Bandag Inc. reports consolidated net income of $2.8 million on net sales of $900.5 million for 2002. This compares to net income of $43.8 million on sales of $949.3 million the previous year.
However, effective January 1, 2002, Bandag adopted SFAS 142. The change in accounting method resulted in the discontinuation of the amortization of goodwill and other expenses. Without the accounting change, which affects the last two fiscal years, net income would have decreased 3% from 2001 ($51.8 million) to 2002 ($50.1 million).
Consolidated sales and cost of products sold decreased by 5% and 8%, respectively, from 2001. Consolidated gross margin in 2002 improved two percentage points from the prior year.
For the fourth quarter 2002, Bandag recorded net income of $17.5 million -- up half a percent from the same period in 2001 -- on sales of $230 million. On a comparable basis -- taking into account SFAS 142, Bandag' fourth-quarter net income decreased $1.8 million from fourth quarter 2001 earnings.
Also, Bandag's U.S. tread rubber volume, which accounts for the majority of North America's revenues, rose nearly 7% for the quarter compared to 12 months earlier.
"We are encouraged by some signs of fourth quarter strength in the marketplace, particularly in North America," says Martin Carver, Bandag's chairman and CEO.
"All things considered, International did better than anticipated. Our European restructuring is moving forward. And, while the coming year will continue to challenge TDS, we believe we are making slow and steady progress and expect improvement as the year progresses.
"However, these encouraging factors need to be weighed against the uncertain implications to our business of the global political situation and the possibility of larger conflict in the Middle East," adds Carver.
Bandag's financial highlights for the fourth quarter include the following:
* Increased sales deductions of approximately $4.7 million related to dealer marketing programs.
* Increased raw material costs. Although they had remained stable through the first nine months of the year, they increased significantly in the fourth quarter, with the North American business unit alone experiencing a 4% increase, according to Bandag.
* Restructuring charges in Europe of $3.0 million.
* Income of $2.4 million and $1.4 million in North America and Europe, respectively, due to decreased LIFO inventory levels.
Bandag's Tire Distribution Systems Inc. (TDS) subsidiary achieved margin improvements of two percentage points, although its net sales of $81.2 million for the quarter were down 16% compared to the prior year period.
