,393
Diluted 19,615 19,591 19,536 19,671
Fourth Quarter Twelve Months
Ended December 31, Ended December 31,
Segment Information 2006 2005 2006 2005
Net Sales
Traditional Business
North America $112,233 $122,198 $453,354 $447,434
Europe 29,546 29,221 87,445 91,398
International 30,132 32,666 114,291 124,578
TDS 52,375 45,659 204,739 168,522
Vehicle Services 29,448 22,534 113,741 82,708
Total net sales $253,734 $252,278 $973,570 $914,640
Segment Operating Profit (Loss)
Traditional Business
North America $18,788 $15,137 $49,384 $63,026
Europe (4,330) (1,038) (6,880) (262)
International 3,739 3,834 11,568 14,821
TDS 3,819 1,670 11,719 6,584
Vehicle Services 985 (1,152) (512) 581
Corporate expenses & other (6,230) (5,404) (15,427) (17,535)
Net interest income 1,319 1,528 6,537 6,139
Earnings before income taxes
and minority interest $18,090 $14,575 $56,389 $73,354
Note: Certain prior year amounts have been reclassified to conform with
the current year presentation.
Bandag, Incorporated
Unaudited Financial Highlights
(In thousands)
Dec. 31, Dec. 31,
Condensed Consolidated Balance Sheets 2006 2005
Assets:
Cash and cash equivalents $45,900 $97,071
Investments 80,300 60,150
Accounts receivable - net 163,160 174,017
Inventories 84,607 84,668
Other current assets 53,132 59,960
Total current assets 427,099 475,866
Property, plant, and equipment - net 253,996 209,640
Other assets 71,853 69,531
Total assets $752,948 $755,037
Liabilities & shareholders' equity:
Accounts payable $38,839 $45,794
Income taxes payable 1,611 2,477
Accrued liabilities 91,841 100,647
Short-term notes payable and current
portion of other obligations 14,600 15,351
Total current liabilities 146,891 164,269
Long-term debt and other obligations 22,964 24,061
Deferred income tax liabilities 5,838 4,771
Minority interest 1,750 2,779
Shareholders' equity
Common stock 19,501 19,436
Additional paid-in capital 47,670 37,191
Retained earnings 515,883 529,372
Accumulated other comprehensive loss (7,549) (26,842)
Total shareholders' equity 575,505 559,157
Total liabilities & shareholders' equity $752,948 $755,037
Twelve Months
Ended December 31,
Condensed Consolidated Statements of Cash Flows 2006 2005
Operating Activities
Net earnings $19,952 $49,479
Non-cash translation adjustment due to sale
of South Africa 14,212 -
Provision for depreciation 26,877 26,302
Decrease (increase) in operating assets and
liabilities - net 20,536 (18,798)
Net cash provided by operating activities 81,577 56,983
Investing Activities
Additions to property, plant and equipment (74,064) (63,428)
(Purchases) maturities of investments - net (20,150) 75,965
Payments for acquisitions of businesses (8,094) (2,978)
Proceeds from divestiture of businesses 460 2,251
Net cash (used in) provided by investing
activities (101,848) 11,810
Financing Activities
Principal payments on short-term notes
payable & other long-term liabilities (12,551) (16,938)
Proceeds from short-term notes payable 5,487 6,645
Cash dividends (26,053) (25,774)
Purchases of common stock (8,076) (8,053)
Stock options exercised 8,027 2,235
Excess tax benefits from share-based
compensation expense 380 -
Net cash used in financing activities (32,786) (41,885)
Effect of exchange rate changes on cash and
cash equivalents 1,886 3,517
(Decrease) increase in cash and cash
equivalents (51,171) 30,425
Cash and cash equivalents at beginning of year 97,071 66,646
Cash and cash equivalents at end of year $45,900 $97,071