Bandag Inc. reported consolidated net income of $19.6 million and net sales of $245.9 million for the third quarter ended September 30.
Net income for the quarter was 34% greater than the $14.6 million total reported in the third quarter of 2001. (Because the company discontinued amortizing goodwill on Jan. 1, 2002, by adopting SFAS 142, $2 million was subtracted from last year's $16.6 million total for an apples-to-apples comparison).
Third-quarter net sales decreased 5% vs. net sales from a year ago.
The Tire Distribution Systems (TDS) subsidiary recorded third-quarter sales of $104 million, which were down approximately 10% from the third quarter of 2001. Bandag says the decrease was primarily "due to the loss of several significant customers, most notably the bankruptcy of Consolidated Freightways, and the general impact of the economy," plus rising operating expenses.
For the first nine months of 2002, Bandag reported a consolidated net loss of $14.7 million, which includes the write-off of $47.3 million net of income tax resulting from the adoption of SFAS 142. That compares to net income of $26.5 million over the same period last year.
Before the accounting change, Bandag reported consolidated net income of $32.5 million.
Consolidated net sales for the first nine months decreased 5%, from $703 million to $669.5 million.
Here are some of the highlights of Bandag's third-quarter financial results.
* Lower raw material costs and increased production efficiency led to improved gross margins (while cost of products sold for the third quarter decreased by 8% in comparison to the prior year period, net sales only decreased 5%).
* Consolidated operating and other expenses, excluding goodwill amortization, decreased by close to $4 million when compared to the third quarter of 2001. Bandag says the decrease is "largely attributable to a $4.8 million decrease in litigation costs and $2.2 million in net foreign exchange gains, offset primarily by a $1 million decrease in pension income and a $1.8 million increase in Tire Distribution Systems Inc.’s operating expenses."
* The company's repurchasing of its outstanding common stock during the second quarter had a favorable impact on the third quarter 2002 diluted earnings per share.
* Bandag’s U.S. tread rubber volume, which accounts for the majority of North America’s revenues, out-paced the industry.
* Despite a 10% decrease in volume, net sales in Europe for the third quarter reflected a minor increase from the previous year due to the strength of the Euro.
"Worldwide market conditions were challenging throughout the third quarter," says Martin Carver, Bandag's CEO. "Encouragingly, Bandag’s North American business experienced a modest sales increase, reversing the second quarter’s slight decrease.
"Elsewhere, however, both Bandag International and TDS experienced sales declines during the third quarter. Lower raw material costs worldwide helped strengthen Bandag’s gross margins."
For the reminder of the year, Carver says Bandag is "hopeful that what we saw in the third quarter represents stabilizing market forces in the commercial tire industry and will serve as a base for commercial tire industry recovery beginning in 2003."
