MUSCATINE, Iowa, April 25 /PRNewswire-FirstCall/ -- Bandag, Incorporated
today reported consolidated net sales for first quarter 2007 of $227.0 million compared to consolidated net sales of $212.4 million in first quarter 2006, an increase of 7 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 net earnings were $14.9 million, or $0.75 per diluted share, for first quarter 2007, compared to first quarter 2006 consolidated earnings from continuing operations of $5.7 million, or $0.29 per diluted share. During the first quarter of 2006, Bandag recorded the deferred loss on the sale of its business in South Africa. Bandag recorded a net loss on discontinued operations in first quarter 2006 of $16.4 million, or $0.83 per diluted share, resulting in a net loss of $10.6 million, or $0.54 per diluted share.
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 regulatory approvals, as well as the satisfaction of customary closing conditions. The transaction is expected to be completed in the second quarter of 2007.
In announcing first quarter results, Bandag Chairman and Chief Executive Officer Martin G. Carver said:
"Bandag's first quarter performance is especially gratifying because it demonstrates the benefits of recent strategic actions to strengthen and position our operations for profitable growth globally. North American business unit volumes were up somewhat, even though we experienced some slowing in the important medium truck segment of our market. In Europe, Bandag unit volumes rebounded reflecting both our stronger, leaner organization and strength in the EU economy. International unit volumes recovered well from a year earlier as Bandag benefited from replaced distribution in key markets."
Adding that results from TDS, Bandag's Tire Distribution Systems subsidiary, were down slightly in the first quarter, Mr. Carver said: "TDS performed very well, in light of softening market conditions and limited supplies of OTR (off-the-road) products in most markets."
Financial Highlights
-- Factors that affected consolidated net sales for first quarter 2007
were:
-- North American business unit volume increased 2 percent compared to
first quarter 2006 while net sales decreased 1 percent.
-- European business unit volume increased 6 percent and net sales
increased 19 percent compared to first quarter 2006. Net sales
were positively impacted by approximately $2.2 million due to the
effect of translating foreign currency denominated net sales.
-- International business unit volume increased 16 percent and net
sales increased 20 percent. Net sales were positively impacted by
approximately $0.5 million due to the effect of translating foreign
currency denominated net sales into U.S. dollars.
-- TDS net sales decreased $0.3 million, or 1 percent, from the prior
year period.
-- Vehicle Services business unit net sales increased $6.5 million, or
28 percent, primarily due to an increase in Speedco net sales of
$3.8 million compared to the prior year period. Net sales were
also positively impacted by $2.3 million due to the April 1, 2006
acquisition of Truck PM Plus (formerly Truck Lube 1). Same store
Speedco lube sales remained even with prior year while same store
tire sales increased $0.2 million, or 8 percent. Same store
revenue is comprised of locations that have operated for twelve
full months. As of March 31, 2007, same storelube sales included
38 locations and same store tire sales included 26 locations.
Overall, Speedco had 49 locations, 39 with tire service
capabilities, as of March 31, 2007, compared to 39 locations, 27
with tire service capabilities, at the same time last year.
-- First quarter 2007 consolidated gross margin increased 1.2 percentage
points and Traditional Business gross margin increased 1.8 percentage
points. The North American and International business units' gross
margins increased 3.4 and 2.6 percentage points, respectively. The
European business unit gross margins decreased 5.7 percentage points
primarily due to higher raw material costs. Vehicle Services business
unit's gross margin increased 0.8 percentage points and TDS gross
margin decreased 0.7 percentage points.
-- Consolidated operating and other expenses for first quarter 2007
decreased $9.6 million, or 15 percent, compared to the prior year
period. Operating and other expenses decreased in all business units
with the exception of Vehicle Services. North American, International
and European business units' operating and other expenses decreased
primarily due to reductions in workforce.
-- Capital expenditures were $10.0 million through March 31, 2007,
compared to $22.7 million for the same period last year. The decrease
in capital expenditures is primarily due to lower Speedco expenditures
for new facilities and expansions of tire lanes at existing facilities.
Looking forward, Mr. Carver said: "During the first quarter, Bandag management teams in all of our major business units globally delivered solid results, attesting to the benefits of recent strategic actions. Moving forward, we're very excited about the future. We're confident that our pending merger with BSAH, which is expected to close during the second quarter, will bring Bandag dealers and our businesses significantly expanded opportunities to grow and thrive in the years ahead."
Bandag, Incorporated manufactures retreading materials and equipment for its worldwide network of more than 800 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. Tire Distribution Systems, Inc. (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)
First Quarter
Ended March 31,
Consolidated Statements of Earnings 2007 2006
Income
Net sales $ 227,046 $ 212,355
Other 2,303 4,556
229,349 216,911
Costs and expenses
Cost of products sold 152,064 144,744
Operating & other expenses 55,607 65,179
207,671 209,923
Income from operations 21,678 6,988
Interest income 1,865 2,454
Interest expense (231) (314)
Earnings before income
taxes, minority interest
and discontinued operations 23,312 9,128
Income taxes 8,598 3,599
Minority interest (167) (180)
Earnings from continuing operations 14,881 5,709
Net loss on discontinued operations -- (16,356)
Net earnings (loss) $ 14,881 $ (10,647)
Basic earnings (loss) per share
Earnings from continuing operations $ 0.77 $ 0.30
Net loss on discontinued operations -- (0.85)
Net earnings (loss) $ 0.77 $ (0.55)
Diluted earnings (loss) per share
Earnings from continuing operations $ 0.75 $ 0.29
Net loss on discontinued operations -- (0.83)
Net earnings (loss) $ 0.75 $ (0.54)
Weighted average shares outstanding
Basic 19,428 19,324
Diluted 19,766 19,571
First Quarter
Ended March 31,Segment Information 2007 2006
Net Sales
Traditional Business
North America $ 99,437 $ 100,100
Europe 23,315 19,522
International 32,034 26,679
TDS 42,195 42,475
Vehicle Services 30,065 23,579
Total net sales $ 227,046 $ 212,355
Segment Operating Profit (Loss)
Traditional Business
North America $ 18,063 $ 7,224
Europe 2,090 801
International 5,446 3,248
TDS (204) (26)
Vehicle Services (497) (996)
Corporate expenses & other (3,219) (3,263)
Net interest income 1,633 2,140
Earnings before income taxes
and minority interest $ 23,312 $ 9,128
Bandag, Incorporated
Unaudited Financial Highlights
(In thousands)
Mar. 31, Dec. 31,
Condensed Consolidated Balance Sheets 2007 2006
Assets:
Cash and cash equivalents $ 34,956 $ 45,900
Investments 97,075 80,300
Accounts receivable - net 148,970 163,160
Inventories 87,001 84,607
Other current assets 52,030 53,132
Total current assets 420,032 427,099
Property, plant, and equipment - net 254,561 253,996
Other assets 75,630 71,853
Total assets $ 750,223 $ 752,948
Liabilities & shareholders' equity:
Accounts payable $ 38,100 $ 38,839
Income taxes payable 9,069 1,611
Accrued liabilities 79,408 91,841
Short-term notes payable and current
portion of other obligations 12,866 14,600
Total current liabilities 139,443 146,891
Long-term debt and other obligations 23,696 22,964
Deferred income tax liabilities 5,961 5,838
Minority interest 1,583 1,750
Shareholders' equity
Common stock 19,514 19,501
Additional paid-in capital 49,332 47,670
Retained earnings 517,511 515,883
Accumulated other comprehensive loss (6,817) (7,549)
Total shareholders' equity 579,540 575,505
Total liabilities & shareholders'
equity $ 750,223 $ 752,948
Three Months
Ended March 31,
Condensed Consolidated
Statements of Cash Flows 2007 2006
Operating Activities
Net earnings (loss) $ 14,881 $ (10,647)
Non-cash translation adjustment
due to sale of South Africa -- 14,212
Provision for depreciation 6,818 6,653
Decrease in operating assets and
liabilities - net 2,037 10,576
Net cash provided by operatingactivities 23,736 20,794
Investing Activities
Additions to property, plant and
equipment (10,033) (22,677)
Purchases of investments - net (16,775) (4,750)
Payments for acquisitions of
businesses -- (7,997)
Proceeds from divestiture of
businesses -- 460
Net cash used in investing
activities (26,808) (34,964)
Financing Activities
Principal payments on short-term
notes payable and other long-term
liabilities (1,195) (1,468)
Cash dividends (6,630) (6,515)
Purchases of common stock (792) (946)
Stock options exercised 611 1,181
Excess tax benefits from share-based
compensation expense 156 90
Net cash used in financing activities (7,850) (7,658)
Effect of exchange rate changes on
cash and cash equivalents (22) (4)
Decrease in cash and cash equivalents (10,944) (21,832)
Cash and cash equivalents at beginning
of year 45,900 97,071
Cash and cash equivalents at
end of year $ 34,956 $ 75,239
Bandag, Incorporated