Bandag Inc. posted consolidated net earnings of $11.9 million on consolidated net sales of $211.1 million for the second quarter ended June 30, 2004. That compares to earnings of $8.7 million on sales of $204.1 million for the same period a year ago.
Earnings included favorable tax adjustments of $1 million resulting primarily "from the reassessment of certain tax matters."
Chairman and CEO Martin Carver cited several factors that contributed to Bandag's second-quarter performance.
"Globally, tread volume was up by 5% during the quarter, reflecting increased trucking activity, particularly in North America," he said. "In its first full quarter as part of Bandag, Speedco Inc. demonstrated both its fit to Bandag and the validity of our strategy to offer our customers a wider range of vehicle services."
Speedco's net sales were $14.4 million for the second quarter; its operating income was $1.8 million.
(Bandag has an 87.5% interest in Speedco, which purchased its six licensed locations in June. Speedco now operates 32 on-highway quick-service truck lubrication locations.)
"Also important, Tire Distribution Systems Inc.'s performance improved significantly during the quarter," said Carver. Bandag's distribution subsidiary (TDS) reduced its net loss from $2.4 million a year ago to a loss of $34,000, "reflecting the benefits of selected divestitures and sales increases in some of the remaining locations."
Second-quarter 2004 and 2003 sales by divested and closed TDS locations were approximately $300,000 and $18.1 million, respectively.
TDS' operating and other expenses were $5.6 million below the previous year.
Financial highlights for Bandag's business units are as follows.
* North America business unit volume was approximately 3% higher than the prior year period.
Operating income for the North America business unit decreased $1.5 million, primarily due to raw material cost increases and higher operating and other expenses.
* European business unit volume increased 2%while net sales increased $1.7 million, or 10%, "primarily due to the effect of translating foreign currency denominated net sales into U.S. dollars."
Operating income in the European business unit in second quarter 2004 decreased $1.4 million compared to the previous year, primarily due to a decline of 5.6 percentage points in gross margin and higher operating and other expenses.
* International business unit volume increased 12%. Also, net sales increased 11%, or $2.5 million (approximately $1 million was the result of translating foreign currency into U.S. dollars).
Operating income for the International business unit in second quarter 2004 decreased $0.6 million compared to the prior year period, primarily due to a decline of 0.8 percentage points in gross margin and higher operating and other expenses.
"The improved performance we experienced during the second quarter is heartening, and, while we're hopeful that the renewed strength we're seeing in trucking activity gains momentum, we continue to moderate our optimism and closely monitor global economic activity," said Carver.
For the first six months of 2004, Bandag reported consolidated net earnings of $15.9 million on consolidated net sales of $384.6 million. That compares to earnings of $11.1 million on sales of $379.4 million in the first six months of 2003.
In May, Bandag announced that Yellow Roadway Corp. would not be renewing the outsourcing agreement for Roadway Express tire and wheel services and, in accordance with the terms of the agreement, would be repurchasing tire and wheel assets from Bandag.
According to Carver, the transition process is proceeding smoothly and on schedule. Bandag received an initial payment of close to $32 million on July 9 as part of the transaction.
Bandag anticipates completing the transition and final settlement in August 2004.
Bandag's common stock closed at $45.01 a share on the New York Stock Exchange on July 16. That compares to a 52-week high of $51.30 and low of $32.85. Bandag's Class A common stock closed at $41.90 a share vs. a 52-week high of $47.71 and low of $30.19.
Bandag's Class B common stock is unlisted.
