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Bandag reports 12% increase in sales despite net loss

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Bandag Inc. reported a net loss of $12.6 million on consolidated net sales of $212.4 million for the first quarter ended March 31, 2006. That compares to net income of $5.9 million on sales of $189.8 million for the same period in 2005.

During the first quarter of 2006, Bandag recorded the previously announced deferred $16.4 million loss on the sale of its business in South Africa.

Consolidated net earnings from continuing operations were $3.8 million for the quarter, compared to $6 million the previous year.

"First quarter sales results showed progress, despite intensifying competitive climates," says Chairman and CEO Martin Carver. (Bandag's sales were up 12%.) "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."

Factors that affected consolidated net sales for first quarter 2006 included the following:

* North American business unit volume increased 1% and net sales increased 10% compared to first-quarter 2005 totals. Net sales were positively impacted by price increases in May 2005 and January 2006.

* European business unit volume increased 9% and net sales increased 1%. 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 17% and net sales decreased 8%. 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 million compared to the prior year period. Same store lube sales increased $2.8 million, or 16%, and same store tire sales increased $400,000, or 93%.

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.

Bandag also reported that John McErlane, vice president and president of TDS, was elected vice president, North America. In that capacity, McErlane reports directly to Carver and is responsible for both the North American business unit and TDS.

In addition, Mark Winkler was elected to the new position of vice president, vehicle services. He is responsible for all vehicle services and also reports directly to Carver.

"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," says Carver.

Bandag's common stock closed at $41.92 a share on the New York Stock Exchange on April 18. That compares to a 52-week high of $47.93 and low of $40.57. Bandag's Class A common stock closed at $35.10 a share versus a 52-week high of $42.59 and low of $34.

Bandag's Class B common stock is unlisted.

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