Bandag agrees to sell South African subsidiary
Bandag Inc. recently announced it will sell its South African subsidiary to local management. The long-term licensing agreement will be effective Dec. 2, 2004, assuming the respective parties fulfill their obligations under the agreement.
The company, which represents less than 2% of Bandag´s net sales and total assets, will be renamed Bandag Southern Africa (Pty) Ltd.
Some $2 million of the approximately $3.5 million purchase price (depending on currency fluctuations) will be paid in cash. The remainder will be paid in equal installments over five years.
Bandag had this to say about the installments:
"In relation to the installment payments, Bandag is considered the ´Primary Beneficiary´ under FASB Interpretation No. 46, revised December 2003 (FIN 46R), ´Consolidation of Variable Interest
Entities.´ Under the guidance of FIN 46R, Bandag will continue to consolidate the South African operations on its financial statements as long as Bandag is considered to be the Primary
"Although determination of Bandag as the Primary Beneficiary could change based on changes in the capitalization of the South African operations, based on the current facts, Bandag would be considered the Primary Beneficiary until final payment has been made. As a
result, Bandag will defer recognition of the expected net loss of approximately $14 million to $17 million, or approximately $.70 to $.90 diluted earnings per share, until the earlier of final
payment of the five year obligation, which is expected to be Dec. 1, 2009, or until it is no longer considered the Primary Beneficiary within the meaning of FIN 46R."