Bandag, Inc. (NYSE: BDG and BDGA)
Flash Results
(Numbers in Millions, Except Per Share Data) Q1 2006 Q1 2005 Net sales $212.4 $189.8 Earnings from continuing operations
$3.8* $6.0 Diluted EPS from continuing operations $0.19* $0.30 * Before loss from discontinued operations of $16.4 million, or $0.83 per
diluted share.
MUSCATINE, Iowa, April 18 - Bandag, Incorporated (NYSE: BDG and BDGA) today reported consolidated net sales for first quarter 2006 of $212.4 million, an increase of twelve percent, compared to consolidated net sales of $189.8 million in first quarter 2005.
Consolidated earnings from continuing operations were $3.8 million, or $0.19 per diluted share, for first quarter 2006, compared to first quarter 2005 consolidated net earnings of $6.0 million, or $0.30 per diluted share. During the first quarter of 2006 Bandag recorded the previously announced deferred loss on the sale of its business in South Africa. Bandag recorded a net loss on discontinued operations of $16.4 million, or $0.83 per diluted share, resulting in a consolidated net loss of $12.6 million, or $0.64 per diluted share.
In announcing first quarter 2006 results, Martin G. Carver, Bandag's Chairman of the Board and Chief Executive Officer, said, "First quarter sales results showed progress, despite intensifying competitive climates. As expected, margins continued to experience pressure from higher raw material costs. Modest increases in tread volume in the North American and European business units were offset by declines in the International business unit. Sales of Tire Distribution Systems, Inc. (TDS), Bandag's tire distribution subsidiary, grew approximately 30%, which reflects increased unit sales as well as price increases."
Financial Highlights
-- Factors that affected consolidated net sales for first quarter 2006
were:
- North American business unit volume increased one percent and net
sales increased ten percent as compared to first quarter 2005. Net
sales were positively impacted by price increases in May 2005 and
January 2006.
- European business unit volume increased nine percent and net sales
increased one percent. Net sales were negatively impacted by
approximately $2.2 million due to the effect of translating foreign
currency denominated net sales into U.S. dollars.
- International business unit volume decreased seventeen percent and
net sales decreased eight percent. Unit volume and net sales were
negatively impacted by 13% and 17%, respectively, due to the
divestiture of South Africa. Net sales were positively impacted by
price increases and by approximately $2.9 million due to the effect
of translating foreign currency denominated net sales into U.S.
dollars.
- TDS net sales increased $9.8 million, or 30%, from the prior year
period. Net sales were positively impacted by increased unit sales
and higher prices.
- Speedco sales increased $6.0 million compared to the prior year
period. Same store lube sales increased $2.8 million, or 16%, and
same store tire sales increased $0.4 million, or, 93%. Same store
revenue is comprised of locations that have operated for twelve full
months. As of March 31, 2006 same store lube sales included
33 locations and same store tire sales included seven locations.
Speedco had 39 locations, 27 with tire service capabilities, as of
March 31, 2006, compared to 33 locations, eight with tire service
capabilities, for the same period last year.
-- First quarter 2006 consolidated gross margin declined by 3.3 percentage
points. Speedco's gross margin declined 4.3 percentage points,
primarily due to expenses associated with the start-up of new stores
and the addition of tire lanes to existing stores. Traditional
business gross margin declined 3.7 percentage points, primarily due to
higher raw material costs. North American business unit gross margin
declined 4.1 percentage points.
-- Consolidated operating and other expenses for first quarter 2006 were
$7.8 million, or fourteen percent higher than the prior year period.
Speedco operating and other expenses increased $2.9 million, primarily
related to the additional stores and tire lanes.
-- Consolidated interest income increased $0.6 million for first quarter
2006 due to an increase in interest rates.
-- Capital expenditures were $22.7 million through March 31, 2006,
compared to $8.9 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 also reported that John C. McErlane, Vice President and President of TDS, was elected to the position of Vice President, North America. In that capacity, Mr. McErlane will report directly to Chief Executive Officer Martin G. Carver and will have responsibility for both the North American business unit and TDS. In addition, Mark A. Winkler was elected to the new position of Vice President, Vehicle Services. Mr. Winkler will be responsible for all vehicle services and will report directly to Mr. Carver. Mr. Winkler has been employed in various management capacities by Bandag since 1991. Bandag also made other changes in management reporting obligations and responsibilities.
Outlook
Commenting on the outlook in 2006, Mr. Carver said, "Globally, the intensifying competitive environment demands that we manage our business ever more closely to continue delivering value-added services to our dealers and fleets in major markets, and that is precisely what we are doing. We are confident that together TDS' solid operating performance, continued Speedco expansion and the underlying strength in trucking markets around the world provide a platform for continued Bandag progress in 2006."
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 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 2006 2005
Income
Net sales $212,355 $189,756
Other 4,556 2,061
216,911 191,817
Costs and expenses
Cost of products sold 147,761 125,746
Operating & other expenses 65,179 57,396
212,940 183,142
Income from operations 3,971 8,675
Interest income 2,454 1,813
Interest expense (314) (456)
Earnings before income taxes, minority
interest and discontinued operations 6,111 10,032
Income taxes 2,513 4,193
Minority interest (180) (123)
Earnings from continuing operations 3,778 5,962
Net loss on discontinued operations (16,356) -
Net earnings (loss) $(12,578) $5,962
Basic earnings (loss) per share
Earnings from continuing operations $0.20 $0.31
Net loss on discontinued operations (0.85) -
Net earnings (loss) $(0.65) $0.31
Diluted earnings (loss) per share
Earnings from continuing operations $0.19 $0.30
Net loss on discontinued operations (0.83) -
Net earnings (loss) $(0.64) $0.30
Weighted average shares outstanding
Basic 19,324 19,392
Diluted 19,571 19,707
First Quarter
Ended March 31,
Segment Information 2006 2005
Net Sales
Traditional Business
North America $100,100 $91,270
Europe 19,522 19,389
International 26,679 28,869
TDS 42,475 32,677
Speedco 23,579 17,551
Total net sales $212,355 $189,756
Segment Operating Profit (Loss)
Traditional Business
North America $4,207 $8,605
Europe 801 921
International 3,248 3,439
TDS (26) (1,097)
Speedco (996) 799
Corporate expenses & other (3,263) (3,992)
Net interest income 2,140 1,357
Earnings before income taxes and
minority interest $6,111 $10,032
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 2006 2005
Assets:
Cash and cash equivalents $75,239 $97,071
Investments 64,900 60,150
Accounts receivable - net 149,015 174,017
Inventories 85,515 84,668
Other current assets 58,161 59,960
Total current assets 432,830 475,866
Property, plant, and equipment - net 225,143 209,640
Other assets 75,983 69,531
Total assets $733,956 $755,037
Liabilities & shareholders' equity:
Accounts payable $39,812 $45,794
Income taxes payable 1,789 2,477
Accrued liabilities 91,083 100,647
Short-term notes payable and current
portion of other obligations 12,820 15,351
Total current liabilities 145,504 164,269
Long-term debt and other obligations 23,512 24,061
Deferred income tax liabilities 5,853 4,771
Minority interest 1,672 2,779
Shareholders' equity
Common stock 19,472 19,436
Additional paid-in capital 39,928 37,191
Retained earnings 509,419 529,372
Accumulated other comprehensive loss (11,404) (26,842)
Total shareholders' equity 557,415 559,157
Total liabilities & shareholders' equity $733,956 $755,037
Three Months
Ended March 31,
Condensed Consolidated Statements of Cash Flows 2006 2005
Operating Activities
Net earnings (loss) $(12,578) $5,962
Provision for depreciation 6,653 6,482
Decrease in operating assets and
liabilities - net 12,597 5,157
Net cash provided by operating activities 6,672 17,601
Investing Activities
Additions to property, plant and equipment (22,677) (8,893)
Purchases of investments - net (4,750) (7,150)
Payments for acquisitions of businesses (7,997) -
Proceeds from divestiture of businesses 460 2,251
Non-cash translation adjustment due to sale
of South Africa 14,212 -
Net cash used in investing activities (20,752) (13,792)
Financing Activities
Principal payments on short-term notes
payable and other long-term liabilities (1,468) (1,886)
Cash dividends (6,515) (6,418)
Purchases of common stock (946) (481)
Stock options exercised 1,181 699
Net cash used in financing activities (7,748) (8,086)
Effect of exchange rate changes on cash
and cash equivalents (4) 262
Decrease in cash and cash equivalents (21,832) (4,015)
Cash and cash equivalents at beginning of year 97,071 66,646
Cash and cash equivalents at end of period $75,239 $62,631
Note: Certain prior year amounts have been reclassified to conform with
the current year presentation.
